Specialty / Non-Apparel:
Winning over customers in specialty retail

Internet Retailer's Best of the Web 2005

AdvanceAutoParts
AuntiesBeads.com
Drs. Foster and Smith
Lego
Lillian Vernon
Northern Tool
REI
Ritz Camera
Rockler
Sharper Image
Telescopes.com
Tool King
Vermont Teddy Bear

One way to stand out among thousands of online retailers is to focus on a niche market. But serving a strong niche will not alone guarantee retailing success. Even specialty retailers have their competition, from other niche players as well as mass merchants, and the winners in this space must excel in at least three areas: Providing customers enough information to support the purchase of specialty products; tailoring the shopping experience to the way their customers like to shop; and providing consistency in products and service across all channels that a merchant chooses to sell through.

Woodworking products retailer Rockler.com, like the other specialty retailers among Internet Retailer's 2005 Best of the Web Top 50, is a good example of a merchant that identifies its customers' needs and serves them well. Shoppers on Rockler, for example, can read about how to install a European door hinge as well as get useful information about the 10,000 other products Rockler sells.

Realizing that its customers like the flexibility of shopping and receiving customer service through its three channels of web, stores and catalog, Rockler has tightly integrated the shopping experience through each channel. "Integrating the service capabilities of the catalog and in-store pickup into the web is a good move for a multi-channel retailer, because people will use all three channels cohesively," says Jim Okamura, senior partner with J.C. Williams Group.

RitzCamera.com, serving the booming digital camera market as well as traditional photography, has designed its site to cater to all types of photography enthusiasts. "This site has really rich content; it's clearly a place for someone who is a camera buff to look for a camera," says Heather Dougherty, senior analyst at consultants/researchers Nielsen/NetRatings. At the same time, she notes, it's also a site that welcomes amateurs by providing enough information so they can narrow down their search. "They understand that there's a big difference between the types of users and the information they need," she says.

Providing sufficient product information and customer support helps Telescopes.com stand out among astronomy enthusiasts. "The company has established itself as an authority in this category and that is what makes a difference in any specialty retail category," Okamura says.

Specialty retailers also thrive by building personalization and trust into their service. VermontTeddyBear.com, for instance, leverages the web to not only let customers customize products, but to see their personalized stuffed animal before purchasing it. "When you are selling over the phone, the customer has to trust you as to what the bear will look like," says Tom Funk, web manager for VermontTeddyBear. "But with the Internet, they can actually see the bear they are ordering."

Specialty retailers can also expand on their niche as they learn of supplemental interests of their customers. ToolKing.com, which has already transitioned from a growing brick-and-mortar chain to a single store and more than half of its sales on the web, is using its insight into its customers' interest to expand from tools into related home improvement and automotive products.

But knowing that its customers like to find what they want quickly, it keeps its web site streamlined to support easy shopping. "One or two clicks and you can get exactly where you want to go," says Neil Stern, senior partner with retail consultants McMillan/Doolittle. "They understand who their customers are and how they want to shop."

Customer data is the backbone of any multi-channel retailer's marketing strategy. Without a good sense of who their customers are, where they reside, and what they purchase, retail marketers might as well be walking in the dark.

With that in mind, AdvanceAutoParts.com has beefed up its web analytics to better understand customers' behavior patterns. Since installing the new analytics software from WebSideStory earlier this year, the company has increased the number of visitors accessing its store locator, which in turn has helped drive more traffic to its more than 2,500 retail locations.

Having a better understanding of its customer base has also prompted AdvanceAutoParts.com to install a link that translates content on its site into Spanish. The move places the retailer on the cutting edge of multilingual Internet retailing. "Advance Auto's option to view its site in Spanish reflects their customer base," says Anthony Latona, partner with Consumer Consulting LLC. "This commitment to the Hispanic market shows where they are heading with their business."

Indeed, many Hispanics do customization work on their automobiles or are setting up small auto repair businesses that a retailer such as Advance Auto Parts can supply. Advance Auto Parts has been increasing its product line to cater to the customization and commercial markets.

At the same time, Advance Auto Parts is working to more closely link its web site to its retail locations. Customers making purchases through the web site are asked to enter their ZIP Codes so the company can fulfill orders from local stores, if possible, rather than a central warehouse. The strategy is not only a way to speed delivery, but it also shortens the shelf life of merchandise in its stores. "A $3,000 diagnostic tool is not the kind of part a typical consumer buys and will not have high turnover in the store," adds Latona.

