August 29, 2001, 12:00 AM

A Very Wary Christmas

(Page 2 of 3)

“We’ve been working on the sites for a year. We’re ready for Q4,” declares Dawn Robertson, president of Federated Direct. “What we’ve seen emerging is that the customer wants shopping online to be simple and fast. While they wanted that last year, too, it’s become a real focus this year.”

In addition to site enhancements that make it easier to search and buy, Federated Direct’s strategy for the holidays is directed at merchandising gifts, brands and selected categories of business, with specific merchandising goals and plans for each. Robertson wouldn’t give away details - holiday offerings won’t show up on the sites for weeks-but the strategy is built on a tiered approach that ties promotions to customer response as the season progresses. In other words, don’t look for many big holiday promotions that offer big discounts on popular items that already sell themselves.

Discounts are a traffic-building technique that web merchants will be using far less frequently this season. “E-retailers won’t be able to offer the discounts and promotions of the past holiday season that drove consumers online,” Johnson says. “So it won’t be as promotional a Christmas this year.”

Flexible promotions

That’s what retailers say now. But part of the beauty of the web is that it allows retailers to change their marketing strategies immediately in response to what’s selling or not selling. “With all the mechanisms like e-mail that retailers have available, I wouldn’t be surprised to see them designing flexible marketing programs this year,” Whitfield says. “If they don’t reach whatever metric they’re looking for by a certain time, they’ll go to Plan B, which will include things like promotions and e-mail campaigns. They will try to get as much full-margin, full retail price sales as they can, but everyone is also planning for how they can be sure to sell through as much inventory as they can.”

That pretty much sums up Federated Direct’s approach this year. “As the products sell or don’t sell, we’ll promote them,” Robertson says. “If something’s really selling and the customers are responding, it would remain the same value price it is every day. If not, we take a different stand. We don’t plan to merchandise below certain price points.”

That’s in part because Federated Direct already has made a substantial investment in revving up its web sites-Robertson won’t say how much-which it must recoup soon if it’s to reach its goal to break even in 2003. For the same reason, Federated Direct isn’t expanding its assortment with lower-priced items this Christmas, choosing instead to expand SKUs toward the other end of the scale in pursuit of bigger margins. Macy’, for example, will offer 75,000 SKUs this Christmas, up from 60,000, while will expand similarly. Robertson also says Federated Direct limits free shipping to four times a year, only one of which will fall during the holiday season.

“We’ve put together strong merchandising of gifts and we didn’t have that last year,” Robertson says. “We didn’t have the boutiques and the collections last year that we have now. We’ve made some enhancements, and there are more coming down the pike. We’re taking the offense, not the defense.”

Ashford is too; it just looks different. While you’d have to live under a rock not to know Macy’s (who hasn’t seen those Thanksgiving parade balloons on TV?), companies like Ashford are still trying to build a presence. But as it prepares for what it hopes will be its biggest sales quarter of the year while keeping an eye on costs, Ashford has severed some 20 affiliate relationships that weren’t producing sales and shifted most of its remaining advertising relationships to a pay-for-performance structure. “There were many editorial sites that didn’t generate sales for us,” says Richard. “It was a good branding opportunity, but there are no dollars for branding these days. Sites have to generate measurable sales.”

Ashford also is working with search optimization providers on a revenue-share basis. It’s narrowing its assortment to decrease the number of lower-priced items that aren’t profitable. The 30% reduction will leave about 12,000 SKUs online. It’s also eliminating about one third of the 300 brands it carries. “We can reduce the assortment to SKUs that perform and still have a broad offering,” says Richard. “Like offline companies that focus on sure bets, we’ll focus on sure bets as well.”

Other measures

This Christmas presents e-retailers with big challenges-a shaky economy, the need to rein in costs, and the rising expectations of web-savvy consumers. Web merchants with even a few years of experience are making the moves they believe will position them to seize what’s also the year’s biggest opportunity to bring in revenue. No one knows for sure how it will shake out until the glitter of the holidays settles.

But though e-retailers are focused on making their numbers, the holiday’s gains also have to be measured in terms of learning-even when they may look like losses. “Few major online retailers don’t have a strong multi-channel presence or at least an alliance,” notes Whitfield. “So is the only measure of success the sales from the site, or is it the ongoing relationship they build with customers and the fact they can now communicate with them by e-mail? I think this Christmas could be the year many of them start really thinking about the role of the web and the best way to measure an online store’s success.” l


A delivery option just right for procrastinators

Online retailers largely redeemed themselves last year from the delivery debacles of 1999, in part by declaring cut-off dates after which they could no longer promise on-time deliveries for the holidays. But cutting off shipments as the holiday approaches presents merchants with a dilemma: it also effectively cuts off sales. To extend the shopping season even further-and thereby bump up sales an extra notch or two-Davidson, N.C.-based technology developer has developed a web application that guarantees Christmas delivery of orders placed on Christmas eve-make that Christmas day.

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