Big Deal

By letting suppliers peek at analytics, Blinds.com gets better deals and higher profit

If a merchandise supplier wants space on Blinds.com’s home page, it better be ready to deal. Just as big retail chains exert pressure on their suppliers to cut better prices and trade promotions deals in return for prime shelf space, Blinds.com, armed with web analytics data that show suppliers the impact of effective merchandising and promotions, is pushing a similar strategy. And it’s the analytics software that bolsters the strategy, creating a program that most offline retailers can only dream of.

As most retailers know, one of the toughest challenges in merchandising is choosing from among thousands of products which ones to feature in a limited amount of space. They need to select products that catch the eyes and wallets of shoppers as well as merchandise with higher margins to drive the most sales and profits.Getting cooperation from suppliers in providing the hottest products and promotions can help retailers decide which products to display.

“Having the right products on our pages makes a difference,” says Daniel Cotlar, chief marketing officer of Blinds.com’s parent company Global Custom Commerce.

The difference at Blinds.com is a 30% increase in gross profit margin per customer visit and stronger overall sales compared to a year ago, when it began sharing analytics data with its suppliers to create more finely tuned merchandising displays and promotions, Cotlar says. And it’s the sharing of analytics results like the sales impact of more elaborate product displays, notices of faster production times and discounts on popular features that has made that difference.

The strategy should play out strongly as Global Custom Commerce elicits supplier assistance in promoting its customizable products and reaching its goal of grabbing more of the 95% share of the blinds market controlled by retail chains and other stores. “It’s not top of mind yet for people to go online to buy blinds,” says Global Custom Commerce founder and CEO Jay Steinfeld.

Playing the game
For years big retail chains have held sway over many of their suppliers, getting them to offer promotional benefits and other favorable contract terms in exchange for the most noticeable space—or any space—in a store’s limited interior real estate. It’s unusual for a small, specialty online retailer—indeed, for any online retailer—to play the shelf-space game with suppliers, experts say.

The strategy has been slow to come to Internet retailing for several reasons, says Sucharita Mulpuru, senior retail analyst at Forrester Research. With only so many promotional dollars to spend, retailers and suppliers have been more inclined to focus on bricks-and-mortar stores. “Online has been a small piece of the pie,” Mulpuru says. “Suppliers haven’t cared as much about online space, and retail store merchandise buyers haven’t wanted to lose any promotional money to the web channel.”

But things are changing, though more so in some retail categories than others, she adds. In the computer hardware and software category, for example, 44% of sales are online. Retailers in this category are exerting more clout with suppliers to receive better promotional and contract terms in exchange for profitable exposure on web pages. “The more highly penetrated a category is in online sales, the more likely suppliers and retailers will be to start cooperating online,” Mulpuru says.

Moreover, the online channel offers something the bricks-and-mortar channel can’t—software that can capture, store and analyze virtually every move a web shopper makes. This highly valuable customer data can be put to practical use in merchandising, marketing and other efforts by suppliers as well as retailers, and it’s playing an important role in getting retail trading partners to cooperate on contracts and promotions.

Indeed, using such web analytics has brought Blinds.com into the shelf-space game, even though it’s not what many would consider a likely player. “When suppliers see our analytics data, it gives them a lot more confidence that we can grow with scale and control, and that they can be a part of that growth,” Steinfeld says. “As a result, we can get better deals.”

Blinds.com initially decided to use sales and customer traffic data in dealings with suppliers after observing Wal-Mart Stores Corp. “Just because we’re a niche player doesn’t mean we don’t take the ideas of competitors who are larger and came before us,” CMO Cotlar says. Wal-Mart, noted for its system of sharing retail sales forecast and manufacturing production data with its trading partners, also is known for the clout it holds over suppliers.

What’s going on
“You hear about Wal-Mart sharing real-time information on what’s going on on their sales floors with suppliers, then limiting costs from its suppliers,” Cotlar says. “That’s one of the things that led us into this. Once you have data in your hands about what’s going on on your web site, you can think about how you can benefit from it with suppliers.”

Effective analytics data, which Blinds.com gathers with an application from Omniture Inc., can range widely. By showing the impact on sales of better product descriptions, price discounts, product displays and other forms of merchandising, analytics provides the proof suppliers often need to invest in promotions.

Most suppliers are quite interested in looking at all this data when offered the chance, Cotlar says. Blinds.com has shared data with a few of its suppliers that showed the impact displaying products along with complementary items and offering free upgrades have had with other suppliers’ products.

The analytics data added credibility to suggestions Blinds.com made to suppliers, such as displaying wood blinds in room settings or letting shoppers move up to popular, higher priced models at no extra charge. “We use analytics to experiment with everything—promotions, Buy button styles, customize-and-buy offers,” Cotlar says. “We’re trying to look at every product, every generator of traffic and every promotional campaign to see how we can optimize conversion rates.”

In one case, Blinds.com shared data with suppliers that showed a 20% spike in sales when displays of its own Blinds.com brand custom-made, two-inch faux wood blinds clearly listed that it would take 5 days to produce instead of 7. “We showed them the conversion rates measured by the number of purchases divided by the number of product views for that particular item,” Cotlar says. In turn, suppliers modified their production time to the shorter period and realized stronger sales as a result.

