Almost two years after it closed 103 stores to concentrate on its Internet channel, Discovery Communications Inc. is outsourcing its e-commerce operation altogether to Delivery Agent Inc., a third-party provider of online retailing, digital advertising and content services to entertainment companies.
Under the new agreement with Discovery, No. 183 in the Internet Retailer Top 500 Guide, Delivery Agent will provide a full range of services for DiscoveryStore.com, including web hosting, web site design, e-commerce platform management, merchandising, marketing, customer service and fulfillment. In exchange for operating DiscoveryStore.com, Delivery Agent will pay Discovery undisclosed royalty fees.
As part of the arrangement, Delivery Agent, which supplies services to companies such as NBC Universal Inc., Martha Stewart Living Omnimedia Inc. and Twentieth Century Fox Film Corp., also will develop new e-commerce sites for other Discovery media properties, including TLC and Animal Planet. “Transitioning to a royalty model provides opportunity for increased profitability while significantly reducing the financial risk of holding large product inventory,” says Discovery Commerce chief operating officer Kelly Day.
The move to outsource its primary e-commerce site is part of a broader and ongoing cost-savings initiative for Discovery, which went public in September. In May 2007 Discovery closed its mall-based and other standalone stores in order to cut costs, boost sales and grow DiscoveryStore.com, which the company says draws an average of 12 million shoppers each year. “Since 2007 the company has executed on a plan to reduce risk and costs, streamline operations, and increase profitability for its commerce division,” Discovery says.
The move to outsource operations for DiscoveryStore.com also coincides with similar plans from Discovery to market and merchandise its own branded products through other chain retailers and to outsource its retail license business. “Discovery’s brand strength and legacy of creating award-winning consumer products, paired with Delivery Agent’s track record of building winning commerce solutions for the entertainment industry, makes this an ideal go-forward strategy for achieving our growth goals for commerce,” says Day.
Discovery, which generated Internet Retailer-estimated web sales of $53.1 million in 2007, posted sales of $3.44 billion in 2008, an increase of 9.6% from $3.14 billion in 2007. Revenue in the fourth quarter increased by 0.11% to $904 million from $903 million.