A successful pilot pushes AOL into product liquidation
America Online is getting into the retail product liquidation business, Kelly Day, AOL’s head of retail, told the National Retail Federation Annual Convention & Expo in New York this week. AOL’s "Deal of the Day" service, which offered steeply discounted merchandise to AOL subscribers, was a pilot of merchandise liquidation which was successful enough that AOL plans to expand liquidation offerings this year, Day said. "It was a test of how we leveraged the greatest amount of media to deliver the sale of inventory," Day said.
Deal of the Day sales quickly grew to $75,000-$100,000 a day, she reported. AOL next experimented with packaging deals so that customers were presented with more than one deal a day. Sales of the combo deals jumped to $300,000 a day. The results were encouraging enough that AOL will launch its liquidation business later this year, Day said. "We believe very strongly that marketing and messaging is a huge component of the success of this," she said.
Day reported that, contrary to a belief that the Deal of the Day shopper is a cautious bargain hunter, the average ticket at Deal of the Day is 50% higher than at the AOL Shopping portal. "Consumers come in because they are price conscious, but end up spending more than the average at AOL Shopping," she said.
As for ownership of the goods being sold, Day said AOL’s model will depend on the approach the seller wants to take. Thus, AOL could take ownership of the merchandise, could sell it on consignment for the retailer or manufacturer or could simply be a conduit of buying and shipping information to the seller’s fulfillment function.
Day was part of a panel discussion at NRF’s "Alternative Online Retail Channels for Optimizing Inventory," or, online liquidation of merchandise. The panel also featured Patrick Byrne, CEO of Overstock.com Inc., and Lora Borenstein, vice president, consumer products, for eBay Inc. "Liquidation is not just near and dear to our hearts, it’s what we do," Borenstein said.
AOL’s approach is similar to that of Overstock.com. Byrne reported that Overstock does not take possession of 50% of the merchandise it sells.
In addition to product liquidation, Borenstein told attendees that marketers are using eBay for customer acquisition as well. She cited the case of a restaurant chain that sold coupons for $100 worth of meals for $90. "They’ve just spent $10 to acquire a customer," she said.
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