Online sales increase almost 3%, but HSN’s total sales dip by the same amount.
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Links that mean business
In fact, a successful affiliate program involves far more than putting up links. “You spend three months getting the software and the right merchandise together, and after six to nine months, you start seeing results,” says Dunn. “People ask me why every retailer doesn’t get an affiliate program. Well, it’s not a quickie. It takes some doing.”
If you’re Amazon, which reported some 430,000 associates in a recent filing with the Securities & Exchange Commission, you dedicate employees-lots of them-to oversee those relationships. But if you’re like most e-retailers, long on ambition and short on staff, you may find yourself looking to outsource.
Not surprisingly, a fast-growing roster of companies specializing in the care and feeding of performance-based affiliate programs has sprung up. BeFree, one of the first service bureaus on the scene, grew out of a case of Amazon-envy at rival Barnes & Noble. At the request of bn.com, systems consultants already working with the company on other projects developed technology that could host and manage an Amazon-like affiliate program, but on outside servers, and voila, a new company was born. Others including LinkShare, Commission Junction and Dynamic Trade soon followed, each adding its own spin to performance-based marketing solutions.
And efforts to squeeze the most out of affiliate marketing haven’t stopped at spawning a new category of vendors. Retailers are experimenting with models that go beyond simple click-through from content to commerce sites. Forrester prognosticators call the new wave of affiliate marketing “cooperative e-commerce” and predict it will evolve into entirely new models. Among them, niche content sites will band together as syndicated “boutiques” to command more attention and improve commissions. Top media brands will hook up with top merchants in exclusive deals to build community as a platform for driving sales.
Finally, merchants in non-competing categories will partner in cross-marketing agreements to target a common customer base with comple-mentary products. And if that’s the shape of things to come online, the future already is here. Last Christmas, eToys and GapKids paired up to refer shoppers to each other’s sites for discounted shopping. This spring, J. Crew ran an e-mail promotion for a Travelocity contest offering a free trip to St. Bart’s. (So why not pick up a few J. Crew T-shirts in case you end up winning?)
In March, WholePeople.com, launched as a spin-off of natural products grocer Whole Foods Market and RealGoods Trading Corp., a multi-channel marketer of renewable energy and sustainable living products. The spinoff, 78% owned by Whole Foods, also pulled in the Nature Conservancy, a group that acquires and preserves endangered wetlands and prairies, and WholeHealth MD, a company specializing in integrative medicine.
The common denominator is the customer. The so-called whole living market is a growing lifestyle segment whose members choose products based on their concerns about the effects on wildlife and the environment, among other criteria. It’s worth $280 billion and represents as much as a quarter of the U.S. population. With an existing customer base of 15 million already buying foods, Whole Foods Market saw an opportunity to expand into new offerings online-if it could change the perception that it sold only groceries. The resulting alliance with RealGoods and others is a soup-to-nuts offering of merchandise, services and content.
While the partners hash out their strategy and assemble the content to sell shoppers on the site and its merchandise, affiliate marketing is a vehicle that brings them there. WholeFoods.com, now shuttered, already worked with LinkShare to manage its 12,000 affiliates. Executives expect a similar number for WholePeople.com, which has been pulling in new affiliates at the rate of about 100 per week. Affiliates will pocket 11 to 20% of each sale they refer. As the site bulks up its merchandise lines, it’s moving away from its overlap with Whole Foods Market. By year’s end, only 15 to 20% of the SKUs sold in Whole Foods Markets also will be offered at WholePeople.
“In a lot of ways, we see ourselves as aggregators of high-quality products and services that in and of themselves might have trouble attracting a customer base cost-effectively,” says David Robinson, vice president of marketing at WholePeople.com.
Partners and affiliates play distinct roles in the marketing mix, Robinson adds. “We see the affiliate program more as a customer acquisition tool and the partnerships as joint ventures built around content or products. Our goal for the affiliate program is to put out a number of ways the customer can find us. Once they find us, the partnerships are designed to create a more robust site by adding more offerings and the kind of expertise we want to offer in selected categories.”
Whole Foods was quick to seize on affiliate marketing both times it has launched Web sites, but others have moved more slowly. Eddie Bauer, online since 1996, is just now launching an affiliate program with the help of Dynamic Trade.
Why the wait? “Two reasons: resources and branding issues,” says Sally McKenzie, the retailer’s director of e-commerce. “Affiliate programs got started with the dot-com onlies. When you think about their position, that makes great sense, because they had a brand nobody had heard of and had to find all kinds of ways to spread brand awareness.”
But that’s not the case for Eddie Bauer. “Brand equity is first in what-ever we do,” says McKenzie. “We needed to make sure that we would be seen on sites congruous with our brand.” Resources were another issue. “If we got involved with a lot of smaller affiliate sites, it meant an enormous amount of paperwork and communications. So we looked to outsourcing.”