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According to Internet Retailer (and Hershey's ecommerce homepage, www.hersheygifts.com) Hershey's Gifts will be closing its catalog and web businesses on July 31st, 2009. My initial question is... why?
Why, after all the examples we've seen of ecommerce success even in the midst of economic recession, would a major brand shutter its direct retail operations? Why, knowing the ease and efficiency afforded to direct retail customers by online shopping, would Hershey's cut this entire business unit from its growth strategy in one fell swoop?
Let's look at Hershey's foundational business model. Traditionally, Hershey's is not a direct retailer at all. Hershey's is a brand manufacturer; a producer of chocolate happiness and a vendor to the direct retailers who sell it. I can't name a single gas station or convenience store that doesn't sell Hershey's candy. The price point is low, the purchase is driven by impulse, and it may very well be the only product that's more convenient to get in the real world than in the virtual one.
But Hershey's knew that all along.
So instead of selling almond bars and $5 bags of kisses through a channel with shipping expenses equivalent to the value of the product, they designed HersheyGifts.com to be a resource for much more luxurious and valuable candy products. The online selection is comprised of fancy gift tins and baskets, categorized by gift "occasions" complete with pretty packaging and all the other cost justifiers required to drive up average order value.
Internet Retailer reports that the ecommerce and catalog operations combined drove $22 million in 2007 and experienced no growth in 2008.
Now, I can't imagine the flat growth curve of 2008 was the deciding factor for closing the doors. As I mentioned in a previous post, "Flat is the new Up". A website that maintained its sales in 2008 didn't do half bad, all things considered.
Internet Retailer also reports that the closure will eliminate only 12 employee positions. Even after considering the cost of catalog distribution, mail order solutions and other materials, these would have to be some pretty well-paid employees if the $22 million operation was losing money.
In the end, I guess it's not for me to know what's responsible for the demise of HersheyGifts.com, but I won't be surprised to see some iteration of direct retail efforts emerge from that company again in the near future.
Posted by: Jesse Kurth
Why, after all the examples we've seen of ecommerce success even in the midst of economic recession, would a major brand shutter its direct retail operations? Why, knowing the ease and efficiency afforded to direct retail customers by online shopping, would Hershey's cut this entire business unit from its growth strategy in one fell swoop?
Let's look at Hershey's foundational business model. Traditionally, Hershey's is not a direct retailer at all. Hershey's is a brand manufacturer; a producer of chocolate happiness and a vendor to the direct retailers who sell it. I can't name a single gas station or convenience store that doesn't sell Hershey's candy. The price point is low, the purchase is driven by impulse, and it may very well be the only product that's more convenient to get in the real world than in the virtual one.But Hershey's knew that all along.
So instead of selling almond bars and $5 bags of kisses through a channel with shipping expenses equivalent to the value of the product, they designed HersheyGifts.com to be a resource for much more luxurious and valuable candy products. The online selection is comprised of fancy gift tins and baskets, categorized by gift "occasions" complete with pretty packaging and all the other cost justifiers required to drive up average order value.
Internet Retailer reports that the ecommerce and catalog operations combined drove $22 million in 2007 and experienced no growth in 2008.
Now, I can't imagine the flat growth curve of 2008 was the deciding factor for closing the doors. As I mentioned in a previous post, "Flat is the new Up". A website that maintained its sales in 2008 didn't do half bad, all things considered.
Internet Retailer also reports that the closure will eliminate only 12 employee positions. Even after considering the cost of catalog distribution, mail order solutions and other materials, these would have to be some pretty well-paid employees if the $22 million operation was losing money.
In the end, I guess it's not for me to know what's responsible for the demise of HersheyGifts.com, but I won't be surprised to see some iteration of direct retail efforts emerge from that company again in the near future.
Posted by: Jesse Kurth
It's true that an ebbing tide lowers all ships, but there are certain industries that are more vulnerable to the type of economic situation we're all living right now. Conversely, there are certain industries that are more insulated, and some that actually benefit.