In other cases, Blinds.com has used analytics data to show the impact of best practices deployed by its suppliers. When manufacturer Bali introduced images that displayed its blinds in furnished room settings, Blinds.com’s analytics showed a noticeable increase in sales of Bali products, Cotlar says. “That gave us the ability to go to other manufacturers and convince them of the impact of displaying room scenes,” he says. And the data helped Blinds.com convince Bali to increase its number of room scene displays, he adds.

The retailer also used analytics data to win over Levolor, a major supplier of window treatments. “In the past, Levolor had been reluctant to do promotions online, but when they saw our analytics that showed what could be done, they came to us with more innovative promotions,” Cotlar says.

Levolor agreed to begin testing new promotions by offering a free upgrade to its Lightmaster wood blinds, which are designed to more effectively block light and increase privacy. “They found out through our analytics that the offer made a big difference in making them stand out among the 19 other wood blinds products,” Cotlar says.

The experience led Levolor to come back with more innovative promotions. For example, Levolor decided to offer $20 cash back on each set of blinds, causing its sales volume to more than triple during the promotion. “And then there was the halo effect,” Cotlar says, noting that orders continued to increase after the promotion. “If we hadn’t had the analytics, we would never have had that offer on our site.”

A major advantage of using analytics data to show suppliers the impact of effective promotions and merchandising displays, Cotlar adds, is that suppliers become more amenable to initiating deals. “The biggest difference that has stemmed from using analytics is that it has made our suppliers proactive and more innovative with marketing and merchandising,” he says. “We’re a lean staff and we can’t be hunting down suppliers all the time to get them to push promotions. Now we have a 6- to 12-month promotional calendar and know in advance what promotions are running. Before sharing analytics data with suppliers, we had a ‘What will we do next?’ calendar.”

What to do next? Sharing analytics data with suppliers goes beyond just getting more innovative promotions and merchandising, Cotlar says. For example, a supplier slowing down production can result in shipping delays. Blinds.com can present the supplier with analytics data that demonstrates how shipping delays can lead directly to abandoned shopping carts. “We show them they can make more money by providing us with their products more quickly,” Cotlar says.

The e-retailer also can show its suppliers data on which types of products get the most click activity during particular seasons, encouraging suppliers to run timely promotions for those products. And since Blinds.com emphasizes its shoppers’ ability to customize all products by size, color and material, it works with suppliers to run promotions on customization that help differentiate Blinds.com from its retail chain competitors. “They show how what Blinds.com offers is different from what shoppers can buy in Home Depot,” he says.

In the end, spending time with web analytics data is more productive than working with financial records like income statements and balance sheets, Steinfeld says. “While income statements tell us what we did financially, web analytics shows us how we can be more aggressive with supplier promotions. So now we spend more time on web analytics.”

And Blinds.com’s parent, Global Custom Commerce, is preparing to spend even more time on analytics. It is planning to expand into additional niche markets and expects to use the same analytics-sharing strategy in its new ventures. With ongoing and proactive cooperation from suppliers, the company expects to continue growing without overspending on products and promotions. “And we’re not growing at the expense of profit margins,” Steinfeld says.

paul@verticalwebmedia.com

How does Santa know how much to pack?

Funky and classic, European and domestic, Oliebollen LLC is an e-retailer of children’s apparel, toys and accessories—and, naturally, a merchant with its eye on the holiday shopping season. The pure-play, however, does not have Santa’s omniscience when it comes to knowing the precise number of toys it will need come the holidays. How many French-made Petit Bateau footie pajamas and hooded shirts? How many German-made Haba building blocks? How many U.S.-made Shylling toy tea sets? How many lumps of coal?!

Knowing ahead of time products that likely will be big sellers can mean significant differences in cost, selection and delivery time. A standard toy industry practice is for suppliers to grant better terms, including pricing and product mix, when a retailer commits several months ahead of time to a large amount of inventory, sometimes within a specific group of toys, says Oliebollen founder and president Margaret Schankler. “But how can you predict Christmas sales six months ahead?” she asks.

The trick is to figure out how to sell enough products early in the slow, pre-holiday season to meet suppliers’ goals and win discounts and favorable payment terms, she says. Working with web site designer Enlighten and web analytics vendor WebTrends, Oliebollen gets an early look at pre-purchase shopping behavior, including browsing, cart-adds and wish-list activity. “This gives us much better ability to predict trends and understand the customer mindset instead of just purchasing behavior, what we used to rely on,” she says.

Schankler has learned, for example, that shoppers show more interest in European brands than domestic ones earlier in the season, apparently because they believe the former will be more difficult to re-stock while the domestic products will be more available. So she has bumped up promotions of European brands, confident she can move her targeted amount of inventory and hence win better pricing terms from suppliers.

“I was used to the concept of sales projections as educated guesses based on generalized trends,” Schankler adds. “Now, with the ability to see data on the actual products people are interested in, I can really get a sense of what they might be purchasing in the next few months.”