A Juggling Feat

You may never have heard of Papaver Rhoeas, but if you know what it is and you’ve searched for it online, chances are you’ve been on AmericanMeadows.com.

Ray Allen, founder and president of the wildflower seed retail site, already knew that seed for the common Red Poppy was his top seller. But one day while poking around the site’s log files he was surprised to discover that its Latin botanical name ranked number 20 in popularity among the hundreds of search terms that brought visitors to the site.

When he found Rudbeckia Hirta, or Black-eyed Susan, at number 30, a lightbulb went off. “Don’t have just the obvious keywords—have lots of them,” he advises.

Allen now pays about a nickel a word on paid search engine Overture Services Inc. for Latin names, for which there is, no surprise, little competition. While he also pays as much as 72 cents for a limited number of more competitive keywords, the mixture keeps his average cost per click down to 24 cents.

AmericanMeadows sells seed for 70 varieties of wildflower, and each has a page headlined with its botanical name. 300 people a day come to the site via searches under any of those names. To cultivate that important connection from the web universe to his site, he bought top positions in all 70 words. “They’re putting in Latin names and they’re spelling them right,” Allen says. “Those people are hardcore gardeners. And hardcore gardeners are some of my best customers.”

The experience taught the former advertising agency executive something about effective media buying in an online economy. “Try to find words that are cheaper; it brings your average cost per click down,” he says. “Every online business has web logs, and you can find these words in there.”

That’s the kind of insight an Internet retailer might pay a marketing services company for or depend on a large internal team to figure out. But for every Lands’ End or Amazon, there are hundreds—thousands—of smaller niche players who stand as proof that making a go of it online doesn’t necessarily require either. These survivors have had to tackle and solve all the same problems the big guys do, only without the big guys’ resources. Many have invested long days and even longer nights in figuring out how to get more for less and leveraging whatever assets or knowledge they already possessed. They’ve also learned from more than a few bumps along the way.

DelightfulDeliveries.com

Drop-shipping everything poses a challenge, but under the watchful eye of a small retail owner, a truly virtual store works

An early promise of the Internet was the virtual storefront. Web retailers would be the customer-facing window on manufacturers and suppliers, taking orders, processing credit, and arranging drop shipment of goods to customers without ever once putting their hands on the goods.

That’s exactly how it works at DelightfulDeliveries.com, a Long Island, N.Y-based online gourmet gift basket retailer with 25 supplier partners, 1,200 online SKUs, and a 600-square-foot office with not a single piece of inventory. “It’s truly virtual,” says CEO Eric Lituchy, who co-founded the company with his wife Gina Ezratty. “We have a great store without having any products in stock.”

But wait a minute—didn’t the purely drop-ship model help tank more than a few e-retail entrepreneurs that tried it? So what did Lituchy do differently?

Lituchy grants that the drop-ship model does produce lower margins and that the loss of some control, such as losing the ability to mix and match basket contents by special request, is a downside. Yet the nature of his merchandise—perishable goods—offered no other choice unless he was willing to invest heavily in refrigeration and a warehouse operation, something he knew he didn’t want to do based on his experience with a previous direct gift business. So to protect himself and his site from representing suppliers who don’t deliver as promised, he’s very particular in choosing partners. “We look for companies that have been doing drop-ship for a number of years. Most of the partners we work with either already have their own sites or they have been doing mail order for a long time. They’ve already gone through their growing pains,” he says.

Automating orders

DelightfulDeliveries launched online in 1998 and was profitable within two years, Lituchy says. It had sales of $1 million last year and anticipates hitting $3 million this year. Not bad for a company with three computers and two and a half employees—one of whom is on maternity leave. What made it work as the company’s sales scaled up is effective automation and tight integration of front-end processes with the back end.

When Lituchy started the company, he personally e-mailed each order to the right partner. At up to 30 orders a day, the process was time consuming but manageable. But within a year of launch, order volume grew to the extent that manual order processing was no longer practical. At a cost of about $5,000, the company worked with a web development company to design a back-end system hooked up to its existing Yahoo storefront platform that would take orders and parse them out to different parts of the database for different partners.

The system generated an e-mail notification to partners as orders arrived at DelightfulDeliveries.com. The partners then could check their password-protected area of DelightfulDeliveries’ database for order details to initiate fulfillment. As they fulfilled orders, the partners put tracking information back into the system, which generated an e-mail notification back to the customer from Delightful-Deliveries.com.

The time is right

As order volume has continued to grow the company has again had to boost the functionality of its fulfillment system. Last December, working with another web developer, it started moving onto a Linux platform that affords some key upgrades. Among them, it offers a more streamlined process for customers placing orders, and it automatically displays only real-time delivery options to the customer placing the order.

