A Profitero study showed Target’s online prices were 25% more expensive than Wal-Mart’s, which were just slightly more expensive than prices on Amazon.
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Beyond keyword marketing, Home DÈcor Products sites also maintain a presence in comparison shopping engines, affiliate programs and also do direct marketing, including e-mail and in-box promotions to customers under co-op programs with different manufacturers.
When a bathtub lists for $50,000, how much does it cost Home DÈcor Products to keep it in inventory for HomeClick? The answer is, it doesn`t keep it in inventory. Sales of the tub are chalked up under the 49% of sales that the company drop ships directly to customers.
Keeping only the proven sellers in inventory is another part of HomeClick`s strategy. When HomeClick forms a relationship with a manufacturer, generally it puts the entire catalog online--hence its online assortment of approximately 1 million SKUs. But only selected products are inventoried. "I don`t take inventory risk," says Golden. That means that 37% of sales--a small number of the SKUS offered online--are of products in inventory. Another 14% are cross-docked, shipped from the manufacturer or distributor to the customer with a stop in HomeClick`s warehouse for staging.
So when does a product get promoted from drop-ship status to inventory? Home DÈcor Product`s powerful ERP system includes a module for forecasting and replenishment, and when sales of an item reach a certain threshold, it`s time to inventory the item. "When we realize we have a product that, were it to be in inventory, would turn twice a month, then we bring that product in-house," Golden says.
Faster shipping=better margins
The benefit to keeping the top-sellers in-house is that quick delivery boosts margin on the sale of those products. Because the high end of the home improvements business may involve delivery lead times of four to six weeks, "We`ve learned we can sell things at a higher price if we can get them to the customer quicker than that," says Golden. "This meshes well with identifying what people will buy based on order history rather than speculation, and bringing those products in here so if a customer orders them, we can ship the next day."
The conversion rate from the more than 1 million visitors to HomeClick.com every month is about 2.5%. Golden concedes that some purchases that start with research on HomeClick end in manufacturers` showrooms rather than on the site. While he doesn`t get those sales, he says he gets credit in the form of cooperation from the luxury manufacturers who agree to list products on the site. "We are helping to create demand for these products overall. In many cases, we are the exclusive authorized Internet retailer for these products. Luxury brands don`t want their products to be sold inside a big box store," he says.
More of the same
Luxury manufacturers gave a thumbs-up to the high-end-only offering on HomeClick, but that doesn`t give Home Decor Products a way to leverage its back-end systems to reach the larger share of the home fixtures market, which buys mass market brands such as American Standard and Koehler. To reach that segment, Home DÈcor Products launched AbsoluteHome.com last August. Barbecues.com and KnobsandThings.com followed.
Golden is looking to do more of the same. "We are going to continue to go deeper into the categories we are in and we will also look for other niches we can exploit," says Golden. The company also will seek additional ways to use its infrastructure to help manufacturers sell products directly to consumers, such as handling the sale of replacement parts, for example, if a manufacturer can`t sell parts directly because of channel conflict.
And just as GSI Commerce has evolved into a provider of e-commerce infrastructure for other, branded sellers, Golden sees similar prospects for Home DÈcor Products in the future. "I would like to provide e-commerce services for manufacturers that want us to take on their products directly," he says. "I think you will find us doing those kinds of deals in the next year."