Mighty Merchandising

Finding the focus in merchandising can make all the difference

There are tons of merchandise categories, and plenty of ways to get them in front of customers. And Eric Klose is constantly watching for the best way to make a match.

“We’re always looking, always listening for what might work, and how we can define a market,” says Klose, vice president of marketing for CSN Stores Inc., an online retailer with hundreds of web sites—each covering a niche reflected in its URL, like BeanBagChairsOnline.com, DinnerPlates.com and
TheWokStore.com.

There are more to come, Klose adds. But CSN’s goal isn’t to reach a larger number of web sites, it’s to market whatever makes sense in terms of merchandise appeal and customer demand, he says. For example, if CSN already offers products like dining room furniture on a home furnishings site, but customers don’t seem to find its dining tables and chairs, it may decide to build a niche site on dining sets. “We listen to what our customers are saying, and if they can’t find what we already sell we move into it with a new site,” he says

Macro vs. micro

The strategy helped CSN to nearly double sales last year to more than $200 million, the retailer says. At ShoppersChoice.com L.L.C., which is also building out multiple niche sites in home furnishings, the strategy has led to sharply increased conversion rates, says CEO Mike Hackley.

Building a dedicated web presence to market a particular product category is a strategy retailers follow in different ways to suit their goals. While retailers like CSN and ShoppersChoice.com are building dedicated niche sites, other retailers, particularly those with strong established brands like Sears as the titles of their web sites, are creating microsites within their main e-commerce properties.

An overall trend in web merchandising, experts say, is finding the best way to match consumers with brands—or, in the case of CSN, ShoppersChoice and others, to virtually create new brands with web site addresses focused on particular products or categories—then provide a shopping experience dedicated to a niche. Thanks to the flexible capabilities of today’s e-commerce technologies, which support relatively fast rollout of completely new niche sites, or microsites based on search and navigation technology, retailers have more options than ever in developing online merchandising strategies.

“Retailers are ready for a revolution in web merchandising,” says Paul Miller, former head of direct commerce at Sears Holdings Corp.—operator of Sears.com, Kmart.com and LandsEnd.com—and now a Chicago-based independent consultant in retail e-commerce. Retailers today have more options to build broader shopping experiences within narrow niches, making it more likely shoppers will find something to buy instead of winding up in a merchandising dead-end, he adds.

Horizon Hobby Inc., for instance, a retailer as well as wholesaler of radio-control toy cars, model trains and learning toys, is emphasizing particular brands on HorizonHobby.com with in-depth microsites that incorporate consumer reviews-driven recommendations technology, says Sebo Dapper, former director of web commerce and now head of the retailer’s European markets.

By using site search-and-navigation technology from Endeca Technologies Inc. combined with cross-selling recommendations technology from Baynote Inc., Horizon Hobby has developed dedicated online “storefronts” to display groups of products by brand as well as category. Hosted on servers from Thanx Media Inc., the storefronts have produced a double-digit lift in revenue while enabling the retailer to improve merchandising of many products that would otherwise get lost, Dapper says.

“We have 80,000 SKUs, and this has allowed us to merchandise them on our e-commerce site better so shoppers wouldn’t just hit a dead-end on a product page,” he says.

No time

Many of Horizon Hobby’s products—plastic assembly kits and metal die cast model cars and planes, for example—are relatively slow sellers that typically fall outside of primary display space. “No one has had the time to spend merchandising these items,” Dapper says.

But with storefronts focused on product categories or brands, Horizon Hobby now presents more of these less-known items in organized series of pages that make it more likely shoppers who want them will find them.

A storefront designated to the Losi brand of radio-control model vehicles, for example, lets visitors browse among colorful images of popular model cars, beach buggies and trucks, but on the same page shoppers can also view relatively obscure items like the plastic shell of a Losi model truck body.

A fan of model truck bodies doesn’t have to stop there. Adjacent links let him click into more detailed pages of related items from multiple brands as well as from the Losi brand only. As the shopper navigates, each new display of products offers links to continue browsing through related items and brands. “If a shopper searches on the term Losi, the site returns a mini Losi site instead of just a bunch of results,” Dapper says. “Losi might have thousands of products, but a shopper can get to all of them from the main Losi page.”

The storefronts as well as other sections of HorizonHobby.com offer cross-selling recommendations through Baynote, which specializes in generating recommendations based on shopping activity of consumers with a shared passion—like radio-control cars, Dapper says.

Baynote tags web site pages to monitor more than 20 sets of visitor activity such as the navigation patterns shoppers use before clicking on particular products or categories, whether and for how long they read supplementary editorial content, and whether they add items to carts and eventually purchase them. Gathering this data among groups of visitors showing similar interests, the Baynote technology automatically displays products new visitors are most likely to view and purchase, Dapper says. Certain criteria, such as whether a shopper places a product in a shopping cart, add weight to recommendations to give products a more prominent position in cross-selling displays.

“Endeca gives us the ability to help shoppers get to our products, and Baynote is taking that to another level,” Dapper says. “Baynote came up with good recommendations sooner than we expected. Our hobbyists are really into our products, and some of them probably know more about our products than we do.”