With the auto parts business undergoing myriad changes in consumer purchasing behavior due in part to retailer consolidation and the creation of more complex auto systems, Advance Auto Parts is making the changes needed to thrive in this rapidly diversifying industry. "They are putting it together better than anyone else in the business," says Latona.

Advance Auto Parts Inc.
5673 Airport Road Roanoke, VA 24012
Date Launched
August 2001
Unique visitors (monthly)
NA
Vendor Relationships
Site Design
NA
E-Commerce Platform
NA
Web Hosting
In-house
Site Search
NA
Content Management
NA
Order Management
Integrated Information Systems
Payment Processor
NA
Fulfillment
Integrated Information Systems
Affiliate Marketing Management
NA
Search Engine Management
NA
E-Mail Marketing
NA
Web Analytics
WebSideStory

When Auntie's Beads launched as a retail web site from Ron and Susie Henderson's garage four years ago, the idea was to operate as a niche web merchant with a small store on the side. But its market--providing beads and other materials to people who like to make their own jewelry--has quickly grown into a multi-channel operation with more than $6 million a year in sales.

Most of those sales are on AuntiesBeads.com. "AuntiesBeads.com does what a niche specialist should do," says Jim Okamura, senior partner with retail consultants J.C. Williams Group. "They present themselves as a category killer of bead retailing, and they definitely show the breadth and depth of what they carry."

But Henderson, CEO and co-owner, has found the web to be more than just a driver of sales. While the web accounts for 85% of all sales, he has also found it invaluable as support for opening stores.

For one thing, the web gives Houston-based Auntie's Beads the volume it needs to offer low prices, allowing its three stores as well as its web and catalog to compete against larger retail organizations, he says. But the web also helps to determine the best locations for stores and to find store managers, adds Henderson, a former IT project manager for Fidelity Investments who says he's "having fun in an entrepreneurial experience."

Soon after the site launched in October 2000, customers began asking if AuntiesBeads.com had a store. So he matched requests for stores with online sales by ZIP Codes to determine where to open brick-and-mortar locations. It now has two stores in Texas and one in Kansas City, Kan., with three more planned next year.

When Henderson opened the store in Kansas City, he hired as its manager a bead enthusiast who had frequently communicated with him through the "Talk to the CEO" feature at every page on AuntiesBeads.com.

So far, the stores have brought in about six times the amount of web sales in the local communities where they operate, though there's no sign that the stores are taking away from online sales, Henderson says. "The sky's the limit," he says. "I really believe in the concept of a multi-channel operation."

Auntie's Beads Inc.
342 S. Main St. Grapevine, TX 76051
Date Launched
October 2000
Unique visitors (monthly)
100,000+
Annual Web-Based Sales
$6,000,000 (2004)
Vendor Relationships
Site Design
Experio, In-house
E-Commerce Platform
In-house, Microsoft.net
Web Hosting
Full Control
Site Search
SLI Systems
Content Management
In-house
Order Management
In-house
Payment Processor
Linkpoint
Fulfillment
In-house
Affiliate Marketing Management
LinkShare

Search Engine Management
Overture, Google, FindWhat.com
E-Mail Marketing
VerticalResponse

Web Analytics
Full Control

Although its history is cataloging, pet supplier Drs. Foster & Smith Inc. sees a future tied to e-commerce. After opening an e-commerce site in 1998 and racking up first-year web sales of about $800,000, the company's Internet-generated business today yields annual revenue of $80 million, more than 45% of sales.

Web sales are growing along with Drs. Foster & Smith's multimillion dollar investment in DrsFosterSmith.com because the company is making a concerted effort to build the most frequently visited pet supply store on the Internet. Drs. Foster & Smith is focusing on search engine marketing, both natural and paid, and is using new bid management technology that expands the return on its search marketing investment. The company also developed a system to import online orders directly into its back-end system.