This might be an obvious point to make. After all, we see the news about increased sales at movie theaters driven by people who want an inexpensive escape from a harsher reality, and busier auto repair shops because of people postponing the more expensive alternative of purchasing new cars. Cost conscious consumers are shying away from major cash outlays in all kinds of areas, and I'm seeing some pretty specific ecommerce examples for illustration.
NFL.com cashed in on 2008 consumer attitudes with an 18.9% increase in sales over 2007 according to Internet Retailer. In case you missed the news reports, it turns out that sports are another favorite passtime for reality escapists. What better way to live the dream than to buy the gear? Combine that with the obvious array of holiday gifts at the peak of football season and you've got a recipe for success.
At the same time, Select Comfort Corp., manufacturer and retailer of beds and mattresses, saw a 32% decline in 2008 vs. 2007. If I'm not mistaken, a new mattress is about a once-every-10-years investment. Anyone who didn't absolutely need a new mattress in 2008, probably didn't buy one. If they did, they probably didn't invest in a high-tech robot mattress. A tried and true Sealy helps deliver me to la-la-land just as well.
People are likely to maintain their reality abandonment through 2009, so we would be wise to apply these lessons wherever we can; including mail order solutions, catalog management software, and customer relationship management applications.
Which products in your mix could take advantage of this trend?
Posted by: Jesse Kurth
No, the stock prices for ecommerce retailers are not insulated from fluctuations in the broader market. In fact, they've been moving consistently in step. However when the market is up, it seems to be way up for online retailers.
Monday saw positive movements in the stock market in reaction to president Obama's latest budget announcements and economic stimulus plans. As tracked by Internet Retailer, a handful of major ecommerce stocks significantly outperformed the rest of the market, with single-day increases between 10.2% and 25.2%. The companies in this top category represent greeting cards, prescription drugs, jewelry, a major discount brand outlet, and the horticulture industry (flower delivery).
I couldn't have chosen a more diverse group myself. So what's the common theme for success?
Convenience. Yes, convenience is a foundational advantage for nearly any ecommerce operation -- also an advantage shared by plenty of companies who didn't enjoy such a massive bump in stock price. But think about the time consuming activities involved with purchasing items in any of these categories in the traditional brick-and-mortar retail world.
Greeting cards: I have to find a store with adequate selection, walk the aisles in search of the appropriate message, pluck, read, and replace card after card while determining which one suits my personality and my recipient. I wait in line at checkout, purchase postage from somewhere else, and wait for the mail man at home. Can you say "hassle"?
Prescription Drugs: My chronic illness affects my mobility, so I'd rather not travel to the nearest pharmacy when I can order online.
Jewelry: Not just any bracelet will do for my wife. I need to peruse the entire universe of styles, colors, shapes, and sizes before I drop hundreds of dollars on that perfect anniversary present. Think I'm excited to visit every jewelry store in town? Me neither.
You get the idea. It's the same with flowers and brand name products at discount prices. These categories are particularly well suited for the convenience of online retail. Just one more affirmation that your online product mix can have a significantly positive impact on the strength of your ecommerce program. Product data management solutions can influence your ability to do this, and it should be considered if you're on the market to improve your position online. Mail order solutions are essentially the more antiquated way of acheiving this end, and continue to prove adventageous for certain product categories as well.
Posted by: Jesse Kurth
Monday saw positive movements in the stock market in reaction to president Obama's latest budget announcements and economic stimulus plans. As tracked by Internet Retailer, a handful of major ecommerce stocks significantly outperformed the rest of the market, with single-day increases between 10.2% and 25.2%. The companies in this top category represent greeting cards, prescription drugs, jewelry, a major discount brand outlet, and the horticulture industry (flower delivery).
I couldn't have chosen a more diverse group myself. So what's the common theme for success?
