In its second-largest acquisition, Amazon buys the company for $970 million.
Smaller e-retailers make their case to value-conscious shoppers, seeking to woo them back from the likes of Wal-Mart and Amazon.
Talk about ambition. David Redlich has a vision of his tiny-by-comparison office and business supplies e-commerce site, ReStockit.com, breaking into the list of top 100 online retailers and reaching sales of $100 million.
No matter that the economy has been in a downspin that has tended to favor huge retailers known for low prices, both online and offline. That means ReStockit competes in office supplies against such top 10 online retailers as Staples, OfficeDepot, OfficeMax and CDW, and in computer and consumer electronics against the rest of the top 10: Amazon, Dell, Apple, Sears, Newegg and Best Buy. To top it off, ReStockit goes up against the likes of mega-wholesale club Costco.com in selling restaurant supplies.
As deal-seeking shoppers flocked to the likes of Wal-Mart Stores Inc., Amazon.com Inc. and Costco Wholesale Corp. in the past year, many smaller e-retailers responded by emphasizing their own value proposition-through deals, free shipping and improved service.
ReStockit’s sales were up 28% this year as of August, and Redlich says he’s not intimidated by his giant rivals. “We see ourselves competing against the big boys because we’re nimble and flexible,” he says. “We’re like the little prize fighter who jabs quickly back and forth, going up against the bigger stalwart that doesn’t move as quickly.”
The economic downturn just made smaller merchants work harder and smarter, Redlich and others say.
“2009 got us to work more on what’s worked well in the past, and really use that data to market to customers better than we’ve done in previous years,” says Brian Schwank, director of marketing for Rock Bottom Golf, a web-only golfing equipment and apparel retailer with about $28.3 million in 2008 sales that competes against larger rivals like multichannel retailers Golfsmith International Holdings Inc. and Edwin Watts Golf.
To hold their own against larger competitors, e-retailers like ReStockit and Rock Bottom Golf are leveraging the accessible and powerful marketing and merchandising resources the Internet offers. Their tools range from steep discounts and free shipping offers prominently displayed on home pages to a special emphasis on customer service and unique efforts to engage shoppers through social marketing.
ReStockit is the 414th largest online retailer, with $14.5 million in 2008 sales-one-half of one percent of 8th-ranked CDW’s sales of $2.6 billion, less than 0.2% of No. 2 Staples’ sales of $7.7 billion, and 0.07% of No. 1 Amazon’s sales of $19.17 billion. It has its work cut out for it, as do online retailers of comparable size.
But this year, teams of ReStockit employees and managers are fine-tuning their merchandising strategies more in depth and more frequently than in the past.
“We have a daily huddle, discussing what we’ve learned from the day before, and we’re having more pricing meetings and merchandising meetings to address how to get our customers to take action,” Redlich says. “People are looking for savings in this economy, and we’re providing quality of merchandise and selection at a great price.”
110% price guarantee
ReStockit involves all employees in frequent discussions about how to improve core operations like merchandising and customer service, including an ongoing review of the best uses of such technologies as live chat, site search and navigation, and personalized cross-selling.
“As a small company, we don’t have the brand power the big guys have,” Redlich says. “So while building our brand, we need a constant call to action-so our customers have a reason to place an order today or this week.”
One new technique that hooked many shoppers is a 110% price guarantee: ReStockit offers shoppers a coupon valued at 110% of the difference if they report a lower price within three days on an item similar to one purchased on ReStockit.com, Redlich says. ReStockit promotes the 110% offer across the top of its home page and authorizes customer service agents to use live chat sessions to check prices and, if warranted, immediately issue a coupon code.
To maintain profit margins amid the price discounts, ReStockit gets suppliers to agree to wholesale price rebates for hitting retail sales targets.
“Simply asking them to lower their prices doesn’t always work, especially if you want them to stay in business,” Redlich says. “The rebates help with our margins and in setting low pricing for our customers.”
Finding an edge
To build on its niche in the golf equipment market, Rock Bottom Golf is complementing its off-price strategy with online affiliate relationships through the LinkShare network with coupon sites including CouponMountain.com and CouponCabin.com. And, in a potentially more significant initiative, it’s using social marketing to build on the loyal following it has developed among customers who value its fun-to-shop environment as well as its low prices, Schwank says.
Rock Bottom, which operates on a Yahoo Store e-commerce platform, has worked with search engine optimization firm McDougal Interactive to build an online golf game that lets visitors compete against one another if they submit an e-mail address. The game features Rock Bottom’s cartoonish mascot, Scratch the Caveman, who also appears regularly in marketing and merchandising content. To score points, players click their mouse to make Scratch swing his club in time to hit a moving target.
For now, players access the game by clicking an obscure link at the bottom of Rock Bottom’s home page. But the retailer and McDougal Interactive are building a widget that, before the holiday shopping season, will let Rock Bottom’s several hundred followers on Facebook download the game to their personal pages on that social network; Rock Bottom is also offering the game widget for download through its e-mail newsletter, which goes to about 350,000 consumers.
“Social marketing is tricky because it’s hard to throw promotional deals to people in their personal space on networks, but this gives us some skin in the game while people are having fun interacting with our brand,” Schwank says.
To further expand its brand as a fun and value-oriented place to shop, Rock Bottom is also developing a series of advertising videos featuring golf-playing Scratch. Developed at a cost of about $2,000 each, the 30-second videos will initially run on YouTube; if they prove popular, Rock Bottom will probably run them as commercials on televised golf programs, Schwank says.