Computers/Electronics/CDs/DVDs
Creating the kind of site that consumers love

IRWD2010 Conference

Internet Retailer Best of the Web 2006

BestBuy.com
CDBaby.com
CircuitCity.com
Crutchfield.com
Headsets.com
HPShopping.com
iTunes.com
Netflix.com
Newegg.com
SonyStyle.com
ThinkGeek.com

By their very nature, online consumer electronics retailers build and maintain some of the web’s best e-commerce sites. The reason: the need to maintain market share in a furiously competitive web category.

Merchants in different segments may be able to compete by only offering lower prices or a wider selection, but in consumer electronics, visitors demand it all. When a visitor clicks on one of these sites, they naturally expect to find the merchandise they want and at a great price.

But visitors also expect a total online shopping experience that includes customer ratings, product reviews, interactive product displays and plenty of technical specifications. For example, BestBuy.com recently introduced a rich media program that enables customers to design a kitchen or laundry area, research the products on BestBuy.com and e-mail the design to others. “The design center is a sophisticated use of guided selling applications,” says Kent Allen, president of The Research Trust.

Another online consumer electronics retailer making maximum use of content is Crutchfield.com, which recently enhanced its Crutchfield Advisor pages with better search functionality. Now one click on the new Reviews tab automatically pulls up what’s pertinent in the Crutchfield Advisor, letting shoppers skip the additional steps of going to that area of the site and searching the Advisor for the information. “This helps the brand and the customers’ experience,” says Crutchfield.com senior director Andrew Stevenson.

When they land on a retail site and look to spend hundreds of dollars on a personal computer or even more on a plasma TV, customers expect lots of advice and technical specifications. In response, SonyStyle.com created Sony 101, a series of online classes. SonyStyle’s information centers are also designed to emphasize the Sony brand and use content to create cross-selling opportunity, says Jack Halperin, senior vice president, consumer direct business.

Winning consumer electronics sites know that online customers respond to a well-balanced shopping experience, which is a key reason HPShopping.com is integrating online photo service Snapfish into its product mix and giving registered users perks such as free online storage. “Digital imagery is a priority for us,” says Peter Moreo, director of sales and merchandising. Another electronics site, Newegg.com, fulfills customer expectations by posting large amounts of photos of new products that includes all sides of the merchandise and the accompanying accessories, manuals, wires and CDs.

Customers respond to consumer electronics sites that cater to their lifestyle—and make it easier to shop across multi-channels. For instance, ThinkGeek.com is growing at more than 30% per year because the site has the right mix of gadgets and prices that technocrats find appealing. “We’ve been growing about 30% per year for the last four or five years and expect to do about $18 million this year,” says co-founder Scott Smith.

With many consumer electronics sites offering about the same content, products and design, top performing retailers are using multiple channels to remain the best of the web. Circuit City now guarantees items purchased online can be ready for a store pickup in 24 minutes or the customer receives a $24 gift card. “We wanted to come up with a time frame that grabbed people’s attention,” says Circuit City chief marketing officer Fiona Dias.

Customer education is a major part of successful multi-channel retailing and few multi—channel retailers are as adept at meeting this difficult challenge as BestBuy.com.

In October, BestBuy.com unveiled a new interactive education tool that uses rich media and room planning tools to enable customers to design a kitchen or laundry area, pick appliances from BestBuy.com to see how they fit the design, and share the design with others. The application, which is part of a campaign to boost awareness that Best Buy sells more than consumer electronics, is a viral marketing strategy.

By allowing users to e-mail their designs to others, BestBuy.com has created a tool to introduce the store, its products and its guided selling tools to a new audience, not to mention, lock in users as repeat customers.

“Best Buy has invested well and wisely in guided selling tools,” says Kent Allen, president of The Research Trust. “Once someone commits the time to learn how to use these tools, they will come back. The design center is a very sophisticated use of guided selling applications.”

Guided selling tools are also a way to get people into the store by whetting their appetites for product information just enough so they desire to actually see a product in person before making the purchasing decision. Once inside the store, personal shopping assistants can leverage the customer’s knowledge about what they want in the desired product, but more importantly, to also close cross-sell and upsell opportunities.

“Retailers have a better chance of selling accessories in store than online because people can actually touch and feel the merchandise and see how the entire package fits together,” adds Allen. “Best Buy defines multi-channel retailing as being customer centric and vice versa.”

Beyond its expertise in using guided selling tools to drive sales, BestBuy.com has also begun offering online rebates so customers can receive instant credit toward another purchase without having to print, fill out, and mail a form.

