Buy.com
The art of the deal at Buy.com

One of the web’s allures for consumers is the ability to find discount prices. Thus an online retailer who stakes out the low-price territory faces the challenge of making sure everything it does reflects the fact that it has great deals—whether it is making sure its prices come up near the top on search engine results, making it easy for customers to redeem product rebates or finding unusual reasons to declare a sale.

Executing on that approach is what sets Buy.com apart from other Internet retailers. “Buy.com is driven by the value/price mentality and it is focused on making sure consumers save money,” says Lauren Freedman, president of consultants The E-Tailing Group Inc. “Deals are what Buy.com is all about.”

But having the best price is not enough if you can’t get the word out. That’s why Buy.com works closely with shopping search engines to make sure that at sites like Google, Price-Grabber.com or Shopping.com, Buy.com products get good play in the results. “We make sure we optimize our listings for consumers who are ready to buy,” says Larissa Hall, vice president of marketing. And it’s not shy about buying its way to the top of major search engines. “We do what we have to to make sure we stay on top,” Hall says.

That also means giving careful review to product descriptions to make sure they match what consumers are asking for. “Consumers often use different words or phrases to describe PDAs, for example,” Hall says. “We have to make sure we match all the different descriptions, even consider common misspellings or incorrect terms.”

In addition to paying to get premier listings at shopping sites, Buy.com advertises heavily on informational web sites. “If a consumer is reading about photography, we want links on each page of that web site so the consumer can click to find out about our camera deals,” Hall explains.

Buy.com also isn’t afraid to invest in other services related to saving consumers money. “Buy.com is one of the few that lets customers apply for rebates online on their site,” says Freedman. “Most other sites require consumers to mail in the rebate coupon. That can be a hassle and often, consumers never get the rebates they’re entitled to.”

A final element of Buy.com is tied to unusual sales. “We try to be entertaining and come up with creative reasons to have a sale,” Hall says. While a lot of retailers throw a sale in honor of President’s Day, for instance, Buy.com took a different approach and threw a sale in honor of the California recall vote. “We like to stay up with the times,” Hall says. m

eBay
Continuing to push the horizon

Like a superstar athlete who keeps coming in first in different sports, eBay Inc.’s eBay.com routinely tops rankings of web sites by number of unique monthly visitors. Whether the product category is home-and-garden, computers-and-electronics, or apparel-and-beauty, eBay came far out in front of other retailers who are leaders in their field in recent months, according to visitation figures compiled by Nielsen/NetRatings.

In the mass market category, eBay topped all others in terms of unique visitation during a study Nielsen did in September. The numbers put eBay in a field of its own: It recorded 14.4 million unique visitors in one week—more than double the 6.2 million unique visitors to Amazon.com, and more than six times the number of unique visitors to Yahoo Shopping.

One of the biggest challenges for publicly held eBay, a marketplace that channels sales for more than 40,000 sellers, is to keep looking for ways to grow and satisfy investors. So far, that hasn’t been a problem, as eBay has moved into new product categories, showing substantial gains. It reports more than $1 billion in annual gross merchandise sales in eight categories: motor vehicles, computers, consumer electronics, sports, books, clothing, toys and collectibles. It recently introduced a store by Universal Music Group, the world’s largest music company, to sell recordings and assorted other items ranging from lyric sheets to back-stage concert passes. It has also shown strong growth in wholesale markets, increasing its number of business-to-business categories over the past year to 250 from 25.

One of eBay’s strongest characteristics is its scale. With an active user base of some 37.4 million buyers and sellers, it has a unique ability to test new categories. “They can facilitate a marketplace if they see any demand developing on the buying or selling side, even if they don’t do much research,” says Heather Brilliant, an analyst who follows eBay for investment research firm Morningstar Inc. “They have the ability to test new markets without taking on new risks.”

But as big and dominant as eBay has become, it hasn’t forgotten its roots as a marketplace for small buyers and sellers of collectibles and assorted other products. It recently launched a separate, instructional home page to show unregistered users how eBay operates.

Meantime, it continues to grow both in the U.S. and internationally and to develop new revenue streams. It recently agreed to offer its PayPal payment services through CyberSource Corp.’s payments processing services, for example, opening up a new revenue base. “EBay is a very well-managed company, and they will continue to grow,” Brilliant says.

JCPenney.com
Meeting the needs of Middle America

When you’re selling about $500 million worth of merchandise annually via the Internet and trying to appeal to a broad segment of Middle America, you face a tough challenge. But JCPenney.com has been able to post sales gains of 25% this year while offering tens of thousands of items. The key: knowing the customer. “This retailer attracts less well-to-do and technology savvy customers than you’ll see shopping at Amazon.com or the other bellwethers,” says Geoff Wissman, vice president at Retail Forward Inc. “JCPenney doesn’t offer a lot of bells and whistles, but it does offer a highly functional site.”

