April 2, 2013, 12:01 PM

How Karmaloop keeps online coupons legitimate

The e-retailer has 140,000 brand evangelists who can offer coupon codes.

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Streetwear retailer Karmaloop has increased its online sales rapidly in recent years by connecting with its base of young adults and offering apparel that fits their lifestyles from brands like Mighty Healthy and Free People. The retailer, No. 138 in the Internet Retailer Top 500, did $130 million in sales in 2011, up 81% from an estimated $72 million in 2010.

Helping to drive that growth is an army of 140,000 independent reps, or customer evangelists, who spread the word about Karmaloop through means including handing out fliers on street corners, writing about the retailer and its brands on blogs, and distributing coupons.

“They’re our street team,” says Megan Knisely, director of affiliate marketing. “They’re brand evangelists who love our brand and spread the word about it. We think of them as an extension of our work force.”

In 2012, she says, these Karmaloop street reps accounted for 25% of Karmaloop’s overall revenue. The retailer’s 2012 revenue figure wasn’t available, though Karmaloop says its street reps also accounted for about one-quarter of 2011 revenue of $130 million, or more than $30 million.

Karmaloop provides its advocates with a web site at repteam.karmaloop.com, where they can sign up as reps, receive their own rep code, and learn how to distribute their rep code as part of Karmaloop coupons to people they meet on the street or online via their own blogs or other sites where Karmaloop doesn’t already have exposure. Coupon recipients get 20% off purchases on Karmaloop.com; street reps earn points, based on the amount spent by shoppers with those coupons, that they can redeem for cash or Karmaloop products.

With coupon-code monitoring software from BrandVerity, the retailer also closely monitors its street reps’ placement of online coupons, to ensure that they play by the rules. If a rep distributes her rep code through a popular coupon site such as RetailMeNot, where Karmaloop already advertises, for example, the retailer will get an alert on an online dashboard, then inform the rep to remove her code from the site. “We want reps to reach new audiences we haven’t reached yet, and we want to be able to give the credit to the reps who are doing a fantastic job of spreading the word about Karmaloop,” Knisely says.

“We have a three-strike rule,” adds Danii Frazier, affiliate marketing assistant at Karmaloop.” If they use their rep codes outside of the rules three times, we suspend them.”

Karmaloop typically checks the BrandVerity dashboard once a week and may find 30 or 40 reps operating outside of its rules. Most make amends to stay within the program. “Sometimes we get repeat offenders,” Frazier says. “But normally reps are willing to work with us; it’s why they’re here.”

BrandVerity, which launched its coupon-code monitoring software in January, provides it over the Internet as a software-as-a-service for which retailers pay a monthly fee based on usage. The fee starts out at about $250 per month for a retailer monitoring once a day one brand with about 25 codes, according to Sam Engel, marketing manager for BrandVerity. The fee rises with the number of brands, codes and monitoring frequency, he adds.

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