It’s not every online retailer that can boast of joining the $1 billion annual sales club through purely organic and internal efforts, but so far that’s the case with Newegg.com. In business and on the web since 2000, Newegg doubled its web sales from $500 million in 2003 to $1 billion in 2004.
The reason for such fast-track growth is offering a hot customer segment the products and the prices they want, the company says. The online retailer’s core demographic are younger gamers and IT do-it-yourselfers who grew up with computers and the Internet, like the latest in computers and computer games, and are often employed as information technology workers. “We recognized an emerging segment early on,” says Howard Tong, Newegg vice president of marketing. “We sell to the individual who would rather install more memory on their own computer than always buy a new one or have someone else do the installation.”
Today, Newegg serves more than 2 million established customers who on average buy three to five items and spend about $300 each time they make a purchase, Tong says. Newegg enjoys a higher-than-average sales conversion rate of 6% to 7% because the company, which processes and ships about 25,000 orders per day, is focused on customer service, he adds. “We operate our own fulfillment centers in New Jersey, Tennessee and California, which means we can ship almost 98% of all orders in the same day,” he says. “We like to think of ourselves as the Nordstrom of the online computer and consumer electronics category, meaning we want to offer the best in customer service.”
Today, about 80% of Newegg’s inventory of 15,000 SKUs includes products for computer and computer accessories. But to diversify, the company is expanding into consumer electronics such as digital cameras and flat-panel TVs. “Since we do our own fulfillment and enjoy good supplier relationships, we only sell what’s in stock,” Tong says. “We aren’t going to give customers a rain check on a consumer electronics item that we don’t have and can’t get.”
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