“Best Buy has a history of being first to market with a lot of online shopping applications and they continue to provide the tools to better segment the customer shopping experience,” says Geoff Wissman, vice president for Retail Forward Inc.

At first glance CDBaby.com looks like an e-commerce site that’s as laid back as its founder, Derek Sivers, a professional musician turned Internet entrepreneur who launched CD Baby as a haven for independent artists who want to sell their music online.

But CDBaby.com is a web retailing destination for shoppers and musicians who are truly serious about independent music. Today CDBaby.com carries an inventory of more than 100,000 CDs and sells a wide variety of music ranging from blues to hip hop.

Although basic in design and lacking the flash graphics and hyped-up images found on other music sites, CD Baby features expanded search functions and an extensive library. For instance, site visitors, which average almost 700,000 per month, can search CD Baby by artist, music category and top sellers. But what really makes the site work well for customers and artists is its niche and unique approach to selling independent music, says Sivers. “We are the web store for independent artists who need a place to sell their CD,” he says. “There is a lot of insincerity in the music business, but this site is a real deal with a soul.”

CD Baby carries music performed by nearly 110,000 independent artists and has sold more than 2 million CDs since 1998. Independent artists also flock to CDBaby.com because the site has paid independent musicians nearly $20 million in royalties.

Sivers, who launched CD Baby as a way to sell and promote his own album, keeps CD Baby’s site design and e-commerce functionality straightforward and low-key. The company has outlasted higher-profile and better-financed start-ups such as RiffAge.com and occupies a new 25,000-square-foot distribution facility, but Sivers remains the chief programmer and a very hands-on web designer. “For the first year, CD Baby was just me,” he says. “I’d put the daily orders in my backpack and ride my bike down to the Post Office.”

But the fact that the site is straightforward and remains a hit with shoppers and artists alike accounts for why CD Baby has staying power, says Barbara Zaccone, president of multimedia design communications firm, Barbara Zaccone Associates. “The layout is clean and the navigation works well,” she says. “The site serves its audience very successfully without having to use a lot of bells and whistles.”

Already a seasoned pro at allowing customers to buy online and pick up in store, CircuitCity.com has pushed the concept to a higher level. The multi-channel electronics retailer now guarantees items purchased online to be ready for pickup in 24 minutes or the customer receives a $24 gift card. The new service, which plays on the notion of 24/7 customer service, is expected to give CircuitCity.com an edge during the peak holiday shopping season, a time when many consumers prefer to shop online to avoid in-store crowds, but worry about timely delivery from online retailers.

“Closely integrating the online and in-store channels can advantageously position a retailer in the minds of their customers,” says Geoff Wissman, vice president with consultants Retail Forward Inc.

CircuitCity.com hatched the idea for the new service when research revealed that a small percentage of consumers were aware they could purchase an item online and pick up in store, a service Circuit City launched in 1999. “We knew several other retailers offered the same service, but fulfillment usually takes place in 24-48 hours, and only a few claim to have pickup within an hour, so we decided that to compete more effectively on this point, we had to do it best,” says Fiona Dias, chief marketing officer for Circuit City.

Making the transition to fulfilling an online order within 24 minutes was not as big a stretch as it might seem. With in-store sales associates trained to fulfill online orders within minutes of receiving them, the key was tweaking its inventory tracking application to show real time availability of all products in each store. Sales associates working in each store’s warehouse are equipped with beepers that notify them immediately when an order is placed.

So why the guarantee of 24 minutes? “It’s a play on the 24/7 shopping capabilities of the Internet,” explains Dias, who adds the retailer has made 24-minute pickup a center point of its advertising strategy. “We also wanted to come up with a time frame that grabbed people’s attention, and maybe seemed a little absurd to our competitors, but which we knew we could manage and would make our online shopping experience simpler.”

Finding the electronics products they want on Crutchfield.com is close to a sure thing for web shoppers, given the depth of the assortment. But seeing the content that sells is also critical, and this year the multi-channel retailer tops its own performance with a site refresh that helps shoppers get to that key information faster.

New web site functionality reaches into the Crutchfield Advisor, an extensive repository of staff and consumer-generated articles and product reviews, to link content relevant to the item being viewed on a product page directly to the review. One click on the new Reviews tab automatically pulls ups what’s pertinent in the Crutchfield Advisor, letting shoppers skip the additional steps of going to that area of the site and searching the Advisor for the information.