Indeed, JCPenney does know its customer—modest income, predominantly female and, possibly most important, operating on a dial-up Internet modem—and designs its web site accordingly. “We don’t go for sexy features because we want to make sure we can offer fast downloads on dial-ups,” says Bernie Feiwus, senior vice president. “A lot of the features out there today are great if you’re operating on broadband, but most of our customers aren’t.”

Another way that JCPenney serves customers is to rely on years of experience in the catalog business to help with customer service and fulfillment. To that end, JCPenney works to integrate the various sales channels. Customers can have orders delivered for pick up at a local store and they can return merchandise there. The catalog refers customers to the web site for more extensive selections.

“Junior apparel and maternity clothes are not big sellers in our catalog and we can’t justify spending a lot of square inches on that merchandise,” Feiwus says. “Our Internet costs are lower and that allows us to offer a full line of these products. We have references in the catalogs telling customers to check out these products online.”

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Similarly, the chain’s point-of-sale terminals are equipped so that if a store customer wants an item in a different size or color from what is in stock, the clerk can scan the tag and check the web site. If the item is available, the clerk can help the customer order it right there. The web site also sells a lot of items not available in the store, such as electronics, toys, small appliances and exercise equipment.

Although its attention is on selling goods, JCPenney supplements its retail offerings with related editorial content. On the window furnishings page, for example, the site has tips for how to measure windows before ordering and what type of window treatments look good on various window shapes. Likewise, the luggage page explains which bags fit in the overhead compartments of various airplane models.

NeimanMarcus.com
High class and high tech

When you have the reputation for quality and service that Neiman Marcus has, your web site can’t do just an adequate job. Online customers have to feel they’ve walked into the store. With personal e-mail and chat services, high-quality graphics and superior search capabilities, NeimanMarcus.com replicates the parent company’s shopping experience online.

“This web site really knows its customer,” says Lauren Freedman, president of consultants The E-Tailing Group Inc. “It has excellent visuals and provides a great showcase for top-brand boutiques. It does whatever it takes to satisfy the customer.”

Indeed, high-end names are what NeimanMarcus.com is all about. Its customers are more likely to search by brand name than product category. “We’re very focused on designer names,” says Michael Crotty, vice president of marketing for NM Direct. “While our customers can type in sweaters, they’re more likely to want to see what we have in Burberry or Prada.”

These designer names are critical when Neiman Marcus works with outside search engines as well. “We won’t pay to have our name pop up if someone just types in ‘shoes’, but we want to be sure we’re at the top of the list if they type in ‘Gucci shoes,’” Crotty says.

Online advice is critical as Neiman Marcus offers both editorial content informing customers what handbags and shoes are stylish this season as well as a personal e-mail and direct-chat service with recommendations from fashion experts.

Neiman Marcus also has integrated the web site with its stores and catalog. It allows customers to return web merchandise to stores and uses the various channels to cross-sell items. “We send out 90 catalogs a year, but each has a focus,” Crotty says. “That focus may be on jewelry, formalwear or handbags. But if a customer needs shoes and the catalog is focused on handbags, the catalog will refer them to the online site where there will be a more extensive shoe offering.”

Indeed, Crotty says the online offering is broader than either catalog or store selection. “We sell a lot of health and beauty items online, but have a limited selection in our catalogs,” he says. “We also sell home accessories, entertainment centers and fine linens online that we don’t have the floor space to sell in stores.”

Still, a lot of the attention is on apparel, which has been a hard sell for online retailers. Neiman Marcus’s job is a little easier because it is selling familiar brands and designer products. It also features a virtual model. “It gives customers good representations of what the items really look like,” says Heather Brilliant, stock analyst with Morningstar Inc.

Overstock.com
The `Big O` discovered

Overstock.com’s national multimedia ad campaign asks consumers if they’ve discovered the secret of the “Big O,” and it looks like they have. Since the campaign launched in TV, radio and print in August, Overstock’s unprompted name recognition has jumped from 4% to 12% of American adults while prompted recognition jumped from 10% to 23%. Traffic to the site is up 50% over pre-campaign levels.

The multi-million-dollar ad campaign is just one reason the brash 1999 pure-play start-up is looking like a mature business. Of course, media buying like a big player doesn’t necessarily mean you’re in the club: just ask the ghost of Pets.com. But add in last year’s IPO, its earlier launch of a complementary b2b site, and its growing expansion into new categories, and it’s clear that Overstock is doing what it takes to make good on what it set out to do; that is, use the Internet to become a dominant closeout solution for holders of brand-name merchandise.

“They’ve taken a fragmented, niche industry and made it a more efficient liquidation market for both consumers and businesses,” says Retail Forward analyst Rob Gallo. Besides increased product breadth and assortment, Gallo singles out recent improvements to site organization. If a sweater is available only in one size, for example, that information is displayed immediately so shoppers needn’t click further to find that out. Given the disparity of products offered at any given time, such functionality is critical for liquidators. “Everything is set up to encourage frequent visits, and they are trying to make it as convenient as possible,” says Gallo.

