Undaunted by their lack of resources or web knowledge, owners of small retail sites tackle (many) big issues
By Mary Wagner
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.”
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
