Geeknet terminates a purchase agreement with Hot Topic and accepts a $20 per share bid by GameStop.
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“It depends on why the community is there in the first place,” Cothrel says. “What was the promise when the community was built? It can be a different relationship down the road when you want to monetize the community, because sometimes the community gets very offended by commerce. And it’s not because commerce and community don’t go together. Whenever people tell me that, I tell them to check out the DVD discussion on Amazon.com. It’s just a matter of being straight with the community members about the fact that you’re a business organization, that these are your objectives, and here’s the value you want to provide to people as potential customers.”
Striking the right balance when folding commerce into community raises big questions right off the bat: Should the retailer brand the community it sponsors or operate it at a distance? What are the most effective community tools? And most importantly, what’s it going to cost, and what makes the cost worth it?
As to the branding issue, the short answer is: it depends on what the e-retailer is after. Beauty.com, owned by Drugstore.com, operates MakeupAlley.com, one of the web’s largest online communities of cosmetics enthusiasts. There’s nothing on the Makeup Alley home page to identify Beauty.com as the site owner. Heavy on user message boards and community features such as a cosmetics swap for members, the site delivers market intelligence for Beauty.com. Monitoring community posts from the sidelines supplies Beauty.com with consumer soundings on the pros and cons of products and emerging brands, data it cranks into merchandising operations on its retail site. And when users click on member reviews of a featured product, there is a link to Beauty.com to buy.
Luxury goods seller Ashford.com took a different approach when it acquired TimeZone.com, an international online community of timepiece enthusiasts some 80,000 strong. Though not actually branded as an Ashford.com property, TimeZone is visibly linked to Ashford with a click-through button on the home page. Several TimeZone features such as “Sales Corner” and “Watch of the Moment” also link back to Ashford, though the site also delivers plenty of independent user-driven content through its public forum. “When we as a commerce site bought a community site, we had to be very respectful of why TimeZone had been formed in the first place. Before Ashford acquired it, TimeZone was just individuals posting information on watches. We wanted not to intrude, but to add value,” says Mary Lou Kelley, Ashford’s vice president of marketing. Ashford has done so by providing technical support to the site, she adds.
Kelley won’t share conversion data, but she believes that as many as 50% of active TimeZone community members have clicked through to Ashford. “If the community knows it can post a question about a watch they’re considering and get a blunt answer, it adds value to both sides,” she says.
Who’s got the clout?
Ashford’s experience with TimeZone underscores a fact first established for e-retailers by Amazon: consumer product reviews are the most influential feature on community sites. “In the sites we studied it was the most important community feature by far,” says Glenn. While only 1% of community members actually contributed to the review, they wield considerable influence: more than a third of site visitors read them, spending 45 seconds or more on review pages.
Greenwood Village, Colo.-based eBags.com is acquiring a travel community, Virtual Tourist, now some 100,00-plus members strong, that it’s hosted on its site since September. Virtual Tourist was the creation of travel enthusiasts who developed software applications to bring fellow enthusiasts together online; eBags has added more applications, such as giving members the ability to scan in and send photo postcards of their travels along with trip recommendations. Not only do such community features increase participation in the site, members’ communication with each other gives eBags marketing opportunities at no added cost. For example, postcards go out to members as text links in e-mails that also carry the offer of $10 off the recipient’s next $50 eBags purchase.
Maintain the integrity
“It actually costs us nothing to be a ridealong,” says Peter Cobb, vice president of marketing and an eBags co-founder. Cobb says ebags eventually hopes to link more personalized sales opportunities to topics of interest to community members. “For instance, if someone was looking at Paris, Milan and Florence, we might have our upper-end Italian handbags as a link, because people going there probably have more interest in those products. There are definitely integration opportunities, you’ve just got to make sure they maintain the integrity of the community.”
While Cobb cites the essentially free marketing opportunities eBags has gained from hosting the travel community, e-retailers must be highly creative to squeeze out such benefits without incurring what can be major costs. Depending on their existing set-up, e-retailers looking to build, acquire or partner with communities on their sites may face some or all of costs including research, strategy development, and added software and hardware to construct, manage and integrate the community onto their site.
But consultants say it’s the ongoing labor costs even more than technology that can make community an expensive marketing tool for e-retailers. And indeed, it’s not cheap. For example, clients of Participate.com, a pool that includes several Fortune 1,000 companies, pay from $300,000 to $3 million a year for research and community maintenance services alone. Sites that offer something unique, such as learning or development opportunities, to vendors of community services may pay less.
That’s the case at hardware and home gear e-retailer OurHouse.com, where fees fall below the lower end of Participate.com’s usual scale, although the company won’t say by how much. Evanston, Ill.-based OurHouse launched online in May 1999 with the aim of becoming a one-stop shopping site for advice and products for home improvement. “Giving consumers a place to come and ask questions and share ideas was about the most important thing we could do from the perspective of building loyalty and retention,” says Geni Burke, marketing director.