Overstock buys surplus merchandise at up to 80% off retail prices and sells it at an average 50% off. “We have been very careful about squeezing cost out of our system and passing it on to the consumer,” says CEO Patrick Byrne. Overstock has applied that model to a growing number of categories, including a year-old expansion into books, DVDs, CDs and videos. It prices books at 23% below Amazon on average; best sellers at 25% below. With some 400,000 titles, the media category represents 10% of sales in its first year, Byrne says.

Overstock this summer won Palm’s liquidation business from another site and more recently expanded into travel services, partnering with consolidators of unsold airline tickets, hotel rooms and rental cars to give Overstock shoppers access to those partners’ deals with air carriers, hotel chains and rental agencies. Both moves support Overstock’s core strategy. “Our goal is to be the first place consumers go to save on everything they buy,” Byrne says.

Sears.com
New fuel for Sears.com

As recently as six months ago, Sears.com was unlikely to come up on anyone’s list of top web sites. The retailer’s Internet offering was not well organized and it was sluggish. Then in October 2003, the site underwent a major redesign that improved the navigational capabilities and download speeds and increased the amount of visual and written information about each product.

“The new site is much better organized and products are laid out much better to make it easier for consumers to find what they are looking for,” says Heather Brilliant, stock analyst for Morningstar Inc.

The new site greatly improved the shopping experience. Bill Bass, vice president and general manager of Sears Direct, says pages can be downloaded two to seven times faster, even though the graphic and written content on each product has been increased by a factor of about five. “We saw a dramatic improvement in speed and customer satisfaction the day the new site went live,” Bass says. The increase in speed came as the result of new caching technology and a lighter HTML code.

Much of the improvements at Sears.com came as the result of bringing in Internet experts, including Bass, from Lands’ End, the apparel retailer Sears acquired last year. In addition to the improved site functionality, analysts laud Sears.com for an effective integration with stores. The site’s database is linked to the inventory of the company’s 870 stores so customers can order online and pick up at a local store the same day. “About 40% of our web sales are situations where the order is placed online and the customer picks it up in the store,” Bass says.

Sears has also found a lot of store sales are the result of online research. “One-fifth of the people who buy a major appliance at our store have previously researched the product at our web site,” Bass says.

The Sears site allows customers to call up two models of an appliance on the screen then get a detailed comparison of features. Customers can also call up a model and ask to see the next higher and lower priced models to compare features. By the time they visit a store to view the models, they have narrowed down their selection.

With all the attention on appliances, electronics, tools, home goods and auto accessories, there is still one big hole in the Sears online offering: apparel. The chain does not plan to offer apparel online until next year. Then, Sears is likely to rely even more on the expertise of Lands’ End in satisfying the consumer demands unique to that product line.

ToysRUs.com
Dividing to conquer

For the time-strapped Mom who wants the largest selection of toys, good prices, and customer service boxed up and delivered to her door on time, one mouse click to ToysRUs.com does the job. While shoppers might find most of those elements elsewhere online, they won’t find them all in one place, a key to ToysRUs.com’s growing sales. At $340 million last year, they were up 23% from a year earlier, giving the company an estimated 35% of the online toy market, the largest single share.

“Our value proposition is good product, good service, incredible selection at a very sharp price,” says ToysRUs.com president Ray Arthur. Arthur estimates that ToysRUs.com’s online selection is nearly three times that of its closest online competitor.

After a wobbly start in 1999 plagued by fulfillment issues, ToysRUs.com made news and deep-sixed its shipping problems in 2000 with an alliance that split off fulfillment and site operations to Amazon. Jupiter Research analyst Patti Freeman Evans says the deal has been a win for both and critical to ToysRUs.com’s growth.

“They have separated out the functions of their online business so that the Toys R Us Group does what they do really well, merchandising and planning, and given to Amazon the part that Amazon does really well, site presentation and order fulfillment. Toys R Us has been able to build this big assortment and make interesting merchandise partnerships while letting Amazon worry about site functionality and customer service,” she says.

ToysRUs.com takes in 70% of its revenue in the weeks before Christmas, which makes getting shoppers to return during the rest of the year a priority. To do that, it’s developed other sites that target families with children at different development stages, introducing parents to the brand at BabiesRUs.com and leading them through preteen and teen years with offerings like the educationally focused Imaginarium.com, personalized gift site PersonalizedGifts by ToysRUs.com and new sporting goods site SportsRUs.com.

Though it’s a separate company, ToysRUs.com leverages the 50-plus-year-old brand power of the brick-and-mortar Toys R Us Inc. The Toys R Us Big Book catalogs, for example, feature computer icons and item numbers next to most toys, indicating online availability. The web site returns the favor with market intelligence. For instance, when preselling popular toys online before release, it shares customer response to help Toys R Us stores plan inventory.

As with other leading retailers, the web is assuming a role at ToysRUs-.com that reaches beyond transactions. “It’s an information tool, a communication device, and a vehicle for delivering content that keeps people connected to the Toys R Us family,” Arthur says.