Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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The company points to high customer satisfaction ratings in Forbes Best of the Web and Yahoo! Internet Life’s Best Electronics Site ratings in 2000, as evidence that in-house fulfillment and customer service are worth the investment. “The payback is that we drive service levels up, which helps us make more sales,” Drew says. “As we grow, these expenses become a smaller percentage of cost of sales.” Furthermore, 800.com says its product return rate is about half the industry average. While 800.com will not say what its rate is, Shop.org’s recently completed survey of multi-channel retailers reports that the returns for electronics purchased online are about 4%.
800.com this year introduced the fourth generation of its web site. A key improvement is adding choice boxes to the search results page so customers can narrow their choices by product subcategories, as well as by price, brand format and other features. The site also added Interactive Wizards to the car audio and wireless stores that provide a live connection between customers and service reps and the Accessory Matchers to the PDA and wireless stores that matches accessories to products. Both will be available throughout the site for other products eventually.
On the back end, 800.com has 28 major applications running on 130 servers, including online help chats, online forums and “anything the customers need,” Drew says. Other features on the site include in-depth product information and online buying guides, side-by-side product comparisons, navigation by price, feature or brand and a price matching policy. Drew says 800.com added these features to give customers all the information they need in one place. “In our focus groups we found that consumers blend advice from consumer product reviews in magazines, authoritative friends and retailer suggestions to make decisions about buying consumer electronics. Consumer electronics are complex products and consumers like to check out all the information on them before buying,” he says. “We make sure we provide it all in one place on our site.”
In anticipation of the holiday season, 800.com in August expanded product offerings in certain popular categories. It beefed up its line of digital cameras, adding Nikon, Pentax, Minolta and Toshiba to a line-up that already included Sony, Olympus, Kodak, Canon, Fuji, RCA and Argus. The store now offers all the leading digital camera brands in 60 models as well as accessories.
It also added more wireless products and accessories and promoted the offerings with free shipping on all PDAs in early autumn.
800.com may have its ducks in a row, but that does not mean it is immune to competition from big sellers online. The recent meeting of the minds between Amazon.com’s electronics division and Circuit City’s stores could present a new competitive challenge. The deal involves selling Circuit City products via Amazon online and allowing customers to pick up the goods at local Circuit City stores, a clear move toward a multi-channel strategy that analysts say is key to survival.
But 800.com tries to put the new competitive threat in the best light. The partnership, Drew says, “points to the importance of the core tenets of our business model: Because of our full-service, specialty approach, our 70-plus leading-brand authorizations and an infrastructure that enables us to control the entire customer experience, we feel we are able to provide the best service, selection and value in web-based consumer electronics retailing. This puts us in an excellent position to continue to compete and differentiate ourselves in the category.”
The company acknowledges that such partnerships shift the competitive landscape. But with its new selling arm at Reel.com, no capital worries and several new product categories, 800.com says it’s ready to face the big boys. Says Drew: “We will forge ahead doing what we do best: provide a high level of service before, during and after the sale.”