Convenience. Yes, convenience is a foundational advantage for nearly any ecommerce operation -- also an advantage shared by plenty of companies who didn't enjoy such a massive bump in stock price. But think about the time consuming activities involved with purchasing items in any of these categories in the traditional brick-and-mortar retail world.Greeting cards: I have to find a store with adequate selection, walk the aisles in search of the appropriate message, pluck, read, and replace card after card while determining which one suits my personality and my recipient. I wait in line at checkout, purchase postage from somewhere else, and wait for the mail man at home. Can you say "hassle"?
Prescription Drugs: My chronic illness affects my mobility, so I'd rather not travel to the nearest pharmacy when I can order online.
Jewelry: Not just any bracelet will do for my wife. I need to peruse the entire universe of styles, colors, shapes, and sizes before I drop hundreds of dollars on that perfect anniversary present. Think I'm excited to visit every jewelry store in town? Me neither.
You get the idea. It's the same with flowers and brand name products at discount prices. These categories are particularly well suited for the convenience of online retail. Just one more affirmation that your online product mix can have a significantly positive impact on the strength of your ecommerce program. Product data management solutions can influence your ability to do this, and it should be considered if you're on the market to improve your position online. Mail order solutions are essentially the more antiquated way of acheiving this end, and continue to prove adventageous for certain product categories as well.
Posted by: Jesse Kurth
My last post dealt with an incredible percentage of total sales via the ecommerce channel, but I've yet to see growth numbers like this. Aeropostale saw an 85% increase in sales online last year over 2007.
We're not talking about revolutionary new products. We're not talking about office supplies either. Aeropostale is still selling pants and shorts, t-shirts and sweatshirts, jeans and flip-flops to high school students everywhere. How does a company like this achieve 85% growth, from one year to the next, through the same sales channel with the same products and the same target market?
I've got a few thoughts on that matter, but not all of them have to do with website optimization or design best practices. While those two things surely played a significant role in converting shoppers into buyers, I think the lion's share of credit goes to a different variable.
The clothes are getting better.
There. I said it. For what I lack in experience I compensate in youthfulness -- or in other words, high school wasn't that long ago for me. 10 years ago, as a freshman (have I shown too many of my cards?) I wouldn't have shopped at Aeropostale if I was paid to do it. The clothes never fit right, they were always too thin and cheap, and I could always tell they were just trying really hard to look like American Eagle or Abercrombie & Fitch.
Allow me to step back in time for a moment and peruse Aeropostale.com with my "high-schooler" hat on. These t-shirts are cool! They embrace a greater variety of designs, colors, and textures than they ever have before. The jeans come with the fades and durability I like, not to mention the branded madras trucker hat I've been looking for.
I guess the moral of this success story is that sometimes you needn't look any further than your own products for the growth catalyst your business needs. Then start researching a mail order solution and a customer relationship management application.
Posted by: Jesse Kurth
We're not talking about revolutionary new products. We're not talking about office supplies either. Aeropostale is still selling pants and shorts, t-shirts and sweatshirts, jeans and flip-flops to high school students everywhere. How does a company like this achieve 85% growth, from one year to the next, through the same sales channel with the same products and the same target market?
I've got a few thoughts on that matter, but not all of them have to do with website optimization or design best practices. While those two things surely played a significant role in converting shoppers into buyers, I think the lion's share of credit goes to a different variable.
The clothes are getting better.There. I said it. For what I lack in experience I compensate in youthfulness -- or in other words, high school wasn't that long ago for me. 10 years ago, as a freshman (have I shown too many of my cards?) I wouldn't have shopped at Aeropostale if I was paid to do it. The clothes never fit right, they were always too thin and cheap, and I could always tell they were just trying really hard to look like American Eagle or Abercrombie & Fitch.
Allow me to step back in time for a moment and peruse Aeropostale.com with my "high-schooler" hat on. These t-shirts are cool! They embrace a greater variety of designs, colors, and textures than they ever have before. The jeans come with the fades and durability I like, not to mention the branded madras trucker hat I've been looking for.
I guess the moral of this success story is that sometimes you needn't look any further than your own products for the growth catalyst your business needs. Then start researching a mail order solution and a customer relationship management application.
