In its second-largest acquisition, Amazon buys the company for $970 million.
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Finding specific products on the web site was a chore for shoppers before 2007. “We had products in eight or 10 different places on the site,” Smith says. “We had products anywhere someone would want to find them. Our navigation was not filtering because everything was everywhere. It was very difficult to follow.”
Smith and other Fingerhut executives had come to a fundamental conclusion about e-commerce marketing. “We finally understood that people use search for specifics,” he says. “They don’t search the site to see what’s in electronics, they search for a DVD player.”
In addition to rethinking its web marketing approach, Fingerhut executives reviewed the site’s features and functions. For example, they rethought how to position add-on warranty offers and after some testing gave it a separate page. The result was an immediate double-digit increase in warranty sales.
The company also tested and implemented a new add-to-cart button that streamlined buying. Offermatica, now part of Omniture, conducted page and cart testing and assisted in establishing a master plan for ongoing testing of site features and functions, Smith says.
Site redesign has become an annual event for Fingerhut, with the 2006 version devoted to the credit-based buying options the e-commerce site offers. 2007 focused on the shopping experience and growth reflects Fingerhut’s continuing shift of sales to the web, Smith says. E-commerce made up almost 33% of $440 million in total sales for 2007. That mix likely will shift upward for 2008, Smith says.
2008 initiatives include current plans to implement a new site search tool from Mercado. “It was the best fit for helping us build merchandising around search results,” Smith says. Go-live is planned for late summer.
Fingerhut also is contemplating customer ratings and reviews. “We’re not committed, but we’re doing some research,” Smith says. Testing new functions and ideas will dominate 2008 and future years. “We will invest more money in online marketing, such as behavioral initiatives retargeting those who have abandoned the site,” he says. The company performed some behavioral testing in 2007 with the help of Dotomi Inc., an online advertising services company.
To Fingerhut’s way of thinking, 2008 will bring more of the same pattern that it has followed for the past two years, with the web accounting for about 22% of total sales in 2006 and one-third in 2007. “In 2008 we will continue to invest in online media and convert more catalog customers to the web,” Smith says.
Online baby supplies retailer is growing up with its customers
By Bill Briggs
Start-up web-only retailers typically must crawl before they can walk, in terms of sales. For Diapers.com, the process has been compressed into a progression more like crawl-sprint-fly since its founding in 2005.
The company, which began as an online diapers, wipes and formula specialty retailer, relies on web analytics to meet its goal of delivering competitively priced products and great customer service as it caters to busy parents. Diapers.com’s first web site was designed to make purchasing simple and site upgrades have followed that pattern. “We deliver products at reasonable prices but with spectacular service,” says Vinit Bharara, chief operating officer.
In 2007, Diapers.com customers in any of the top 50 metropolitan markets received shipments in two days or less from either East or West Coast warehouses. And orders of $50 or more shipped free, Bharara says.
Satisfied customers keep coming back and that’s one of the key reasons Diapers.com is No. 231 in the 2008 Internet Retailer Top 500 Guide, up from No. 396 in last year’s guide. 2007 web sales were $36 million, a 227.3% increase compared with 2006 web sales of $11 million.
Diapers.com was the fastest-growing retailer in the web-only category and was second-fastest among all Top 500 retailers in 2007. The company also grew 340% in 2006, from $2.5 million in 2005 revenue.
The business, founded by Marc Lore, CEO, and Bharara, was the result of their combined diapers needs as parents and the discovery that there were no web-based diaper retailers. They, like many parents, found shopping for diapers that came in many sizes and prices frustrating and the prospect of running out was even worse. The process was ripe for a new approach. In-depth planning and market analysis led the founders to launch Diapers.com and continues to characterize its strategic moves, says Bharara.
“We are very analytical in terms of who to go after and crunching numbers,” he says. Core marketing initiatives, with the exception of its referral program, are “pretty standard but our execution is probably superior because of all the analysis,” Bharara adds. Market analysis dictates how to create print advertisements, for example, and whom to target. Diapers.com does most of its web analytics in-house.
The company attributes much of its 2007 growth to continuing efforts to improve customer service, Bharara says. 2007 marked two milestones for the company: first was the hiring of its first employees and second, it brought customer service and fulfillment in-house and established its own warehouses to speed shipping.
Serving new moms, in particular, and new parents today means saving them time and providing a good price. It’s working for Diapers.com because news of reliable service travels fast. “A large part of our growth has been word-of-mouth,” Bharara says. “To the extent we can provide stellar service there is a ripple effect: Moms tell their friends and the business grows.”
To buttress sales growth the company tripled its marketing budget last year along with bringing customer service and fulfillment in-house. Marketing efforts include online paid search, affiliate marketing and print ads. Perhaps the most unique of Diapers.com’s marketing initiatives is its customer referral program.
The program enables customers to earn cash credits by bringing new customers to the site. Customers get a personalized code and when they refer others to the site, those newcomers earn $5 off their initial purchase by listing their sponsor’s code. Every time that newcomer makes a purchase, the sponsor receives a $1 credit.