May 27, 2010, 3:27 PM

Pure Play

Shoplet.com shows how a web-only David can succeed against three retail chain Goliaths.

Tony Ellison is the type of web-only merchant who gives retail chain executives nightmares.

He doesn't have the overhead of stores or inventory since he takes orders online and has suppliers drop-ship merchandise to customers. His company, Shoplet.com, has 66 employees. That's about the number of employees you'd find in a typical Staples, Office Depot or OfficeMax store, says Nikki Baird, managing partner at consulting firm Retail Systems Research LLC.

Those cost advantages over its three big chain competitors enable Shoplet.com to keep its prices low, and offer a 110% refund if customers find most items online at a lower price. And low prices is a big reason Shoplet hit an Internet Retailer-estimated $100 million in online sales in 2009, growing revenue by about a third from the previous year. The privately held company doesn't disclose its sales.

Ellison points out that office supplies are a good fit for online retail, as most shoppers don't feel the need to see paper, staples or printer toner before making a purchase. Thus, Shoplet doesn't face the challenges to selling online that many other retailers do, such as those selling clothing.

But there are elements in Shoplet's strategy that any e-retailer can deploy. These include ways to make navigation and ordering easier, a clever way of stamping Shoplet as environmentally friendly that would be hard to do in stores, and an almost fanatical attention to making sure Shoplet appears high in natural search engine results.

Shoplet is exclusively focused on online shopping, and ultimately that's what makes the difference, Ellison says. "Shoplet has the web in our DNA whereas our competitors have bricks-and-mortar in their DNA," he says. "We understand the needs of customers shopping online."

Three big rivals
Shoplet's growth moved it to No. 134 among North American retailers in online sales, according to the 2010 Internet Retailer Top 500 Guide. That's still a far cry from the Big Three—Staples, Office Depot and OfficeMax are Nos. 2, 5 and 7, respectively in the Top 500—but it makes Shoplet the biggest online-only player in office supplies and furniture.

Shoplet plays to its strengths—big selection and low prices—in order to offset the advantages that the Big Three have, such as the brand power reinforced by their stores and their ability to source private-label goods that they sell at high margins.

Its drop-ship model enables Shoplet to offer a wide selection. In fact, the 200,000 SKUs on offer at Shoplet.com are 170,000 more than the selection Staples.com advertises, and nearly 190,000 more products than OfficeMax says it stocks at a typical store.

Shoplet features brand names as a centerpiece of its strategy, says Leslie Scharf, senior vice president of business development. "By choice we've chosen to be manufacturer-centric," he says. "The big boys have made it clear that they want to drive consumers to buy private-label products, driving out the vendors in the process by selling inferior products that carry a higher margin. But that's not the way to satisfy customers' needs."

Not all observers are convinced, however, that brand matters much in this category. "Office supplies are a commodity," says Paula Rosenblum, also a managing partner at RSR. "For most people, paper is paper. People don't care what manufacturer produced that paper."

Sandra Gebhardt, an office supplies buyer for Schonfeld Securities LLC, agrees, but she still shops at Shoplet.com. "I just want a good price, as well as the assurance that it will be there tomorrow," she says.

Shoplet, she says, provides both. Shoplet offers free standard shipping for orders of $45 or more, as well as options for next-day or two-day shipping. And a survey of a few popular products shows prices on Shoplet generally are lower than those of its competitors.

For instance, a ream of HP multipurpose paper sells for $6.13 on Shoplet, $7.29 on OfficeMax.com, $6.99 on OfficeDepot.com and $6.99 on Staples.com. A dozen Bic ballpoint pens sell for $1.97 on Shoplet, $2.29 on OfficeMax.com, $2.99 on OfficeDepot.com and $2.29 on Staples.com, and a Safco Uber high back chair sells for $292.48 on Shoplet, $399.99 on OfficeMax.com, $438.99 on OfficeDepot.com and $349.99 on Staples.com. Beyond the cost of its products, as an online-only retailer Shoplet doesn't collect sales tax, except in New York and California.

Green credentials
But Shoplet does not rely just on price to win customers. It also presents itself as environmentally friendly and came up with an innovative way to offer consumers the 8,000 items it deems green.

The retailer has a pop-up window that allows shoppers to replace conventional items in their carts with more eco-friendly options, such as products made of recycled material or that are more energy-efficient. When a shopper adds an item to her cart a green logo notes "Green Replacement Available." If the shopper clicks on the logo, a pop-up window shows images, product details and prices for both the item currently in the cart and the environmentally friendly alternative.

In addition, the Shoplet.com home page highlights its contribution to saving the planet, noting, for instance, that its customers have saved 29,593 trees by buying recycled paper products. Shop Green is one of 10 major navigation options across the home page, along with such basics as Office Supplies, Furniture and Paper.

The e-retailer revamped the home page as part of an overall redesign that went live in December, a product of work by in-house developers. "We wanted the site to be more customer-centric, easy-to-use and search-engine friendly," says Ellison. Shoplet based many of its changes on feedback gathered through e-mail surveys, e-mail comments and customer calls.

Mousing over each of the 10 categories listed in the top navigation bar produces a fly-out listing of products available in that category. Shoplet also rebuilt its site search engine to make it faster and added an autofill function that offers both keyword and category matches. For instance, typing in "paper" brings up keywords such as "Paper Mate" as well as categories such as "paper bags."

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