Posted by: Jesse Kurth
I've just come across the most impressive ecommerce sales figures I've seen yet for 2008 online retail. Internet Retailer is reporting that Staples Inc. saw 37.5% growth in web sales over 2007, as the online channel accounts for 33%... that's right... 33% of total sales for the year.
Am I naive to be so impressed? I think not.
This means that one third of all revenue for Staples Inc. was driven by the internet directly, plus who-knows-how-many more sales prompted by online research before in-store purchases. This gives Staples Inc. the second largest revenue generating ecommerce operation in the world, at $7.7 Billion online alone.
My first question is, why?
First of all, let it be known that Staples bought some of that market share with its acquisition of Corporate Express Inc., another international office supplies retailer. But of course, there's much more to it than that. While online retail is proving itself as the best bet for revenue and year-over-year growth in nearly every industry, office supply products are particularly well suited for this channel.
Millions of businesses worldwide are constantly cycling through inventories of office supplies. When they run out, they know exactly what to purchase, exactly what it will look like when it arrives, and they know pretty well what they'll pay based on the last time they ordered. This is a beautiful sweet-spot for a sales channel that offers the ultimate in convenience and efficiency. In fact, Staples is probably selling online to many of the retailers who are competing for it's high rank in ecommerce sales.
Staples is cashing in on a great combination of sales channel and product set. If you're a retailer with an online operation, take a lesson out of their book when choosing which products to promote most on your site. This could be a simple key to higher growth; a pretty affordable investment compared to mail order solutions and catalog management software.
Posted by: Jesse Kurth
Am I naive to be so impressed? I think not.
This means that one third of all revenue for Staples Inc. was driven by the internet directly, plus who-knows-how-many more sales prompted by online research before in-store purchases. This gives Staples Inc. the second largest revenue generating ecommerce operation in the world, at $7.7 Billion online alone.
My first question is, why?First of all, let it be known that Staples bought some of that market share with its acquisition of Corporate Express Inc., another international office supplies retailer. But of course, there's much more to it than that. While online retail is proving itself as the best bet for revenue and year-over-year growth in nearly every industry, office supply products are particularly well suited for this channel.
Millions of businesses worldwide are constantly cycling through inventories of office supplies. When they run out, they know exactly what to purchase, exactly what it will look like when it arrives, and they know pretty well what they'll pay based on the last time they ordered. This is a beautiful sweet-spot for a sales channel that offers the ultimate in convenience and efficiency. In fact, Staples is probably selling online to many of the retailers who are competing for it's high rank in ecommerce sales.
Staples is cashing in on a great combination of sales channel and product set. If you're a retailer with an online operation, take a lesson out of their book when choosing which products to promote most on your site. This could be a simple key to higher growth; a pretty affordable investment compared to mail order solutions and catalog management software.
Posted by: Jesse Kurth
The story for online retail seems to be consistent across industries as we reflect on 2008 performance. Internet Retailer's recent report shows that Gap Inc.'s ecommerce operation has officially broken the $1 Billion annual revenue landmark. This due in large part to an increasing percentage of total sales taking place via the internet.
This growth wouldn't be quite so remarkable if it mirrored growth company-wide. However, Gap Inc. took last year's holiday retail recession on the chin with total sales down by 7.8%, driven by the 12% decline in comparable-store sales over 2007.
It's a significant enough thing when a business unit posts regular growth numbers like we've seen, but it's even more significant when that growth defies a shrinking economy for companies of every stripe and color.
I heard a funny quote recently:
"People don't buy clothes online. They buy electronics."
Maybe by "clothes" this person meant "frozen quartered beef", and by "electronics" he meant "everything else on planet earth... especially clothes."
I mean... I can only assume.
Based on the fact that Gap Inc., the owner of four clothing and accessories brands and one of the largest retail operations in the United States experienced its only growth through ecommerce, we'd all be wise to see that retail categories of every kind benefit from streamlined ecommerce operations alongside mail order solutions and product data management.
As always, food for thought.