Crutchfield has linked Crutchfield Advisor content directly to product pages on about 650 of the most popular products on Cruthfield.com. Shortening the path has sparked a major increase in the number of visitors influenced by that content, says senior director of Crutchfield.com Andrew Stevenson. “That helps the brand and the customers’ experience,” he adds. “It also has significantly increased conversions among people who view that content.”

Though it’s one of online retail’s senior citizens, having launched in 1996 as the web arm of a 20-year-old catalog business, Crutchfield.com has remained unflagging in its drive to optimize the site. Taking on the deeper integration of its extensive content base with its shopping process is just one example of that this year. It’s also boosted usability, streamlined the user interface, and added images, more user-friendly descriptions and a broader layout that makes it easier for visitors to flip trough the site. This year it’s also launched a Spanish language web site.

Retail consultant Lauren Freedman of The e-Tailing Group says Crutchfield succeeds in differentiating itself on the basis of its knowledge of the category. “Whether it’s the Crutchfield Advisor, their knowledgeable experts on live chat, even ‘Why shop Crutchfield’ on the home page—it all goes to that positioning,” she says. “They go the extra mile and try to do everything they possibly can to help the customer—they do what the mass merchants say they are going to do.”

When you sell in a niche market, the key to success is usually to define the targeted customer and market your product where they are. But it’s not that easy for Headsets.com.

Rather than marketing to a clearly defined niche as many other online retailers have—i.e. teens, plus-sized men or women, or seniors—Headsets.com’s niche market is users of office headsets. And it’s not always an easy category to define or to figure out where customers are.

“Our growth comes from new users of office headsets,” says Mike Faith, CEO and president. And that growth comes at a time when the company’s largest potential customer base—domestic call centers—is drying up. “Most of that business is moving offshore,” Faith says.

That’s left Headsets.com pursing small to mid-sized offices where the retailer has to rely on catalogs and direct-mail pieces to stimulate interest and drive sales to the firm’s web site and call center.

Complicating the job for Headsets.com is that headsets are a commodity product. “Our product is a fairly simple piece of business desktop electronics. Yet our customers tell us over and over that there is real confusion when it comes to buying a headset for the first time. Most people don’t even know what questions to ask,” Faith says.

Rather than sell on price, Headsets.com has found success in its approach to customer service and customer education, leveraging the power of the web to provide information more quickly and efficiently and at lower cost than through call centers or printed material.

“When most visitors come to Headsets.com, they haven’t decided on a product,” Faith says. Selling then becomes a matter of explaining to the customer how each product works and discussing with them which headset works best for their application. Headsets.com’s free trials, fast shipping and easy return policies are all centered on customer comfort.

And while it might seem difficult to discuss various headset products in an online world, Headsets.com solves that problem through online chat developed by LivePerson. “We initially gave a very small amount of real estate on our site to the chat function, but the feedback we got was that our customers loved it. Now it forms a large part of the site,” Faith says.

With the definition of consumer electronics evolving to include lifestyle products, such as in-home digital imaging, HPshopping.com is changing right along with the category.

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In April, parent Hewlett-Packard Co. acquired online photo service Snapfish with the intent of creating unique digital photography offerings. Snapfish, which has 14 million registered users, offers free online storage and sharing of digital photos, as well printing of digital images and film processing, for a fee.

HPshopping.com plans to closely integrate Snapfish’s services into its digital photography offerings. Already, customers of both units have been e-mailed discount coupons for HP cameras and printers and free shipping of photos printed by Snapfish. Ultimately, the integration of Snapfish is viewed as a way for both units to bolster their customer acquisition efforts.

“Our partnership with Snapfish is a way to move their customers into home printing and our customers to Snapfish,” says Peter Moreo, director of sales and merchandising for HPshopping.com. “Digital imagery is a priority for us.”

So too is improving search engine marketing to ensure that consumers coming into the site through a search engine land on the correct page. HPshopping.com has begun adjusting its analytics on keywords based on the sales associated with those words. The company’s research into the concept has helped it identify the sophistication of customers using specific search engines and the types of products users of a specific search engine purchase.

“Every customer has a different search path, so it is important to understand which keywords generate sales,” explains Catherine Paschkewitz, director of consumer marketing for HPshopping.com.

Efforts to bolster sales are also being extended to allow less technically inclined customers to select a pre-built system from a menu of the most popular configurations. The service is expected to play well with gift givers.

“HPshopping.com is really beginning to understand that the future of consumer electronics is merging with home entertainment to create a technological lifestyle,” says Kent Allen, president of The Research Trust.