Drs. Foster & Smith is able to compete online with bigger chains such as Petco Animal Supplies Inc. because of a strategy grounded in building the same type of trust relationship pet owners have with their veterinarians. For instance, Drs. Foster & Smith has five veterinarians, three pharmacists and others who research, write and develop content for an interactive library of more than 3,000 articles on pet care, health maintenance and other pet quality-of-life topics. Merchandisers and staff veterinarians also evaluate several thousand products before selecting about 50 to feature on the web each month or in its catalogs. "This company is operated by two practicing veterinarians who are committed to offering only very select merchandise," says Joseph Voellinger, Internet marketing manager. "People trust the brand and our vet-recommended products."

While Drs. Foster & Smith is still an active cataloger--it publishes more than 40 million annually--the company is investing more than $2 million in new web technology such as analytics and an online information center and is preparing for the day when the Internet generates the majority of all sales. "They've made the transition from catalog-only company to a multi-channel retailer with a strong foundation in e-commerce," says Patti Freeman Evans, e-commerce analyst with Jupiter Research Inc. "Online pet supplies is a growing category and they're poised to grow with it."

Drs.Foster & Smith Inc.
2253 Air Park Road Rhinelander, WI 54501
Date Launched
November 1998
Unique visitors (monthly)
855,000
Annual Web-Based Sales
$85,000,000 (est. 2004)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
Microsoft
Web Hosting
Berbee Information Networks
Site Search
Endeca Technologies
Content Management
In-house
Order Management
In-house
Payment Processor
VeriSign
Fulfillment
In-house
Affiliate Marketing Management
None
Search Engine Management
I-Crossing, Atlas OnePoint, In-house
E-Mail Marketing
In-house
CRM
In-house
Web Analytics
In-house
Content Delivery Network
Akamai Technologies
Rich Media
In-house (Flash)

One of the biggest challenges Internet retailers face is bringing their product to life. Recognizing that its product is well suited to cutting edge computer graphics, Lego.com has embarked on a merchandising strategy built on visual appeal.

By presenting large images of its model kits, as well as multiple perspectives, Lego is making its web site a centerpiece of its burgeoning multi-channel retail strategy.

"Lego is very smart about how it approaches its web site from a design standpoint and a business process," says Patti Freeman Evans, retail analyst with Jupiter Research. "They are very thoughtful when it comes to making changes to their site."

Recent changes have centered on enlarging images 75% to create a better display environment and adding zoom capabilities. The retailer has also added a rich media feature that allows customers to flip through a virtual catalog, just as they would if they were holding it in their hands. Since implementing its most recent changes, Lego.com has increased conversion rates 5% and seen a 10% hike in average transaction size.

While such innovations have proven to be attention grabbing features, Lego.com is merely laying the groundwork for a 360-degree rotational view of merchandise, which the company has in the works. The intent is to create the same hands-on view a customer can achieve in a store.

"Lego products are perfect for 3D imaging online," says Jarid Lukin, e-commerce business manager for Lego Co. "Product visualization is a big focus for us. Customers have told us they want detailed images."

Customer feedback is important for Lego.com because it is gearing up to more closely integrate its web site with its 23 retail stores, some of which are in Disney theme parks. Lego.com frequently conducts customer surveys to learn what it can do better. "The more customer contact we have, the more quantitative and anecdotal feedback we have," he adds.

Such information is critical, because Lego.com attracts a wide range of customers, including children, school teachers looking for educational tools, and Lego enthusiasts who view the site as the ultimate Lego authority. "A robust site is a good place for Lego.com to invest money," says Evans.

The Lego Group
555 Taylor Rd. Enfield, CT 06082
Date Launched
2000
Unique visitors (monthly)
4,300,000
Vendor Relationships
Site Design
In-house
E-Commerce Platform
Microsoft
Web Hosting
Hewlett Packard, Digex
Site Search
Google
Content Management
Interwoven
Order Management
Ecometry

Payment Processor
Paymentech
Fulfillment
Ecometry

Affiliate Marketing Management
None
Search Engine Management
In-house
E-Mail Marketing
Kana
CRM
In-house
Web Analytics
WebSideStory
Content Delivery Network
Mirror Image
Rich Media
RichFX

When Zelnick Media acquired Lillian Vernon Corp. last year, it was for what the company could be as well as what it already was. "It had a strong brand offline and the beginnings of a strong brand online," says president Jonathan Shapiro. "We saw that as a big opportunity."

