Retailers shift their ad spending from TV, radio and print ads to digital ads.
Second 500 brand manufacturers find success with customer service and social media.
Success doesn’t come easy for smaller consumer brand manufacturers that are selling online, as they must compete with the likes of web-only giant Amazon.com Inc. and others that can often deliver a wide assortment of merchandise faster and cheaper.
That didn’t stop the manufacturers in this year’s Second 500 Guide from growing quickly, however, as they boosted online revenue 18.4% in 2011 as a whole—crushing the larger online operations of the consumer goods manufacturers in the Top 500 Guide, which grew 12.0%. This growth puts the Second 500 manufacturers in line with web-only retailers, which posted 18.4% sales growth and retail chains, which grew 18.7%. The group is also slightly ahead of total Second 500 growth of 17.7%, and total U.S. e-commerce growth of 16.1%.
Many of the brands in this year’s Second 500 Guide, which ranks and profiles up-and-coming web retailers and manufacturers based on annual online sales, are taking advantage of the low up-front costs of the online-only business model and they are reaping the benefits of increased online spending by consumers, says Scot Wingo, CEO of ChannelAdvisor, which helps mainly small to mid-sized retailers sell online. “There’s a new generation of brand manufacturers and it’s part of their DNA to go direct,” he says. “There is a lot of pressure in the bricks-and-mortar world, and the brand manufacturers realize that they don’t have to go that route if they don’t want to.”
A few of the fastest-growing manufacturers in the Second 500 are big companies like paint manufacturer Benjamin Moore & Co. and lingerie maker Maidenform Brands Inc. For them, direct-to-consumer web sales are a small part of their business. In some cases big manufacturers like this are just getting their feet wet online; in many cases, they deliberately tone down their online marketing to avoid competing with the retailers that account for most of their sales.
But most of the fastest-growing Second 500 manufacturers are much smaller companies with limited distribution that are less concerned about channel conflict and more about drawing attention to their very specialized products. The smaller brands that are winning are not only offering niche products that are hard to find, they focus on building brand loyalty and differentiating themselves with a fun, personal touch aided by social networking and solid customer service, Wingo adds.
Take Huetiful LLC (No. 986), which manufactures and sells hair steamers, which, the company claims, hydrates hair five times more effectively than hair conditioners. Founded in 2009, the merchant sells exclusively online and has focused from the beginning on building customer loyalty and exemplary customer service, says founder Ken Burkeen.
Instead of allocating dollars to promotions, coupons or mass marketing tactics, for example, the retailer instead chose to hold firm on price and offer a 45-day money back guarantee, free shipping and free returns.
Footing the bill for free UPS shipping both ways may be difficult for some small retailers to stomach, but it pays off because customers keep coming back and recommending his products to friends, Burkeen says. “When you’re a retailer that goes direct to consumer, you have a relationship with every single person you sell to, and things like our return policy take away that barrier they might have to purchase.”
The formula worked last year, as the retailer grew sales 446.0% in 2011, from $150,000 to $819,000. That made it the fastest-growing consumer brand manufacturer in the Second 500 and the third-fastest among all 500 retailers.
In addition to focusing on customer service, innovative social media strategies are also common among the faster-growing online brands. Brands captured six of the top 10 spots in the Second 500 Guide for most Facebook fans, four of the top spots on Twitter and five spots for highest number of video views on YouTube.
Huetiful uses Facebook as a kind of hub to provide information and tips on how to the use the retailer’s products. The company also connects with popular YouTube bloggers that post videos about its products, encouraging them to link those videos back to its e-commerce site. This not only helps boost its online reputation, but aids in SEO as well.
On Twitter, Burkeen regularly tweets to his customers that they can get in touch with him via his direct e-mail address with specific concerns. A recent tweet on Huetiful’s feed from a user with the handle yattamook says, “Just wanted to say. THANK YOU! huetiful has the best customer service. EVER!”
Around 10% of the retailer’s traffic comes from social networks, and Burkeen attributes about 4% of sales to his social media marketing and networking.
“Most of our purchases, especially for services, are word-of-mouth-driven, so I knew the power of social media in recommending products to people,” Burkeen says. “Now we have 34,000 fans, most of whom are product owners.”