AboutJim Novo Expertise Questions about using customer data to inmprove online profitability, particularly in retailing. Topics include profiling customers using weblogs, figuring out which ads generate the highest value customers, how to reduce the numnber of 1x buyers, how to generate higher sales from current customers, customer analysis, ROI calculation, reducing discounts while increasing resaponse rates. Do you collect customer data (purchases, page views, surveys) and not really use it for anything? Want to find out how? Just ask.
Experience
Past/Present clients Cellular One, MBNA, SteelTorch Software, Retek Direct, CBS Sportsline, Kobie Marketing, Aerial, Tupperware, Barnes and Noble, Comcast Corporation, Home Shopping Network
Expert: Jim Novo Date: 11/22/2007 Subject: re: internet store
Question QUESTION: hi
we are a manufacturer. we have a cool product not really on the net and right now we are entering stores. i wonder is it wise to try to sell on the net before retail markets have the products or not(is it better to hold off untill the retail markets first have the products and then launch them onto the net?) Does the net really help sell products or does it create copy cats?
Trying to find the best way to go - any advice would be greatly appreciated.
ANSWER: Great question. Answer is “it depends” and it’s difficult to be more specific without knowing more about the product and your marketing plans. But in general, you should think about these choices as a “chain” or series of events each with a specific but interconnected strategy.
An example would DRTV or infomercial products, which generally are launched at a higher price into the spot TV channel (cable networks, etc.). Here sales are made at a very high margin but the volume is generally low; the Objective is to generate awareness and hopefully make a profit, but breaking even is OK because you essentially have the media “free” and that will help drive the next step.
Based on all the awareness you have generated with TV spots, you then can go to the shopping channels and say, “Look, people know this product because we have already pre-sold it for you. We will let you sell it at a lower price if you will drive volume”. And that’s typically exactly what happens. From the spot TV, the audience knows the product sells for $19.95 or whatever, so when it is offered at $14.95 on the shopping channel they think it’s a great deal and the volume is tremendous. Typically, the spot TV would still be running at this stage, though sales from that channel will have peaked.
Once sales get soft in the TV shopping channel, you then introduce the product online and in stores. This is essentially “end of lifecycle” for the product, where you are simply trying to make sure you don’t get stuck with any. You sell that at cost plus to the onliners / retailers and they blow them out at $9.95 or so. You don’t end up wearing the inventory and everybody is happy because the spot TV / TV shopping has generated plenty of awareness, people pounce on the product, and it moves very quickly through retail. Typically no TV would be running at this stage because you couldn’t sell any at the original price.
Now, I’m not saying you should follow this model. But what I am saying is the decision you are trying to make is more complex than “should we”, it involves understanding which channel can do what for you and at what price.
For example:
You said you are “entering stores”, but did not say if you / the stores are running any media to support this effort. If you are not running any media then I would get on the web and sell the product for retail price or higher. This generates some awareness / demand / trial but preserves the margins of the retail partner, and hopefully your direct profits will cover costs. You basically get “free media” (as in the spot TV example above) and the retail folks will love it because it will drive sales in their channel.
If you / the retailers are doing a lot of paid media support, then I would not get on the web until sales through retail get soft. Then you are in a position to undersell them or liquidate on the web based on the awareness you have generated offline.
On the other hand, if there is a razor / razor blade model built into the product (think a doll with add-on sets of clothing), you could sell the primary razor product and some of the blades in retail, then develop more targeted / segmented / rare blade offerings that are exclusive to the web for online stores.
Again, it’s very difficult to make the “right” judgment on this question not knowing anything at all about the product, whether there are supplemental / follow-on products, whether there are continuity pieces involved (collections) and so forth; and especially not knowing what the nature of the retail relationship is.
But I think you get the general idea. You play the strengths of the channels off each other, generally in some sequential way, depending on what the marketing / media plan is and the characteristics of the product.
QUESTION: Hi THanks for the great answer. i have another question - im setting up a website, my business is based in british columbia canada. So i want to ship internationally (the highest cost of my items are 50 bucks. Can i just ship internationally or are there issue to that? if i had a customer in the US can i ship to them no problem or are there issues associated with that or can i just ship anywhere? Will there be problems with customs etc? I plan on using purolator whom i have a great deal with.
any advice on that?
Answer Your absolute best bet on this question is to discuss it with Purolator; there are lots of different regs and each carrier handles customs somewhat differently.
Whether or not duties will be due (paid by customer) depends on:
1. Receiving country
2. Classification of product / price
3. Lots of other stuff that varies by country
You can probably get a feel for the different issues by researching on the Canada Post web site. In general, the receiving customer will have to pay a customs duty on delivery unless the category of product is duty-free. Price of product may affect whether duty is charged.
Make sure you tell customers on the web site - hopefully in the shopping cart and under Policies - that they are responsible for any duties. Otherwise you will drive up return rate / piss off a lot of customers!