But could a 50-something, catalog-based marketer with a middle-market following--not the web's earliest or most aggressive users--translate itself into the new medium? In a word, yes. Anticipating that its customers would grow increasingly comfortable with shopping online, Lillian Vernon has buffed up its web site, and that's paid off. Web sales, about 30% of sales last year, are now 40% and trending upwards.

That gain is about more than wider web adoption by its customers, though Lillian Vernon's target market of young- to middle-aged women with discretionary income meshes with a large part of the current population of online shoppers, according to Jupiter Research analyst Patti Freeman Evans. "It doesn't surprise me that online revenues are 40%," she says. "Much of Lillian Vernon's offering is gift-oriented, and the category lends itself very well to the online channel. They do a good job of presenting a wide assortment."

Lillian Vernon has made key improvements to its e-commerce operation this year, such as expanding paid search from a few hundred keywords to 5,000. Its affiliate program has broadened in scope and strengthened its incentives to drive up affiliate revenues by 20% over last year, becoming the largest contributor among online marketing efforts. Used so far by about 10% of online customers, chat functionality added this year already is producing double the usual conversion rates, Shapiro says.

Lillian Vernon squeezes extra utility out of the efforts it's put into getting people to and around its site by using it as a vehicle for new product testing. Stationery, launched this year as an online exclusive, did so well that it won a place in the current catalog. Now the company is watching the ride-on toys launched online in October to see if they'll do the same.

It is all part of a strategy to let customers shop however they want to. "We believe that increasingly, what the customer wants is the convenience of a multi-channel retailer," Shapiro says.

Lillian Vernon Corp.
1 Theall Road Rye, NY 10580
Date Launched
1995
Unique visitors (monthly)
923,000*
Annual Web-Based Sales
$80,000,000**
Vendor Relationships
Site Design
IBM
E-Commerce Platform
IBM Websphere
Web Hosting
In-house
Site Search
EasyAsk

Content Management
OCP
Order Management
In-house
Payment Processor
Paymentech
Fulfillment
In-house
Affiliate Marketing Management
LinkShare

Search Engine Management
In-house
E-Mail Marketing
Digital Impact
CRM
In-house
Web Analytics
Fireclick
Content Delivery Network
Mirror Image
*comScore Networks report, October 2004
**Internet Retailer Top 300 Guide est., 2003

If Northern Tool & Equipment's store, catalog and web site were a football team, the MVP might just be the Internet channel. That's because Northern Tool has excelled at harnessing the medium's power for maximum utility, increasingly using it as a hub that supports not only online transactions but all other channels.

Northern Tool's 50 stores are also a growth engine, but the company looks to its web site to do more than sales. "Our goal is for NorthernTool.com to be the ultimate resource for product information for our customers and the Northern team," says Nate Miller, e-commerce marketing manager. "All channels are benefiting from the Internet. The store channel benefits from the site's store location and product information; the catalog benefits from extended product data and selection available online." And the online channel not only rings up dollars on its own, but carries the ball, with customer relations features such as a wish list, e-mail a friend, and track-your-order functionality.

60% of Northern Tool's sales are mail-order, and 20% of those are Internet sales, up from 12% two years ago. Since then, Internet sales have soared by more than 60%. Northern Tool has supported that trend this year by increasing the quality and quantity of images online and upgrading its e-commerce platform for increased stability at higher transaction volume. It's transitioned its call centers from using an internal database of product information to using the web interface.

A recent site re-launch upgraded search and navigation to keep pace with its assortment of 14,000 SKUs. A more web-focused approach to operations has even changed the way Northern Tool handles product description, shifting emphasis from minimizing copy to fit catalog page space to expanding detail as much as possible in the greater space available online.

Perhaps most telling about the web's success among Northern Tool's channels is the resources it's put behind online advertising. Ad dollars devoted to the web site are up by more than 65% over last year. That's paid off by reaching customers new to the company, Miller says, as more than 50% of web buyers at NorthernTool.com have never purchased at Northern Tool before.