When consumers think of purchasing digital music, many think of iTunes.com, the online retail store that supports Apple Computer’s iconic iPod. In the past year, however, iTunes has transformed itself from a destination site for iPod users into the premier retailer of digital entertainment.

What sets iTunes apart from the competition is that it is part of an end-to-end user experience Apple has created for digital entertainment. The store features more than 2 million songs, as well as music videos, 15,000 podcasts, 10,000 audio books, and select hit television shows from Disney and ABC, such as “Desperate Housewives.”

“ITunes is ahead of the curve on most of the items it carries,” says Ted Schadler, vice president and principal analyst with Forrester Research. “They have a good merchandising strategy aimed at the mass market, the site is well organized, and their search applications work well.”

In short, iTunes has created a huge opportunity for Apple to dominate the digital entertainment business, even though iPod users have no alternatives for downloading content. “They may have a captive audience, but they are no slouches as retailers,” adds Schadler.

ITunes’ retailing prowess was clearly evident in the weeks immediately after it began offering videos in mid-October. By November, Apple announced more than 1 million videos had been downloaded from the store.

Overall, music fans have downloaded more than 300 million songs from iTunes since its launched in April 2003. The store has also become an international brand with a presence in 19 countries and reaches more than 70% of the global music market.

Beyond its prowess as a music retailer, iTunes has even helped bring viability to micropayments on the web through its iTunes gift card, which is aggressively marketed online and offline. With single songs sold for 99 cents, videos for $1.99 and CDs starting at $9.99, the card has proven to be a popular, low-cost alternative to accepting credit cards for transactions of $2 or less.

“ITunes has created a seamless and easy-to-navigate environment for consumers to buy digital entertainment,” says Geoff Wissman, vice president of Retail Forward Inc.

Which has made the retailer a popular culture icon in its own right.

Hollywood couldn’t write a better script. A tiny upstart launches a market that takes the establishment by surprise and thrives against huge rivals. Despite the odds, the upstart takes one of its biggest rivals under its wing.

The star of this story is, of course, Netflix Inc., the brainchild of movie buff founder and CEO Reed Hastings, who in 1999 changed movie rentals by launching an online service with no late fees. Netflix.com grew quickly, attracting the attention of Blockbuster Inc, the king of video store rentals, and price-cutter Wal-Mart Stores Inc.

Despite having to fight off aggressive moves from Blockbuster to offer consumers a mixture of online and in-store rental services, Netflix continues to excel at pleasing customers. In a study of the 40 largest retail web sites this year by ForeSee Results and FGI Research—in which a score of 82 out of 100 was considered superior—Netflix scored 85, the highest of the bunch. Why? Because it exceeds customers’ expectations, the study found.

Netflix’s ability to provide useful online information about movies and deliver them quickly to customers continues to pay off in dollars as well. Its third-quarter revenue rose 23% year-over-year to $174.3 million, as its number of subscribers swelled to 3.6 million.

“Netflix continues to shine as the leader in online DVD rentals with its exclusive new feature profiles, which allow a family to tailor their movie list to include different members’ choices,” says Sunita Gupta, executive vice president of retail consultants LakeWest Group.

With the prospect of digital movies downloaded directly over the Internet—a service already offered by Comcast—Netflix has other challenges ahead. But with its takeover this year of the online movie rental business at Walmart.com, it stands to reap an even bigger subscriber base and benefit from co-marketing efforts.

Hastings notes that digital downloads are still limited by the number of available movie titles and the number of consumers equipped to receive them, but as downloads take hold with more titles and buyers, and computers do double duty as video screens, don’t expect Netflix to fade into the sunset. After all, it has all those subscribers, and its story line so far suggests it will continue to play a major role.

When Newegg.com, a retailer of computer equipment and consumer electronics, launched in 2000, it wanted to give tech-savvy shoppers an experience beyond what they would find in a retail store. The company set out to accomplish that by building a large product selection and by offering competitive pricing and top flight customer service and fulfillment. “We have no face-to-face time with the customer,” says Howard Tong, vice president. “The web site is really the only sales front that we have.”

Newegg has built a reputation for offering quality service to do-it-yourself techies, gamers, information technology professionals and what Tong refers to as digital lifestyle persons who make up its customer base. Newegg has eight, custom-built, state-of-the-art logistic centers that ship 98% of packages within 24 hours. And it has a call-center in California that handles only customer service.

To give customers a superior retail experience, Newegg also posts “massive amounts” of photos of new products. That includes shots of all sides of the box and packaging, all sides of the product, all accessories, manuals, CDs and wiring. “Since we don’t have a storefront, you can’t touch or feel or smell the product,” Tong says. “We decided to simulate that retail experience as close as possible.”

