Online sales increase almost 3%, but HSN’s total sales dip by the same amount.
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Hughes says while retailers spend money to promote their brand, Half.com-which started out offering half off the products it sold compared to other store prices-considers the customer experience part of its brand. “We view ourselves as a marketplace. Where branding comes in is in the experience,” Hughes says. So Half.com spends its marketing money promoting its low prices.
While Half.com may be following a retail path by expanding into popular online product categories and adding important site functions to make it easier for people to buy and sell online, it is being more creative about its marketing. In the past, Half.com has gotten its message across by persuading a town called Halfway, Ore., to change its name to Half.com for a year and by printing the message “Why pay full price when you can get it for peanuts,” on bags of nuts sold by New York City sidewalk vendors.
More recently, Half.com has an exclusive deal with fortune cookie manufacturer Wonton Food Inc. to bake Half.com messages into 1 million of the 2 million fortune cookies it makes each day to distribute to restaurants nationwide. The message “Save a fortune at Half.com” along with $5 coupons appear on the back of the paper fortune. Hughes, who declines to reveal the cost, says Half does this to keep marketing costs low as well as to make an impact on consumers. “We market like a retailer because we focus on the price points but we don’t really market like anyone else. We can’t afford to pay Time magazine what they want for advertising so we have to think of creative ways to get our message out,” he says. “The chances of consumers reacting to a newspaper ad is low, but people are definitely going to open a fortune cookie, read it and take notice. They’ll remember that.” The promotion started in April.
Half.com also does limited print advertising in such forums as Sunday newspaper circulars. But it usually only does this type of advertising to help a seller when a product is not moving. “We are opportunistic with print ads,” says Hughes. “Rather than let a retailer’s inventory go unsold, we will turn around the creative for an ad to promote it within 24 hours.”
Half.com also has coupons in online coupon sites, such as Fatwallet.com and DealCatcher.com. Hughes also says a big part of Half’s marketing is online ads through affiliates, especially shopping comparison sites. “We do use a pay for performance model or pay per click in some cases with the larger online properties,” says Hughes.
Duif Calvin, vice president and retail analyst with consultants iXL, says Half.com is a unique online player: it is not a retailer, even though it competes on price with retailers. “Half.com’s fixed price format has been well-received,” she says. “They’ve developed a new model of direct selling and they’re making it work.” But she believes the company is breaking new ground. “Half really is just changing the retailing format by providing retailer services. They are making things possible that some retailers or sellers cannot do on their own, such as selling online, offering payment support and customer service. They are providing a similar service to what Amazon.com is doing with Toys R Us, except without the branding aspect.”
The reason Half.com has been successful, Calvin says, is because it hasn’t tried to become a full retailer, owning merchandise and promoting a brand.
Even as Half.com builds its anonymous, fixed-price business it is not ruling out branding options. “We’re always developing thoughts in terms of how to create new tools for our sellers,” says Hughes. Says a Half spokeswoman: “It’s too soon to say for sure how the marketplace will grow and expand. We’re in close contact with our sellers and if it turns out that the solution is branding then we would consider it.”