The generic brand approach

While Sears and Horizon Hobby are finding ways to engage traffic driven to brands and product categories within their main sites, CSN, ShoppersChoice and other niche players like PlumberSurplus.com LLC are finding success building out sites targeted more on generic product terms than on established product brands.

A merchandising approach sharply focused on a product category, including extensive category-focused content like learning guides, helps to grab customers during the early stage of shopping and researching before they decide on a particular brand or make a purchase, says Timothy Jackson, co-founder and co-managing partner of PlumberSurplus.com, which recently expanded from plumbing supplies into the outdoor recreation market with OutdoorPros.com. “It keeps them thinking about our site while they continue researching products and brands,” he says.

That general strategy has worked well for CSN Stores also. With more than 200 niche web sites selling everything from home furnishings to wall art and woks to waterbeds, it grew sales by 85% last year. CSN is exploring new merchandise categories for presenting on individual web sites, Klose says. “We continue to identify categories we feel are underserved on the Internet,” he says.

With 500 employees at its Boston headquarters, CSN maintains a staff of about 150 customer service reps who gather information from customers on what they like to shop for online. Combining surveys with outside market research, CSN shares the direct feedback from customers among its merchandising and technology staff to help them evaluate potential additions to the retailer’s assortment of niche sites, Klose says.

The niche site strategy is also driving sales at ShoppersChoice.com, where sales are up 45% so far this year compared to the same period last year, following year-over-year growth of 51% to $13.9 million in 2007, Hackley says.

Conversions through the roof

“Last year we built a few niche sites, and our conversions went through the roof,” he says. While visitor-to-sales conversion rates for some products might be under 1% on ShoppersChoice.com, the rates for the same products have often tripled or more on a separate niche site, he says.

That was the case last year with the retailer’s new EggGuys.com, a specialty site for selling charcoal grills under the Big Green Egg brand. Made of ceramic and designed to quickly produce high heat and support a full range of cooking styles, the grills are featured in several online videos that describe their features and how to use them. “They converted at less than 1% on ShoppersChoice.com, but went to 3% to 4% on EggGuys.com,” Hackley says. “By taking the conversion rate up a few percentage points, we can double revenue with the same amount of products.”

ShoppersChoice also operates a handful of other sites, including its long-running BBQGuys.com and two niche sites launched last year, AllMailBoxes.com and UltimatePatio.com.

Hackley identifies market niches by finding interesting products at trade shows, then researches through Google the volume of Internet searches and clickthrough rates on keywords related to a particular product. He figures what he could expect to realize in number of clicks on selected keywords and applies an estimated average purchase price on clickthroughs to pinpoint a market niche worth serving with a dedicated retail web site. “We plan to have 20 more niche sites this year,” Hackley says.

At PlumberSurplus, Jackson and co-founder/managing partner Brian Chelette are taking a different approach to merchandising through multiple sites. They launched PlumberSurplus.com in 2004, building it mostly in house into a category-killer for all things a plumber or homeowner might want to keep things flowing properly—including accessories like shower doors, power tools and heavy-duty workplace radios—with site technology that automatically emphasizes the merchandising of products based on key factors like popularity, profit margins and available inventory. Particularly helpful at engaging site visitors and persuading them to return, Jackson says, are product guides that educate consumers about new-age products like tankless water heaters.

The retailer now wants to build on its online merchandising expertise through additional sites that can complement the efforts that went into PlumberSurplus.com, Jackson and Chelette say. They went live in March with their second site, OutdoorPros.com, tackling a broader category but one still focused on a community of users likely to find value in the merchandising tools like the learning centers designed for their first site. “We have a lot of core technology that we can customize for each new site,” says Vanessa Hofmann, team leader for merchandising.

The company built OutdoorPros.com in seven weeks, copying and pasting code from PlumberSurplus.com, Jackson says. The retailer’s technology platform includes site-and-navigation technology from Mercado, live chat customer service from LivePerson Inc. and consumer reviews technology from PowerReviews Inc.

As it builds out a multi-site market presence, it will try to figure the right mix of technology and merchandising strategy for the customer base of each site. With OutdoorPros.com, it decided to merchandise a broad range of products related to an outdoor lifestyle instead of focusing on a narrow product niche—saving time and personnel resources in the process as it plans its next site, Jackson says. “We didn’t think the outdoor experience for a biker was that different from the experience for a hiker,” he says.

Merchandising and marketing

Providing extensive content in product merchandising also attracts more customers. Although PlumberSurplus competes against many larger home improvement sites, its merchandising strategy shows up in search engine marketing results. A Google search for “bathtubs,” for example, shows the retailer at the top of natural search rankings.

Depth in merchandising content, in turn, leads to more effective landing pages for visitors arriving through Internet search, Jackson says. “When someone is searching for a Kohler model 1501 sink in satin nickel, we land them in a pretty good spot,” he says.

Whether selling to customers through one or numerous web sites, he and other retailers say, finding the right formula of merchandising products can make all the difference in attracting customers, getting them to buy and keeping them coming back.