Posted by: Jesse Kurth
This growth wouldn't be quite so remarkable if it mirrored growth company-wide. However, Gap Inc. took last year's holiday retail recession on the chin with total sales down by 7.8%, driven by the 12% decline in comparable-store sales over 2007. It's a significant enough thing when a business unit posts regular growth numbers like we've seen, but it's even more significant when that growth defies a shrinking economy for companies of every stripe and color.
I heard a funny quote recently:
"People don't buy clothes online. They buy electronics."
Maybe by "clothes" this person meant "frozen quartered beef", and by "electronics" he meant "everything else on planet earth... especially clothes."
I mean... I can only assume.
Based on the fact that Gap Inc., the owner of four clothing and accessories brands and one of the largest retail operations in the United States experienced its only growth through ecommerce, we'd all be wise to see that retail categories of every kind benefit from streamlined ecommerce operations alongside mail order solutions and product data management.
As always, food for thought.
Posted by: Jesse Kurth
I usually keep a close eye on updates from Internet Retailer, and it seems that late-February / early-March is the right time for reflecting on retail performance from the previous year. I've been taking notes to share with you, just in case you're not such an avid IR reader.
First on the list: the Home Shopping Network.
As I understand it, HSN is the hallmark direct-response television retailer. Of course, most of my familiarity with the company comes from sleepless nights in front of the tube, when the only viewing options are get-rich-quick infomercials and HSN. There's plenty to be said for this business model; I can't tell you how many items I've been tempted to purchase with judgment impaired by sleep deprivation. But that's a marketing lesson for another time.
According to IR's reports, HSN's direct-response TV business unit held it's own by maintaining sales levels from 2007, which, considering the economic events of 2008, might as well be considered a landmark achievement. However, HSN experienced real growth through HSN.com, it's ecommerce operation, which grew 16% over 2007. This performance is par for the course, as online growth metrics have consistently outperformed traditional channels year-over-year. If you think about it, the online channel is the greatest innovation in "home shopping" since direct response TV anyway. HSN seemed pretty well positioned to take advantage in the first place.
Despite these great numbers, HSN Inc.'s total sales fell 3% in 2008. This is because HSN owns a very separate business unit called Cornerstone Brands, which operates an ecommerce channel, catalog, and retail stores. HSN would have posted considerable growth overall if not for this unit which shrank in every channel. Store and catalog sales hemorrhaged losses of 22% while the web, still the best performer, lost 6.7% of sales over 2007.
This illustrates two important lessons for retailers:
Mail order solutions and product data management will only get you so far. A good online ordering system with appealing products and (price points) to match will go a long way in hedging your bets for 2009.
Posted by: Jesse Kurth
First on the list: the Home Shopping Network.As I understand it, HSN is the hallmark direct-response television retailer. Of course, most of my familiarity with the company comes from sleepless nights in front of the tube, when the only viewing options are get-rich-quick infomercials and HSN. There's plenty to be said for this business model; I can't tell you how many items I've been tempted to purchase with judgment impaired by sleep deprivation. But that's a marketing lesson for another time.
According to IR's reports, HSN's direct-response TV business unit held it's own by maintaining sales levels from 2007, which, considering the economic events of 2008, might as well be considered a landmark achievement. However, HSN experienced real growth through HSN.com, it's ecommerce operation, which grew 16% over 2007. This performance is par for the course, as online growth metrics have consistently outperformed traditional channels year-over-year. If you think about it, the online channel is the greatest innovation in "home shopping" since direct response TV anyway. HSN seemed pretty well positioned to take advantage in the first place.
Despite these great numbers, HSN Inc.'s total sales fell 3% in 2008. This is because HSN owns a very separate business unit called Cornerstone Brands, which operates an ecommerce channel, catalog, and retail stores. HSN would have posted considerable growth overall if not for this unit which shrank in every channel. Store and catalog sales hemorrhaged losses of 22% while the web, still the best performer, lost 6.7% of sales over 2007.
This illustrates two important lessons for retailers:
- Ecommerce is the indisputable champion for consistent year-over-year growth, or at least, protection from cataclismic losses in retail sales.