Not only does Newegg sell hard-to-find parts, it also provides links to forums for customers to exchange ideas on everything from assembling equipment to troubleshooting. Newegg also has a large customer-review base, where customers can ask questions, give advice or comment on new products, and it posts expert opinions, specifications and other information from manufacturers, and other content. “You have everything you need at your fingertips,” Tong says. “We make it easy to navigate, easy to find, easy to check out, so it becomes a source for not only buying products, but for learning about products.”

Newegg’s customer-centric approach has helped it attract a loyal customer base, says Patti Freeman Evans, retail analyst at JupiterResearch. “Newegg has made it easy for people who really are intensely interested in this information to both share it and get it,” Evans says. “That creates a great bond with the customers because they know this is the place to come even if they’re not going to buy something today.”

After losing its reputation as a leader and innovator in direct to consumer sales, SonyStyle.com is returning to its roots as a branding tool that delivers the information consumers need to make the decision to purchase Sony products on a repeat basis.

The driving force behind the makeover is Jack Halperin, who oversaw SonyStyle.com from 2001 through 2003, and in the process, established the site as a shopping destination for consumer electronics, before moving on to head other initiatives within Sony Corp.

To return SonyStyle.com to preeminence, Halperin is leveraging the site’s infrastructure and knowledge of direct to consumer sales to create a more dynamic sales environment rich with content that influences the purchasing decision, and prompts customers to purchase related Sony products.

SonyStyle.com also plans to syndicate the look and feel of its web site to retail partners so that Sony products on their web sites are presented in a manner consistent with that of SonyStyle.com. The move is part of an overarching strategy to revitalize the Sony brand, which was eclipsed this year by Samsung on Interbrand Corp.’s list of the Top 100 global brands.

“SonyStyle remains an asset for the company and the aim is to use the site to show Sony’s power as an entertainment company that offers customers and retail partners end-to-end solutions,” says Halperin, now senior vice president, Consumer Direct Business for Sony Electronics Inc.

One of the first steps taken toward achieving this goal has been to create Sony 101, online classes where consumers can learn, for instance, how to create a digital library of music, video, and other entertainment mediums on a home computer or how to improve digital photography skills. Halperin envisions SonyStyle.com’s information solutions as a way to move customers of one Sony product, such as hardware, into related products, such as its Media Editor software application, and content, such as DVDs and CDs.

“Providing richer content is a way to keep up with changing consumer expectations and buying habits for shopping online,” says Michael Gartenberg, vice president and research director for Jupiter Research.

It may take geeks to understand geeks, especially when running a retail web site that caters to their whims—like a wristwatch that would give most non-geeks a headache trying to tell time by its binary code formula, a Swiss Army knife with a built-in USB flash drive, or a belt-mounted, scrolling LCD-display that repeatedly announces “I’m a Geek.”

But interject a large dose of business savvy, and you have the makings of ThinkGeek.com. Despite the emphasis on geekiness, this site is run by marketing experts who know how to engage their customers. “ThinkGeek encourages me to want to desire the things they sell, as opposed to other sites that scream price, price, price,” says Matthew Berk, a former JupiterResearch analyst who is co-founder of OpenList.com, a travel-and-entertainment search engine.

The strategy is paying off. “We’ve been growing about 30% a year for the last four or five years and expect to do about $18 million this year,” says co-founder Scott Smith.

And that’s without selling computers. When Smith and several colleagues launched ThinkGeek in 1999, they decided to focus on the geek lifestyle, leaving the tight-margin computer business to others. Starting with basic items like T-shirts and coffee mugs, they’ve gradually expanded with a mixture of useful and just-for-fun products—but always with an overall marketing strategy.

Rather than spending heavily on formal advertising and marketing campaigns—“Geeks can be suspicious of marketing,” Smith says—ThinkGeek uses alternate ways of drawing customers and publicizing its brand. A customer forum section asks people to discuss their computer operating systems, not because ThinkGeek wants to sell them something related to operating systems, but because geeks like discussing such things. “It keeps traffic coming back and increases sales,” Smith says.

Because geeks are known for their reliance on caffeine to get through long hours of programming computer code, ThinkGeek has developed unique products like caffeine-injected Shower Shock soap, which combines cleaning with the impact of a strong cup of coffee.

While serving the needs of geeks, Shower Shock has also paid other dividends. “It got us on Good Morning America,” Smith says.

Caffeinated hot sauce, anyone?