Northern Tool & Equipment Catalog Co.
2800 Southcross Dr. W. Burnsville, MN 55337
Date Launched
1998
Unique visitors (monthly)
1,200,000
Annual Web-Based Sales
$100,000,000 (projected FY05, 8/04-7/05)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
IBM Websphere
Web Hosting
In-house
Site Search
Endeca Technologies
Content Management
In-house
Order Management
In-house
Payment Processor
Paymentech
Fulfillment
In-house
Affiliate Marketing Management
Performics, Commission Junction
Search Engine Management
Performics, NetConcepts, Traffic Leader
E-Mail Marketing
YesMail
CRM
In-house
Web Analytics
Coremetrics

As the web has evolved as a retail channel, smart merchants have come to recognize its power as the center of a multi-channel strategy. And no one has carried out that strategy better than Recreational Equipment Inc. "A few years ago we woke up and realized that REI.com was far more than an online store," says COO Sally Jewell. "We decided to leverage the web to support every aspect of REI."

REI has developed cutting-edge multi-channel strategies including in-store kiosks that let customers order from REI.com products not in stock--a great service, for example, for stores too small to carry canoes. Customers ordering over the web can request free shipping for store pick-up, letting stores cross-sell more products when the customer arrives.

Lauren Freedman, president of research and consulting firm The E-Tailing Group, says REI excels in multi-channel customer service and consistent presentation of products. "Their pages are always strong with lots of good descriptions," she says.

But what makes REI so effective as a multi-channel retailer is its ability to meet new challenges. "They continue to innovate," Freedman says. A size-finder service makes it easier to shop multiple brands, she notes, and the home page offers time-saving short-cuts to holiday gift categories.

Because many shoppers who arrive at a product page through Internet search may not be familiar with the 75-store company, REI is dressing up its pages with more product details and rich media to win them over as customers, says Jason Sutherland, manager of online customer experience.

Key to making the multi-channel strategy work, he says, is coordination among employees in each channel as well as an integrated technology platform.

"If we feature something online, it will be 10 times more powerful if it's integrated with our call center and stores," Sutherland says. "We don't want a customer to go into a store, say they saw something online, and get a blank stare from the store associate."

In effect, he adds, REI is blending more of the in-store and online shopping experiences. "We're looking at deeper, more visual representations of key products," Sutherland says. "Before customers buy online, we'll give them more of a store shopping experience."

Recreational Equipment Inc.
6750 S. 228th St. Kent, WA 98132
Date Launched
September 1996
Unique visitors (monthly)
3,000,000
Annual Web-Based Sales
$100,000,000 (2004)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
IBM Websphere, In-house
Web Hosting
In-house
Site Search
In-house
Content Management
Documentum, In-house
Order Management
Order Power, Websphere, in-house
Payment Processor
Order Power
Fulfillment
Manhattan Associates PKMS
Affiliate Marketing Management
LinkShare

Search Engine Management
In-house
E-Mail Marketing
Dart Mail, In-house
CRM
In-house
Web Analytics
Coremetrics

Content Delivery Network
Akamai Technologies, Mirror Image

Among the things that retailers can do online that they can't do in stores or catalogs is to provide everything a customer wants to know about a product--whether the customer knew he wanted to know it or not. That's one of the areas where RitzCamera.com shines. "This site has really rich content; it's clearly a place for someone who is a camera buff to look for a camera," says Heather Dougherty, senior analyst at researchers Nielsen/NetRatings.

At the same time, she notes, it's also a site that welcomes amateurs by providing enough information so they can narrow down their search. "They understand that there's a big difference between the types of users and the information they need," she says.

Sales at RitzCamera.com this year will grow 25-30%, says Fred H. Lerner, president of Ritz Interactive Inc., which operates RitzCamera.com and 19 other sites, including photo gallery and printing sites, fishing and boating sites and an e-commerce site for golfer Greg Norman's Great White Shark Enterprises. The increase in sales is the result of a combination of more consumers shopping online and the digital camera revolution. "Interest in digital camera photography has increased at a dramatic rate," says Lerner, who is also president-elect of the Photo Marketing Association. "There's a natural fit between digital photography and uploading, sharing and printing images."

RitzCamera.com has been among the most aggressive online advertisers, and Lerner expects that to continue. "We are a premier advertiser with every major shopping portal and shopping bot," Lerner says. "We've been extremely active all along and plan to continue to be active." Lerner, who expects growth in 2005 to be about 20%, says the company has no offline advertising plans. "We'll remain an online advertiser," he says. "That's where we find our customers and they find us."