- Ecommerce is not the magical door to Narnia. Even well managed online divisions cannot push a company with unpopular brands and products into the black.
Mail order solutions and product data management will only get you so far. A good online ordering system with appealing products and (price points) to match will go a long way in hedging your bets for 2009.
Posted by: Jesse Kurth
Internet Retailer has just published the results of it's latest monthly survey, this one all about web design priorities. According to these results, our all-consuming economic crisis hasn't driven website redesign ambitions to a standstill as you might expect.
The survey cites speedier navigation, faster performance, search engine optimization, and engaging features like video and customer reviews as top-line elements of retail web redesign strategy. As far as I can tell, these have been the most desirable elements of effective website design since the web 2.0 revolution anyway.
Question: While the rest of the world is wringing its hands, why are retail website redesign investment intentions still so high?
Answer: Because the most cost-effective business strategies and innovations find their proving-grounds when wallets get squeezed.
Dollar for dollar, investments that drive up customer purchases online are more profitable than for any other sales channel. Every element of improving the shopping experience, from becoming more visible to creating a more engaging shopping atmosphere, is more affordably and profitably achieved online than anywhere else. Just think about how expensive and static those initiatives are in store and in print.
Cost and efficiency rule in a thriving economy. In a struggling economy they rule with an iron fist. From mail order solutions to product data management, retailers will be wise to control cost and maximize efficiency for their most crucial operating tools in 2009. It's time to drive revenue with great website design.
Posted by: Jesse Kurth
An unanticipated consequence of the global credit crunch has been the increased use of alternative payment methods for retail shoppers -- especially online. While credit cards are still the clear leader in retail sales volume, credit is becoming more difficult to find and consumers are keeping a hawk's eye on their personal spending. This makes online account methods like eBillme and PayPal more appealing because they draw from positive, pre-determined balances rather than issuing short term credit.
Despite all the perks and rewards I get from my credit card, I much prefer to pay exclusively with my debit account -- another payment method that's experiencing dramatic increases. It's not worth it to me, as a consumer, to risk spending more than I can pay off at the end of the month. My debit card and a PayPal account can help me keep tabs on every dollar.
DMNews wrote about this phenomenon in its Nov. 24th issue. It mentions that online home electronics retailer Etronics has experienced a 35% jump in eBillme transactions over the past two months, while payment processing company Litle & Co. watched debit card transactions grow to represent over 65% of transactions as well.
While brick&mortar retailers can still offer a similar non-credit, fixed payment option through layaway, there's a clear advantage for online retailers who have many more options for shoppers. According to Javelin Strategy&Research, alternative payment methods are on track to grow from 18% of all retail transaction volume to 31% by 2013. It makes me wonder what similar mail order solutions may develop in the coming years.
Take-aways for today's retailer:
Despite all the perks and rewards I get from my credit card, I much prefer to pay exclusively with my debit account -- another payment method that's experiencing dramatic increases. It's not worth it to me, as a consumer, to risk spending more than I can pay off at the end of the month. My debit card and a PayPal account can help me keep tabs on every dollar.
DMNews wrote about this phenomenon in its Nov. 24th issue. It mentions that online home electronics retailer Etronics has experienced a 35% jump in eBillme transactions over the past two months, while payment processing company Litle & Co. watched debit card transactions grow to represent over 65% of transactions as well.
While brick&mortar retailers can still offer a similar non-credit, fixed payment option through layaway, there's a clear advantage for online retailers who have many more options for shoppers. According to Javelin Strategy&Research, alternative payment methods are on track to grow from 18% of all retail transaction volume to 31% by 2013. It makes me wonder what similar mail order solutions may develop in the coming years.
Take-aways for today's retailer:
- If you're not selling online, START NOW
- If you're already selling online, make sure you're online ordering system can offer alternative payment methods to your shoppers -- they're looking for it.
- No matter what your current ecommerce platform, talk to your ecommerce solution provider about alternative payment methods and how to take advantage.
Posted by: Jesse Kurth
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