“Before, you could enter an order for next-day delivery, but if you were entering it at 9 p.m., for example, though the system would take the order, it would not go out for the next day because no one is shipping at 9 p.m.,” says Lituchy. In contrast, the new system has built-in rules that display only shipment options that are actually available, depending on the time of the order and the ship-to address, as cut-off times for next-day delivery vary throughout the country. “If you place an order on the site at 9 p.m. Thursday, it tells you the order could ship Friday for delivery Saturday, so it shows you time-accurate information,” he says.

As improved automation reduces such headaches for Lituchy, it’s freed more time for finding new partners and for search marketing optimization. He has keywords on both Google and Overture and tracks their performance personally. He uses reports from the search engine to measure traffic, but uses an analytics solution bundled into the software provided by his web development company to measure sales, tracking each keyword weekly and adjusting accordingly. The software, however, provides tracking with a 24-hour delay, one reason the next step will likely be a move to a live hosted analytics service from an outside provider. “It’s very expensive, in my eyes, but it’s probably going to be worth it,” he says.

Lituchy says paid search marketing is now the most important driver of his business, but he warns that online retailers must ensure they have plenty of stock on offer for the traffic that paid search marketing drives. If not, a retailer pays for traffic that pops onto the site, then out right away when shoppers can’t find what they’re seeking or be enticed into buying something else. “You really have to have the products to back up paid search,” he says. “When we had only a few hundred products, if we had done the kind of advertising we do now, we would have been out of business. Now that we have more products to choose from, someone may come searching for a fruit basket but wind up buying a cheesecake. That’s really the advantage we have—the number of products and the quality.”

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Gr8Gear.com

She knew nothing about the Internet, but the part-owner of an Army-Navy surplus store created a web site that now accounts for 25% of sales

“We didn’t even use a web development company,” recalls Andrea Schaloum, manager of Gr8Gear.com, the web arm of Seattle’s largest Army-Navy surplus store, Federal Army & Navy Surplus Inc., which her husband’s family has operated since 1956. With family members in the mid 1990s yet to be convinced that the web could augment a flourishing store operation, spending big on web development was out of the question. Today, five years after its 1998 launch, the web site represents 25% of the business.

But getting there wasn’t easy. To put her site up on the web, instead of the more expensive option of working with a development company, Schaloum educated herself and worked with a lone programmer to build it. “I started working on it non-stop in ‘97,” she recalls. “My kids barely saw me.”

Schaloum’s first step was to put the store’s inventory on computer. With thousands of SKUs and a dedicated web workforce of three, it’s a process that’s still ongoing. To keep launch costs down, Schaloum got one of the first available digital cameras and took all the product photos herself, starting with one of the store’s most popular product categories: patches, pins and medals.

Schaloum kept her fingers crossed as this first batch of products went up online: Would people pay $6 in shipping for a patch or a medal? They did, and still do, with hardly a day going by without orders for these items since the site launched. Starting with about 1,200 items, the online inventory, though still short of what’s available in store, now numbers about 5,000. Schaloum’s goal is to have 12,000 SKUs online.

Part of any retailer’s success online is how effectively it can leverage what it already has in place. Niche players, particularly those with an established offline presence, have an advantage: their target audience is well defined. As such, their challenge is simply to find more customers of the same type, rather than having to appeal broadly to a mass audience. In Schaloum’s case, a decades-old retail operation, the largest of its kind in Washington State, had a customer base, a network of suppliers and a 6,600-square-foot warehouse that occupies the second floor of an equally large first-floor store. The web’s opportunity was to extend the store’s reach beyond the known retail customer base in a way catalogs could not. “The problem with catalogs and surplus is that surplus inventory changes constantly,” says Schaloum. “Every time you do a catalog, you have to rip something out of it. It’s very costly.”

2, and only 2, keywords

The web’s challenge was working in a medium about which the store operators knew nothing, with the requirement that cost be kept to a minimum. After dividing up site development tasks with the programmer she hired, Schaloum next looked at marketing and eventually decided on banner ads in Yahoo, which she maintained for three years until she switched to keywords with the rise of paid search. Gr8Gear once had more than a dozen keywords. “Now we have only two, because it’s so costly—I pay to stay number one under ‘military surplus,’” she says.

Schaloum maintains that spot herself, taking a notebook computer with her when she travels so as to check the ranking and the site morning and night. While she’s not paying for extensive online advertising, she’s still finding ways to reach her target audience at next to no added cost. Gr8Gear’s inventory is diverse, encompassing everything from huge reconditioned military tents that get snapped up by film production companies to extended sizes of current-issue military uniforms and boots. Schaloum spends time checking out content sites in search of those with audiences that overlap Gr8Gears’ targets. These range from the web site for Burning Man, a community campout/survivalist experiment/art installation held annually in the Nevada desert, to sites visited by men and women in active service. Though she pays for some ads on content sites, Gr8Gear.com is viewed by the site operators as a resource for hard-to-find items of interest to their own audiences, and it’s often listed or even linked free of charge.