Once it gets shoppers to the site, RitzCamera.com does a good job of getting customers to consider other purchases, Dougherty says. "They do a lot of cross-selling, almost to an overwhelming extent," she says. But that's not necessarily bad. "When it comes to deep knowledge, anyone who's not specializing in photography has a hard time competing with Ritz," Dougherty says.

RitzCamera.com/ Ritz Interactive Inc.
2010 Main St., Suite 400 Irvine, CA 92614
Date Launched
April 1999
Unique visitors (monthly)
4,000,000
Annual Web-Based Sales
$70,000,000 (2003)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
IBM Websphere
Web Hosting
Savvis Communications, SBC
Site Search
Endeca Technologies
Content Management
IBM Accelerator
Order Management
CommercialWare CW Direct

Payment Processor
Chase Merchant Services
Fulfillment
NA
Affiliate Marketing Management
Commission Junction
Search Engine Management
In-house
E-Mail Marketing
@Once
CRM
In-house
Web Analytics
WebTrends

Content Delivery Network
Piva, Akamai Technologies

Multi-channel specialty retailers understand that in order to thrive on the web, they must have a cohesive merchandising strategy across all channels. For Rockler.com the web offers an opportunity to showcase the best aspects of its catalog and retail store businesses.

Rockler.com has combined the customer service that is a hallmark of its catalog business with the in-store pickup so successfully used by other large multi-channel retailers, and made them cornerstones of its web site. The Medina, Minn.-based woodworking supply retailer has spiced up this recipe by loading its site with information on do-it-yourself projects. The result is an Internet-based playground for woodworking enthusiasts.

"Integrating the service capabilities of the catalog and in-store pickup into the web is a good move for a multi-channel retailer, because people will use all three channels cohesively," says Jim Okamura, senior partner with J.C. Williams Group.

A cataloger for 24 years before opening its first store in 1978, Rockler Woodworking and Hardware has made service a major component of its web strategy since launching the site in 1997. The company, which mails 9 million catalogs annually, was an early adopter of live chat. Most recently, Rockler.com enhanced its shopping cart software by including the ability to check on its web site the status of an order placed via fax machine, phone or mail.

"Personalization is a big focus and we plan on adding more of it to our site," says Ann Rockler Jackson, CEO of Rockler Companies Inc. "Much of what we learned about customer service was through our catalog business."

Information is another major feature of the site. Visitors can read about products and how to use them. "We have a reputation for specialty products and advice on how to build things yourself," adds Jackson.

With more than 10,000 products on its site, the company stresses simplicity in its inventory, preferring to stock primarily small items. Shoppers also have the option of picking up an order at one of company's 35 retail outlets.

"In-store pickup is underutilized by multi-channel retailers," Okamura says. "It not only helps boost conversion rates, it is key to providing a multi-channel shopping experience."

Rockler Cos. Inc.
4365 Willow Dr. Medina, MN 55340
Date Launched
1997
Unique visitors (monthly)
343,000*
Annual Web-Based Sales
$10,400,000**
Vendor Relationships
Site Design
In-house
E-Commerce Platform
In-house
Web Hosting
DigitalNorth
Site Search
Cold Fusion
Content Management\
In-house
Order Management
NA
Payment Processor
Paymentech
Fulfillment
NA
Affiliate Marketing Management
In-house
Search Engine Management
Avenue A, Razorfish
E-Mail Marketing
ExactTarget

Web Analytics
Fireclick
*comScore Networks report, October 2004
**Internet Retailer Top 300 Guide est., 2003

As one of the first retailers to establish a presence on the web, Sharper Image Corp. has firmly grasped the important role that web site infrastructure plays in its online merchandising strategy. From fast page downloads to crisp thumbnail images in e-mail marketing messages, SharperImage.com is designed to create a high-end customer experience.

"For a multi-channel retailer to drive people to its web site, it needs to create a site that delivers a consistent look and feel across all channels," says Peter Franczak, partner with Consumer Consulting LLC. "If that consistency is not there, then a retailer's Internet strategy will not fit its overall merchandising strategy."

SharperImage.com's emphasis on web site infrastructure is grounded in its desire to better serve the customer. Image clarity, no matter what the size, is essential because the same point is stressed in the catalog division. A simple, sparse layout of merchandise on the site reflects the same approach taken in its stores.

"Web site infrastructure is not the most exciting topic, but it is key because the web site is a vehicle to service customers," explains Tracy Wan, president and COO of Sharper Image. "How you service your customer across all channels is critical because you want repeat business."

