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Secrets of eCommerce - Imitate Don't Innovate
By Frank Fiore
Back in the 1980s I had a very successful computer business. We sold MAC and PC hardware and software at a discount through mail order and catalog sales. And when I say “at a discount” I REALLY mean at a discount!
Back in the early 80s when I joined my partner in the business, pricing was very gentlemanly and civilized. Most of the mail order houses at that time tried to imitate the catalog industry that was making gross profit margins (GPM) of 20% to 30% or more. We on the other hand decided to sharpen our pencil and see exactly what we needed to sell at to breakeven - plus a 1% - 2% net profit. Our overhead being rather low – we worked out of a local strip mall that housed a privately owned home stereo store, a second hand clothing store, and a family owned Mexican greasy spoon restaurant – we figured we could sell at a 10% GPM and still make a small profit.
And we were right. Unfortunately this upturned the industry applecart in a lot of ways. First it started a price war. Our competitors had to drop their prices or lose sales. With our tag line of “Low prices are born here – raised elsewhere” our company, to say the least, did not win any popularity contests with competitors –and especially the manufactures.
That was the second problem. Not only were we not selling at the suggested retail price, but we were selling below what even the established retail stores could sell at. This caused quite a bit of gnashing of teeth at the computer retailers like Computerland. They barraged manufactures with complaints saying that were undercutting their sales and taking away their retail customers.
We knew this wasn’t true. Why? Because we knew that a retail customer and mail order/ catalog buying customer (people willing to send in a check or order over the phone) were not one and the same. How did we know this and why did we feel that the retailers didn’t have a case?
Because we had a chain of retail stores too - and they were doing quite well, thank you. We saw that our local customers were willing to pay more for our merchandise, including sales tax, than they would if they picked up the phone and ordered from our mail order house. Of course today, selling at a steep discount is no big deal. Retailers have accepted it and so have the manufactures. Selling at a low GPM has become SOP – Standard Operating Procedure for those of you who haven’t served in the military.
You see we discovered what most retailers and mail order/catalog companies have known now for many years. Retail customers are a different breed from catalog buyers.
And funny enough, catalog buyers are the same type of people who buy online. And if your want your e-business to succeed then my advice is to imitate, not innovate. That is, study what makes mail order/catalog companies so successful and imitate them.
Let’s take a closer look at this idea.
The retail customer wants to see and touch the product before they buy. They also want the immediate gratification of taking it home, then and there. And let’s not forget the social element of shopping. Retail customers may be more inclined to enjoy going to a store with other people and being part of that social experience. Because of these things, it’s a tough job turning them into a mail order/catalog buyer.
So what does all this mean to your e-business?
They say that imitation is the sincerest form of flattery. I suggest you do the same. Follow this list before your launch your new online endeavor and check it twice.
1. Before you even think about a marketing strategy to sell goods or services over the Net, search and find as many catalog companies you can that match the product or services you sell. Here are a couple of good sources. At <a href=http://www.catalogsfroma-z.com/>Catalogs From A to Z</a> you will find thousands of mail order catalogs from around the world. <a href=http://www.catalogcentral.com/>Catalog Central</a> is another source for hundreds of free catalogs including specialty and hard-to-find publications. Finally check out <a href=http://dir.yahoo.com/Business_and_Economy/Shopping_and_Services/Retailers/Directories/Catalogs/>Yahoo’s Catalog Directory</a>.
2. See how they both display and describe the merchandise they offer in their print catalogs. If they have a web site too, check out how they display and describe them as well. You’ll find that the products they chose are common enough – i.e. there are ‘showrooms’ in the real world to see and touch them – or unique enough that they can’t be found anywhere else.
3. Study the types of products they chose to sell ‘remotely’ – that is, without the need for consumers to see or touch the actual products – and compare them to ones you’re planning to sell. There are good reasons why mail order/catalog companies have chosen certain products and product categories over the years. Companies who print and mail catalogs are restricted in the number and type of products they sell due to print, mailing and shipping costs. So they choose the products they offer that will sell the best.
4. Study their customer policies. How do they take an order, how many ways can a customer place an order, what kind of information they ask for, what satisfaction guarantees they offer, what their return policies are and how are returns processed.
Once you’ve accomplished these things then you’re ready to do some outward bound marketing to attract customers to your web site. One way in particular is renting opt-in lists – both email and snail mail lists. Your first inclination would be to rent lists of people who have shown an affinity for the products or services you sell.
But that’s not necessarily true.
Using the knowledge gained from my prior business, I’ve discovered that a list of catalog buyers who have the propensity to buy ‘remotely’ are a better targeted audience than one that has an affinity for your product or service. Why? They are already comfortable with the idea of buying remotely.
The best of both world’s, of course, is to find consumers who are interested in your product or service niche and are catalog buyers – any type of catalog buyers - as well. So, I suggest that you find list brokers who can rent you opt-in lists that reflect both an affinity for your product or service AND have proven to buy through catalogs or mail order. Some of the places to start from to rent email opt-in lists are at <a href=http://www.postmasterdirect.com>Postmaster Direct</a> and <a href=http://www.yesmail.com>YesMail</a>. I would also look at renting snail mail lists from some of the <a href= http://www.the-dma.org/servicelocator/>list brokers</a> listed on the Direct Marketing Association web site.
If you want to see the proof of my supposition, then look at Eddie Bauer. Eddie Bauer operates in all three channels, catalog, e-commerce and retail, and knows its customers well. The overlap between Net buyers and catalog buyers is very high. In fact, less than 15 percent of the customers who buy direct from Eddie Bauer buy solely from the Internet. But the overlap of between retail buyers and catalog buyers is a bigger surprise. That overlap is very low. While 90 percent of catalog buyers shop retail, only 10 percent of retail buyers also use the catalog.
So, why re-invent the wheel. First, there are hundreds of innovators over the past 20 years who have blazed the trail for your e-business. Use their knowledge to your best advantage. And second, remember what they say about pioneers – you can always tell a pioneer by the arrows in their back!
Sometimes imitation is also the better part of valor.
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