Schaloum’s next goals for the site are a redesign and a switch to a new hosting company. The switch has been delayed by wranglings over who owns the password to the site at the current hosting company. Schaloum attributes the problem to delegating to an underling without adequately supervising what he was doing back when she was building the site. But she chalks up the headaches the dispute has created to more learning about how to run a web operation. “You have to hold any contracts yourself,” she says. “It’s an issue most small companies really don’t have a clue about. To me, hosting was just getting from Point A to Point B and paying for it. I didn’t realize that it was also a legal piece. Though you can’t keep track of every single thing personally, you do need to keep track of the specifics on what you contract out.” m

AmericanMeadows.com

An advertising background and an affinity for wildflowers create a big success for a small retailing web site

AmericanMeadows.com’s Allen had some 20 years’ experience with a retail store, catalog and display gardens at the Vermont Wildflower Farm before the 2000 launch of the wildflower seed site that replaced an earlier web site and a catalog. In addition to long experience with the wildflower seed business, he is also a former ad agency owner. That means he could write his own ad copy and search listings as well as knock out a basic design for the site, all of which he did to trim costs. Accustomed in his former profession to spending millions on media, he also had something else: an utter fascination with the (then) largely free cost of online advertising in the form of natural search.

“Once we had a web site with a shopping cart, I became addicted to the idea that I could submit to the search engines of the time, see people come to the site and spend money, and realize that I’d spent zero to acquire these customers,” he says. In submitting pages to the engines, Allen was able to put his earlier training as a copywriter to good use. “I clicked around on the engines and figured out what they wanted to see,” he says. “All you have to do is follow the rules and do as they say. For instance, if an engine says not to use exclamation points in writing the listings, don’t use them.”

Already well represented in natural search results, Allen says he “stumbled over” GoTo.com, now Overture, in 2000. “I thought it was the greatest thing,” he says. “A lot of my competitors were still of the mind that the Internet should be completely free, but I understand the value of advertising.” Today, paid advertising is at the center of marketing at AmericanMeadows.com, with about 80% of the budget going to pay-per-click programs. “My average sale on our web site is $62, so even if I have to pay as much as 72 cents a click, which is well over my average cost per click, it’s a good deal as long as I’m getting quality traffic,” Allen adds.

The advantage of being a niche marketer in the pay-for-click environment is that AmericanMeadows has only a few competitors online rather than hundreds or thousands, so maintaining a top position in many of the most relevant keywords doesn’t cost $10 per click. Nevertheless, Allen quickly bumped up against his limits. He learned he couldn’t afford a term as broad as “flowers,” for example, while the term “gardening” brought in a lot of unqualified traffic.

Mini-marketing

Though it gets much of his ad budget, AmericanMeadows’ online outreach isn’t limited to paid search. Allen also spends time surfing the web for relevant content sites and maintains ad placements on a selected handful, some very small indeed. Tiny ILovePlants.com, for example, a content site operated by a Florida-based gardening enthusiast, never hosted an ad before it posted AmericanMeadows’ banner. “It’s mini-marketing,” he says. “These sites have small traffic, but it’s valuable traffic.”

Allen has considered hosted analytics services from an outside provider, but for now uses an online tool called ConversionRuler, from Timberline Interactive Inc. of Middlebury, Vt., to measure keyword conversions. His near-obsession with tracking results has paid off by flagging him not only on where to spend, but where not to spend. A content site called eNature.com, which features striking nature photography, looked like a good fit for AmericanMeadows’ banner. Though the ad was bringing in a fair number of click-throughs at a cost of about $1,000 per month, they resulted in few conversions. Allen took the banner down within a few months. Similarly, when he discovered that the term “wedding favor,” listed on Overture to direct shoppers to specially-packaged wildflower seeds, was costing nearly $250 a week on click-throughs with a single conversion in one month, he swapped it out for a different term.

Times to pay

Weekly e-mails, which AmericanMeadows creates and sends itself, round out its online marketing program, and the company hopes to move toward regionalized e-mail targeting tied to plant growing zones in the near future. Including retail sales from the Vermont Wildflower Farm, now operated by one Allen son, and the web store, managed by the other, the family business, which peaks at about 14 employees in season, brings in more than $1 million per year.

Though Allen, like most small business operators, has sought to keep costs down by taking on many tasks personally, he, like the others, recommends that site operators admit when they need help and seek it judiciously. “We opened our retail store 20 years ago with what we liked,” he says. “We bought the wrong stuff. I should have worked in the gift shop for six months first. And I’d say now if you’re going to do a retail web site, pay somebody who knows what they’re doing just to observe for a few weeks and give it their close attention. Then you won’t make so many mistakes.”

mary@verticalwebmedia.com