Two of the biggest enhancements for the site are an improved site search engine and a more muscular IP platform. The new search engine employs a higher degree of logic intended to direct customers to the products for which they are searching, even if the product name or category is misspelled. Prior to this innovation, the search engine responded to such errors by listing top selling products. The new IP platform allows pages to be delivered faster.

"When your Internet business is growing 20% to 25% you want to take advantage of high speed Internet connections by serving up pages as fast as possible and directing people to the product they want the first time," says Wan. Internet sales are the fastest growing portion of Sharper Image's business on a percentage basis, she adds.

"The hardest part of selling products on the web to which people aspire is meeting the customer's expectations, and Sharper Image is doing that," says Franczak.

Sharper Image Corp.
650 Davis St. San Francisco, CA 94111
Date Launched
1995
Unique visitors (monthly)
749,000*
Annual Web-Based Sales
$115,000,000 (FY 2004)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
NA
Web Hosting
In-house
Site Search
NA
Content Management
In-house
Order Management
In-house
Payment Processor
First National Merchant Services

Fulfillment
In-house
Affiliate Marketing Management
LinkShare

Search Engine Management
NA
E-Mail Marketing
In-house
CRM
In-house
Rich Media
In-house
*comScore Networks report, October 2004

When it comes to selling highly technical merchandise online, it helps to be an authority on the product and have lots of experience as an Internet retailer. Such are the traits of Telescopes.com, whose management team has drawn on years of online merchandising experience to create a national audience for a niche product.

The Duluth, Minn.-based retailer sells everything from the tiniest accessories, such as eye pieces, to all the equipment needed to create an amateur astronomical observatory. Its selection is complemented by an extensive guide to astronomy that educates visitors about how to select the right product, use it, and even how to view certain celestial objects.

"The company has established itself as an authority in this category and that is what makes a difference in any specialty retail category," explains Jim Okamura, senior partner with J.C. Williams Group. "Their authoritativeness comes from more than just having a deep selection of merchandise."

Indeed, all members of the company's management team are astronomy enthusiasts. "This is a highly technical product and in order to understand it, you need to learn about astronomy," says Jon Thralow, director of marketing and technology for Telescopes.com. "Most consumers are not all that knowledgeable about astronomy, so when they come to our site they are looking for knowledge."

It also helps to be a seasoned online marketer. Thralow's experience as an Internet retailer dates back to 1994 when he and his brother formed Peepers.com, a retail site selling sunglasses. Since then the company has launched several other sites including Binoculars.com and Pans.com.

The company's expertise in online merchandising has helped it become an elite dealer for Meade Instruments Corp., which brought inclusion in Meade's dealer marketing program and boosted the site's sales of Meade's products 130%.

To keep the site fresh, Telescopes.com seeks feedback from customers and performs regular champion/challenger tests of its site's appearance. A blog for astronomy buffs is also in the works. "Telescopes are not an impulse purchase and the site is doing all the little things needed to be a strong specialty retailer," says Okamura.

Telescopes.com
30 E.Superior St. Duluth, MN 53864
Date Launched
October 2001
Unique visitors (monthly)
150,000
Annual Web-Based Sales
$12,000,000 (entire cmpany)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
In-house
Web Hosting
The Planet, Server Central, CI Host, In-house
Site Search
Go Search
Content Management
In-house
Order Management
In-house
Payment Processor
Authorize.net
Fulfillment
In-house
Affiliate Marketing Management
Commission Junction
Search Engine Management
In-house
E-Mail Marketing
In-house
CRM
In-house
Web Analytics
AW Stats

A little more than a decade ago, Tool King LLC operated nine stores--six in Colorado and three in Wisconsin--as it set out to build a national presence selling hammers and power tools to craftsmen and do-it-yourself homeowners. "We had envisioned a store chain across the U.S.," says Don Cohen, managing principal.

But as operating costs rose, the company reined in its plans, closed its Wisconsin stores and focused on finding and selling the latest products in the tool business. In 2001 it stumbled across its hottest trend--one that quickly put Tool King back on a national growth trajectory--when Cohen let his 14-year-old son experiment with selling a cordless power drill on eBay.com.

