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Using technology from PriceWaiter, the retailer also increases its average order value.
Selling high-ticket items like sofas and living room entertainment centers with an average retail price of about $700, Smart Furniture Inc. wanted to figure how to keep more price-sensitive shoppers engaged online and convert them into buyers. So a year ago, it introduced a way for shoppers to name their own price.
Since launching the “Name Your Price” feature from PriceWaiter, the retailer has increased its shopper-to-buyer conversion rate by 3% to 5%, CEO T.J. Gentle says. And while more shoppers are completing a purchase, they’re also spending more per item and more per order. When shoppers complete a purchase through the Name Your Price feature, the average sale price shoots up to $1,100, Gentle adds.
“Our goal is to provide the best shopping experience possible, and one huge element of purchasing furniture is pricing,” he says. “When shoppers come to our site, they may want to comparison shop because they want the best price. PriceWaiter gave us the opportunity to say there’s no reason to shop elsewhere—just tell us what your price is.”
PriceWaiter, a company launched in 2011 and backed by venture incubator firm Lamp Post Group and other private investors, provides a hosted price-negotiation application that presents a Name Your Price button on a product buy page. A customer can click the button to enter a price, then typically receive within minutes if not seconds an e-mail that either accepts or rejects their offer. If the Smart Furniture rep accepts the price, the customer can then click a link from the e-mail to complete the purchase with a credit card or via PayPal on a shopping cart hosted by PriceWaiter, which processes the transaction on behalf of the retailer. The transaction is then forwarded to Smart Furniture’s financial accounting and inventory management software, which is hosted by NetSuite Inc.
Shoppers get only once chance to offer their own price, and PriceWaiter says it has found conversion rates are higher when retailers advise shoppers to make a reasonable offer. In a recent Name Your Price window on SmartFurniture.com for a $1,099 Herman Miller ergonomic desk chair, the retailer advised: “Keep in mind: There is no free lunch. Reasonable offers (1-10% off) have a much better chance of being accepted.” SmartFurniture didn’t comment on its average discount, but Andrew Scarbrough, co-founder and chief operating officer of PriceWaiter, says the average discount offered through the feature is 8% across all companies that offer it.
Scarbrough adds that average order values tend to rise for transactions that use the Name Your Price feature—not only because it can make high-ticket items more attractive to shoppers, but because it often also leads to higher volume orders for which retailers are more willing accept discounted prices.
At Smart Furniture, about 25% of shoppers who use the Name Your Price feature complete the purchase, Gentle says. He adds that Smart Furniture offers the feature on about 40% to 50% of products, generally those retailing for at least $150 with good profit margins.
The retailer, which operates one store at its Chattanooga, TN, headquarters but does 99% of its sales online, is on course to grow total sales about 33% this year, from the mid-teens in millions of dollars last year to a range of $18 million to $20 million, Gentle says.
When a customer enters his own price, the price is reviewed by a customer service rep who has been instructed on the permissible price ranges, based on targeted profit margins, for each product category. In some cases, a rep may click into the NetSuite software to check on how well a particular product is selling and its profit margins before deciding whether to accept or decline a customer’s offered price. In other cases, a rep may also check with a SmartFurniture product specialist for advice on whether to accept a customer’s price.
One problem that cropped up during deployment had to do with items that required the shopper to choose certain configurations, such as selecting the material for a sofa. When some shoppers chose product features before submitting a price on a configured product, the Name Your Price software didn’t capture the fully configured product before trying to submit the price, resulting in an error page. The retailer worked with PriceWaiter to fix the bug within a couple of weeks, Gentle says.
PriceWaiter, which is still operating solely on venture capital, is offering its technology for free to the first 500 retailers that use it, and “we’re approaching that number now,” says co-founder and CEO Stephen Culp. Culp is also a founder and former executive of Smart Furniture, who started to work on the initial concept of PriceWaiter while still at the furniture retailer.
Culp says PriceWaiter plans to continue offering a free, basic version of its Name Your Price application, and will soon release premium versions with additional yet-to-be-named features. PriceWaiter has not yet said what it will charge for its premium versions.