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.
Trying to do too much too soon can sink a redesign process, IRWD speakers say.
Retailers often wonder how much to budget for redesigning an e-commerce site. At least one retailer decided that the cost—and the project itself—would be managed one step at a time.
“Nobody has unlimited money,” explained Timothy Peterson, vice president of marketing for nutritional supplement retailer NutraOrigin. “For us it was trying to figure out what can we spend now, what can we spend soon, and what can we spend later.”
Peterson explained the phased approach NutraOrigin took in a session called “Mastering the Details of Great Design” at the Internet Retailer Web Design & Usability Conference 2011 last week in Orlando. He spoke alongside Betsy Emery, CEO of Tellus, the design and consulting firm that helped NutraOrigin redesign its site last year.
Peterson explained what he found when he joined NutraOrigin in late 2009: a site that attracted fewer than 100 visitors a day and had a conversion rate of under 025%. “Traffic was horrendous,” he recalled. “We got most of our business out of our 800 number. People didn’t want to go to the web site, even though we had thousands and thousands of customers.”
Working with Tellus, NutraOrigin’s e-commerce team realized that its best short-term opportunity lay in encouraging customers to subscribe to receive vitamins and supplements regularly, what the e-retailer calls “continuity” customers. To do that, Peterson said, NutraOrigin had to make its easier to shop and had to give newcomers confidence to become long-term customers. And that became the focus of phase one of the redesign project.
Focusing on one goal for the first phase is important, Emery told attendees. She explained that retailers often want to do everything—improve conversion, boost traffic, increase average order value and more—when starting a redesign. But that leads them to make unrealistic projections of the return on investment from a site redesign. Choosing one goal leads to more realistic expectations and is more likely to lead to a successful first phase. The revenue generated from the first stage can then justify further investments, she added.
Retailers also should budget 25-50% of the redesign cost for annual site maintenance and a similar amount for promoting the site. Spending less on marketing would mean failing to take advantage of the new functionality a retailer has built into its redesigned site. She said it’s realistic to break even on the first phase of a redesign in 12 to 16 months.
Peterson explained that NutraOrigin, which had been in business since 2004, had to think of itself as a start-up as it went into the redesign project in late 2009, and completely redesign the site. However, his team took a phased approach that included setting a goal of getting a functioning site up and running in 60 days, generating revenue to fund further efforts. That goal was met.
For the first year of the redesign project, Peterson budgeted $150,000, which was roughly 10% of the company’s projected online revenue for a year. While that may seem like a lot, he said, spending significantly less would have doomed the redesign project to failure, and likely the company to extinction.
A year after the new site went live in early 2010, Peterson reported that the site’s conversion rate averages around 2.4%, nearly 10 times what it was before, and traffic is also more than 10 times greater at more than 1,000 visitors a day.
Average order value is down from $60 to $30, but Peterson says that is good, because it means NutraOrigin is attracting more first-time visitors who could become long-term clients. “The first order that comes through on the web site is often less than subsequent orders,” he said. “People are taking a chance.”
While NutraOrigin took a phased approach, Peterson pointed out that it also had a plan for subsequent site design projects, including adding new brands and a section where it can sell at wholesale to other retailers.
Knowing it had those plans at the beginning was important, Emery said, because it meant that the retailer built from the beginning with its future goals in mind. Retailers that take that approach won’t have to throw out what they built in phase one when they move to subsequent phases, she said. And that, she added, keeps the total cost of a redesign down in the long run.