In its second-largest acquisition, Amazon buys the company for $970 million.
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Several retailers say they are paying closer attention to what they bid on ad placements on search results pages. For instance, eHobbies CEO Ken Kikkawa has cut back in search advertising for some products that are in short supply because of cutbacks at manufacturers. “We intend to reactivate those campaigns when suppliers are able to ship again,” Kikkawa says. “That’s something in the past we might not have paid as close attention to.”
At Replacements Ltd., uncertainty over the economy led the company to revise its budget for the year seven times over a period of two-and-a-half months, says Jack Whitley, senior vice president of e-commerce. The company ultimately decided to defer major expenditures on information technology and distribution center improvements, but slightly increase online marketing spending, Whitley says.
With many companies of all types cutting back on advertising, Whitley is finding some attractive opportunities to test online marketing methods, such as lead-generation services, without the commitment that vendors previously required. “Where a company may have required a $15,000 to $20,000 commitment in the past, we are now able to get tests for between $1,000 and $5,000,” he says. “This allows us to test more venues, and increase our chances of finding something that works.”
Whitley says the company’s plans could change if the recession deepens. “But for now we’re spending at or above the level last year in our online campaigns, and expanding some of them,” he says. He’s been able to sustain spending because web sales, which represent 75% of the orders Replacements receives for missing pieces of silverware and dinnerware sets, have remained strong during the recession. Sales were up 9% in December over the previous year, and continued to climb early this year.
Strong sales begets the courage to invest. And that’s one of the main things online retailers need today to navigate through the recession, says Junonia’s Kelley. “Courage and cash,” she says. “That’s what the times demand.”
Five recession-beating tips for e-retailers
- Expand merchandise selection without investing in inventory through deals with drop-shippers.
- Find affiliates in areas outside of major cities where store closings have limited consumer choice in your category.
- Enhance product images, add video and upgrade training of service agents to appeal to new online shoppers.
- Highlight sale items and special offers in site search results.
- Promote use of live chat to reduce call center costs.