The first drill they listed on eBay didn't sell, but the second one earned the Cohens $7.50. Then they listed five more, then 10 more, all at fixed prices. "They kept selling," Cohen recalls. "But if that second one hadn't sold, we wouldn't be on the web today."

Cohen invested $8,000 to build a web site, giving the job to one of his store employees with a knack for the web to develop ToolKing.com. The site launched in 2002, when Tool King operated five stores in Colorado that together grossed about $5 million a year.

As in-house staff improved the site's functionality, Cohen built efficient fulfillment and distribution systems based on a single warehouse and a network of drop shippers. Today, Tool King operates a single 10,000-square-foot store doing $5 million a year. ToolKing.com does three times that much, or $15 million, as its online market has mushroomed to an international customer base. It has also expanded beyond tools to offer home improvement, automotive and other products.

Expansion hasn't hurt ToolKing.com's ability to serve customers, says Neil Stern, senior partner with retail consultants McMillan/Doolittle. "One or two clicks and you can get exactly where you want to go," he says. "They understand who their customers are and how they want to shop."

Although he may never realize his early dream of a national store chain, Cohen figures the web will continue to grow sales without running into efficiency problems. "We're looking at $100 million in annual sales within the next 30 months," he says.

ToolKing.com
11111 West Sixth Ave. Lakewood, CO 80215
Date Launched
2001
Unique visitors (monthly)
1,400,000
Annual Web-Based Sales
$20,000,000 (2004)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
In-house on .NET
Web Hosting
Datapipe
Site Search
In-house
Content Management
In-house
Order Management
In-house
Payment Processor
VeriSign
Fulfillment
UPS
Affiliate Marketing Management
LinkShare

Search Engine Management
Traffic Leader
E-Mail Marketing
Constant Contact
CRM
In-house
Web Analytics
In-house
Rich Media
In-house

When avid online shoppers talk about what they're buying on the Internet, teddy bears are usually not among the more common books, CDs, software, food items and apparel.

But one company--VermontTeddyBear.com--has been able to sell $28 million worth of stuffed animals on the web each year, accounting for about half the company's total sales. And it's used its top-notch customization capabilities as well as an aggressive radio marketing campaign to boost those sales.

"This is a great example of a company that has succeeded in a niche market," says Heather Dougherty, senior analyst with Nielsen/NetRatings. "They've been able to allow customers to make their gifts unique."

Indeed, Vermont Teddy Bear has been selling specialty teddy bears for more than 20 years, primarily through telephone orders, and has offered the product via the Internet since 1997. The ability for customers to view products online and see how accessories or different clothing works on various teddy bear models has propelled the firm's sales.

"When you are selling over the phone, the customer has to trust you as to what the bear will look like," says Tom Funk, web manager. "But with the Internet, they can actually see the bear they are ordering. Plus, the Internet has allowed us to turn around orders the same day."

Indeed, for Valentine's Day, the site's biggest holiday, Vermont Teddy Bear will take orders up to midnight on Saturday for a Monday delivery.

While most of the company's customized orders involve the use of different accessories and the embroidering of a recipient's name, sports team name, sports number or personalized message, Vermont Teddy Bear recently added a complete customization service. Here, buyers can describe a unique bear they want made. A designer will listen to the instructions and fax or e-mail a design. The company will make the bear to specs within 17 days.

While Vermont Teddy Bear uses online marketing to promote its site, much of its advertisements are through radio spots on stations with a large male audience. That's because the majority of the customers at Vermont Teddy Bear are men purchasing bears for women. For these ads, popular disc jockeys endorse and talk about the product.

Vermont Teddy Bear Co. Inc.
6655 Shelburne Rd. Shelburne, VT (0)5443
Date Launched
March 1997
Unique visitors (monthly)
560,000
Annual Web-Based Sales
$34,000,000 (companywide 2004)
Vendor Relationships
Site Design
In-house
E-Commerce Platform
Yahoo Merchant Solutions/ePages
Web Hosting
In-house/Yahoo
Site Search
In-house
Content Management
NA
Order Management
Avexxis Enterprise
Payment Processor
Paymentech
Fulfillment
Avexxis Enterprise
Affiliate Marketing Management
LinkShare

Search Engine Management
In-house
E-Mail Marketing
ClickAction/YesMail

CRM
Instant Service
Web Analytics
Yahoo Merchant Services