April 23, 2008, 12:00 AM

Newegg mixes it up more with its customers

Newegg is staying in touch with customers, without worrying too much about whether initiatives like forums, reviews or pages on MySpace and Facebook lead directly to sales. As long as revenue grows, Newegg figures it has the right recipe.

Mark Brohan

Research Director

Electronics retailer Newegg.com takes every opportunity to interact with its customers, and to let them interact with each other. But it doesn’t worry too much about whether initiatives like forums, reviews or pages on MySpace and Facebook lead directly to sales. As long as revenue continues to soar, Newegg figures it has the right recipe.

“It’s about getting closer to that customer, making sure we’re giving them every opportunity to give us feedback. That’s what drives our business,” says Bernard Luthi, vice president of merchandising at Newegg. He’s convinced the strategy is working because more than half of new customers are referred by other customers and because the company, which has been one of the fastest-growing online retailers since its launch, grew again by more than 25% last year to $1.9 billion in online sales. Newegg is No. 10 in the Internet Retailer Top 500 Guide.

Newegg’s target customers-male computer geeks and gamers 18 to 35 years old-are passionate about the PC components and electronic devices that Newegg.com sells, and about Newegg itself. Foresee Results, which measures online consumer satisfaction, ranked Newegg tenth in customer approval among online retailers in a survey last fall.

Newegg is giving customers a chance to promote Newegg through a contest to select the best customer-produced 30-second commercial for the electronics retailer. In addition to awarding prizes to the winner, Newegg will air his commercial on a cable television station in the winner’s home market. “It’s utilizing video, with a community feel to it,” Luthi says.

Newegg also plans to take advantage of the video craze among the tech-savvy by allowing customers to upload video reviews of products. Newegg has featured customer reviews since launching its site in 2001, and customers have submitted over 900,000 reviews in that time, over 250,000 in the last year alone, Luthi says.

The retailer does not edit the reviews, but does indicate whether the reviewer actually purchased the product from Newegg. Customers do read the reviews, as Newegg saw last year when someone wrote a review pointing out a problem with a power supply. “Within a day, four or five others said they had the same problem,” Luthi says. “Sales of the case basically stopped, not because we changed anything, we hadn’t pulled the product. People were reading the reviews.”

He says Newegg notified the manufacturer, which pulled the product, reintroducing it 60 days later with the problem fixed. “Sales began to pick up again,” Luthi says, adding that reviews are “a very, very powerful tool.”

Newegg also has created a community forum on its site called “eggxpert” where Newegg personnel and customers can exchange ideas. But Newegg does not use the forum to promote products. For one thing, Luthi says, it would not promote one manufacturer’s product over another. For another, that’s not the purpose of the forum, which is designed to provide information and give customers a sense they are part of the Newegg community.

Newegg also has created pages on both MySpace and Facebook because “we heard from our customers that’s an area where they live on a daily basis,” Luthi says. Sales from those sites remain small, though growing, and the conversion rate of clicks from MySpace and Facebook is slightly higher than average, he says.

Rick Quiroga, Newegg’s vice president of finance, is speaking at the Internet Retailer Conference & Exhibition, June 9-12 in Chicago, in a session entitled Unlocking Payments Value: Strategies for managing payment acceptance.

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