What are online retailers doing to acquire new customers and boost sales? In addition to the tried-and-true strategies of spending on search, affiliates, and portals, companies are focusing on customization and personalization, deep partnerships and social networking.
“What’s old is new again,” said Patti Freeman Evans, an analyst with JupiterResearch, referring to the renewed interest in partnerships. She was speaking at a panel on acquiring new customers that she moderated at the NRF’s shop.org conference in New York earlier this year. Participants included Drugstore.com, eToys, Bose and Wine.com.
“We’ve reached a ceiling with what we believe is the efficacy of our spend. So we’re looking for new ways to acquire customers,” said Kathy Gersch, chief marketing officer for Drugstore.com. (The company spends on search, affiliates, portals, and some partnerships to acquire new customers.) The company can create special landing pages for product launches and preorders that bring in new customers from manufacturers’ online marketplaces.
EToys has found new markets by managing toy departments for partners, including Sears, Kmart, Buy.com and Amazon.com. The nature of the toy business is that 70 percent of the sales come in the fourth quarter, which makes it difficult for nonspecialists to handle.
“We refer to it as landing a jumbo jet on a dime,” said Michael Wagner, chief executive officer of eToys. The company takes the inventory risk, offers merchandising expertise to retailers that don’t do the volume in toys that it does, and takes a cut of revenue. EToys has some limited branding on sites that it feels adds to its credibility, but the customers belong to eToys partners, and 95 percent of them are new to eToys, Wagner said.
Bose also is pursuing novel partnerships. The company has 100 retail stores, a call center, an online store and partnerships with many consumer electronics companies. Its most unusual partnership may be with American Airlines, where passengers in premium cabins use Bose’s luxuriously quiet and comfortable headphones. Passengers can order the headphones from American Airlines’ catalogue and earn frequent-flier miles.
The company also has a store on eBay where Bose products are sold at full price.
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“It gives us access to the broad base of eBay customers,” said Sue Kurys, manager of online sales for Bose Retail Stores. “We know from search-engine data that Bose is highly sought after and underserved” in eBay auctions, she said.
To pull off these kinds of partnerships, it’s necessary to get the technical department, marketing, creative, distribution and fulfillment operations involved, she said. Luckily, Bose is organized in such a way that it’s easy for the online group to marshal the team it needs. Such projects have ongoing costs and require a full profit and loss plan, she said.
Wine.com, one of the largest wine stores in the U.S., does all the usual marketing through e-mails, search and portals and has lately focused on celebrity partnerships. These are not spokesperson deals or promotions based around one stockkeeping unit, but usually a revenue share with custom editorial content, such as recipes from a famous chef. The celebrities get to pick their profit margin, said Russell Fadin, Wine.com senior vice president of business development.
Overstock.com has attracted customers to its new auction site by adding a social networking component, said president and chairman Patrick Byrne in an interview. Users can create profiles and networks of friends based on shared interests. There is a message board and a feedback system for buyers and sellers that is linked to the social network, so buyers and sellers can see how everyone is connected.
“If you want to buy something from me but you don’t know me, but one of your friends does business with me, you will value her point of view more than you would a stranger’s,” said Byrne.
The site is growing rapidly thanks to its social networking component and eBay’s recent fee increases, he said. Last week, the site listed more than 200,000 auctions, up from about 40,000 the month before.
“We don’t have to market it,” said Byrne. “Everybody who’s already in it is out there networking to friends and bringing them in.”
But Overstock.com does advertise, including on thousands of blogs. “We love bloggers,” said Byrne. “We’ve got one guy who does nothing but run advertisements with bloggers.”