September 16, 2004, 12:00 AM

Sales weren’t up as much as expected, but profits were, thanks to analytics

Niche Retail is reporting strong sales growth at its JoggingStrollers.com as well as at its 11 other e-commerce web sites. But with its customized web analytics, it has figured out how to boost its overall profits while halving its sales projection.

Niche Retail LLC is reporting strong sales growth at its JoggingStrollers.com as well as at 11 other e-commerce web sites. But with its customized web analytics, it has figured out how to boost its overall profits while halving its sales projection. “We’re not selling stuff just to sell stuff,” says president and co-founder Tyler Smith. “We only want to sell products that are profitable.”

The retailer had initially projected to increase its sales fourfold this year over last year, while doubling profits. But with its web analytics strategy of finding the most profitable products as well as the most profitable customers, it has halved its sales growth projection-to a doubling rather than a quadrupling of last year’s sales-without changing its expectations of doubling profits. “We could’ve been on course to do four times last year’s volume, but we would’ve been at half the profit margin,” Smith says.

Niche Retail uses a combination of in-house, freeware and commercial software to analyze site traffic. Using AW Stats freeware, it monitors which terms visitors use in its site search feature, then matches the brands the shoppers want with the brands available on its sites.

When it found many shoppers looking for the Zooper brand of jogging strollers, a line it didn’t carry, for example, it decided to introduce it to JoggingStrollers.com. It then used AW Stats to monitor traffic to Zooper product pages, to confirm shoppers’ interest in the brand and to check conversion rates tied to merchandising displays and the checkout process. Its average visitor-to-sales conversion rate is over 1.4%, Smith says.

But Niche Retail also puts a lot of effort into bringing quality traffic to its sites in the first place. It operates 12 sites mostly catering to families and recreation, including BicycleTrailers.com, TrekkingPoles.com and ChildCarriers.com. Using a combination of in-house software and programs from BidRank and KeywordMax to monitor the effect of paid search terms used in Google and Overture, it identifies and chooses keywords that provide the highest return on investment.

Niche Retail sets three triggers in monitoring keyword performance. Once a keyword has been up for 30 days, or has produced 150 clicks, or has cost $100-whichever point is reached first-Niche Retail’s analytics system will provide a ratio of sales to keyword costs.

“We set a goal to make $5 in sales for every $1 spent on keywords,” Smith says. “We’ve cut everything below that 5-to-1 ratio, and we’ve saved hundreds of thousands of dollars in advertising costs.” He adds that Niche Retail’s next goal is to get to a ratio of 10-to-1.

The analytics system might show, for example, that a top-ranked keyword costing 53 cents does not produce significantly more sales than a second- or third-ranked keyword costing 10 or 11 cents, Smith says.

Building its analytics system wasn’t easy, and Niche Retail had to hire a new staffer to monitor all the new analytical data along with running e-mail marketing campaigns. But the payoff is in producing the same level of profits without the headache of running much larger web sites, Smith says. “It took us six months to figure out how to do this in-house,” he says. “But now I can keep my sanity as we grow.”

 

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