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E-commerce sales fell about 24% in the fourth quarter to $13.9 million, but Medifast is investing in e-commerce with a mobile mobile app and two sites for physician associates as well as consumers in Canada. “Expanding to Canada is a major step in reaching new customers and growing the Medifast brand globally,” CEO Michael McDonald says.
Although e-commerce as well as total sales fell in the fourth quarter of 2013 at weight-loss products manufacturer Medifast Inc., which the company attributed to a drop in consumer demand following a decline in advertising, Medifast says it is looking ahead to stronger sales partly driven by its launching of two e-commerce sites in Canada for physicians and consumers.
Chairman and CEO Michael McDonald says Owing Mills, MD-based Medifast will build on its e-commerce experience in the United States of selling through physicians as well as direct to consumers as it uses the online channel to enter the Canadian market.
“Expanding into Canada is a major step in reaching new customers and growing the Medifast brand globally," he says. “In the U.S., we have seen a lot of success with our multichannel model, which includes our e-commerce business and direct to consumer. We believe this is a great way to launch in Canada and start to share the benefits of Medifast.”
Medifast recently completed its first-quarter launch of e-commerce sites MedifastNow.ca, designed for consumers, and MedifastMD.ca, for wholesalers and physicians in the Medifast Medical Providers network.
MacDonald says the e-commerce sites will serve as the company’s initial entry in Canada, and that it will use the web channel to better learn about customer demand. “We have done a lot of research on the market in Canada and consumer preferences and have tried to customize our web content to the unique needs of the Canadian consumer,” he says. “We look forward to learning more and further customizing as we get feedback from our customers. Of course, the beauty of the online channel is that people can be self-guided and use the materials we offer for support in a do-it-yourself fashion or reach out for further support via our nutrition team and contact center.”
The Canadian e-commerce sites will feature content in English and French, including such shopping tools as the company’s Quick Start Guide, which provides information on suggested weight-loss meal plans.
Medifast hasn’t said more about how it may expand in Canada, but in the U.S. it operates in several segments: Medifast Direct, which sells primarily its U.S. consumer-facing site, Medifast1.com, as well as through its contact center; Take Shape for Life, a network of nutrition “coaches” that sell Medifast products directly to consumers as part of nutritional education programs; a wholesale network of physician partners who provide Medifast products to their patients; and a chain of Medifast Weight Control Centers, including 83 company-owned and 36 franchise locations as of Sept. 30, 2013. (Medifast is not associated with MediFast International Limited, an insurance services company whose web site is at Medifast.com.)
Although Medifast cut back on advertising for its e-commerce channel last year, partly in an attempt to trim operating costs and boost operating profits, the company continued to invest in e-commerce technology, MacDonald said during an earnings call with stock analysts covering the fourth quarter and full-year 2013 results. In addition to the two new e-commerce sites for Canada, and a new mobile for its North American markets, MacDonald said Medifast invested in other improvements last year. That includes improved web analytics to track the shopping behavior of web site visitors, improved multivariant testing of web page content, web tools that let its web marketing team act faster to introduce promotions, and an expanded e-mail marketing technology platform. The company didn’t offer further details on these investments, but MacDonald noted that it recorded improved sales through its web site promotions, including free-shipping days.
What’s more, Medifast is returning to higher spending on advertising for e-commerce. In the earnings call, chief financial officer Timothy Robinson said the company planned to ramp up its e-commerce advertising spend for this year to a “more traditional level” of about 30% of revenue in the Medfast Direct e-commerce channel.
For the fourth quarter ended Dec. 31, Medifast reported:
● Revenue in the Medifast Direct channel, mostly e-commerce sales, fell 24% year over year to $13.9 million from $18.29 million;
● Medifast Direct revenue was 18% of total revenue, down from 22% a year earlier, as total revenue decreased 7% to $77.29 million from $83.24 million;
● Net income of $5.29 million, up 183% from $1.87 million;
For the full year ended Dec. 31, the company reported:
● Revenue in the Medifast direct channel fell 10.4% year over year to $75.5 million from $84.3 million;
● Medifast Direct revenue was 21% of total revenue, down from 24% a year earlier, as total revenue inched up 0.05% to $356.89 million from $356.71 million;
● Net income of $23.97 million, up 51% from $15.88 million.
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