Minding Your Business - Web adds to retailers' profitability
Multiple channels help stores compete
By Ann Meyer
Equestrian retailer Jack Martin isn't one to sit still.
Keeping up with changing times has helped Martin expand the 45-year-old Libertyville Saddle Shop even as suburban sprawl has eliminated some area horse pastures. While many customers drive three hours to shop for tack at the 40,000-square-foot Libertyville store, a growing number are letting their fingers do the walking through the company's print catalogs and Web site, he said.
Long before the term "multichannel merchant" became popular, Martin saw its potential. "I arrived at the conclusion that to grow the business, we had to reach out of our geographic area," he said. He did it by launching a print catalog in 1973 and adding an e-commerce site in 1996.
But competitors have followed suit.
"The retail environment is brutal," Martin said. "The consumer has never had it so well. Clothing is cheaper today in real dollars than 10 years ago." With more merchants so accessible, he said, "We have to be more innovative ourselves."
Increasingly, retailers are finding creative solutions in the form of highly specialized merchandise and engaging, easy to use Web sites. In fact, a targeted direct-marketing approach through catalogs and the Web can prove more profitable than traditional brick-and-mortar retail, experts say.
Profits come with focus
Chicago-based contemporary furniture merchant Chiasso returned to profitability last year after new owners Chris Segal and Greg Kadens, who purchased the rights to Chiasso at a bankruptcy auction in 2003, focused solely on the company's print catalog and Web site. The company is forecasting sales of about $9 million this year, up 20 percent from $7.5 million last year, Segal said.
Chiasso started as a single Chestnut Street store in 1985, with a catalog added the next year. In 1996, the company was purchased by venture capitalists who saw potential in expanding it to a national chain. But the rapid brick-and-mortar expansion backfired.
"The greatest debt burdens were the leases they had signed," Segal said. "They had very expensive real estate in very expensive shopping malls."
Instead of trying to resuscitate the ailing locations, the new owners began revamping the catalog and Web site. The catalog, with new merchandise, more pages and a redesign, also has been driving Internet sales, which now account for more than 50 percent of total sales, Segal said. The company mails about 4 million catalogs a year.
In September, the company will unveil a newly designed Web site that should result in a better shopping experience for customers and increased profitability, Segal said.
Online orders less costly
In general, online orders are less expensive to process because customers key in their own orders, reducing the number of human order-takers necessary.
Web marketing also can help identify new categories of customers.
"You can reach people who are not necessarily the same demographic," said Herb Krug, president of Evanston-based Catalog Marketing Group.
"There is no greater [return on investment] than a Web site right now," said Tony Svanascini, chief executive of Americaneagle.com, a Park Ridge-based Web design and development firm. "It's the cheapest way of expanding their business."
Developing a functioning e-commerce site can cost as little as $10,000, though $75,000 and up is more typical for a mid-size retailer, depending on its size and complexity, Svanascini said. As a form of new business development, "it's not a huge investment compared to opening up a brick-and-mortar store," he said.
While Libertyville Saddle Shop's brick-and-mortar store still rings up the largest order sizes, a single store can't match the larger reach of a catalog and Web site, Martin said.
Today the company mails between 3.5 million and 4 million catalogs a year, and they drive the bulk of the company's sales, including many online orders, he said. The company's own equestrian newspaper, The Sentinel, launched in 1973, serves as another form of brand-building.
By emphasizing its strengths, Libertyville Saddle Shop has maintained a loyal base while luring new customers with its breadth of merchandise and price-match guarantee, Martin said.
Meanwhile, Segal, who is the son of Crate & Barrel founder Gordon Segal, won't rule out a return to brick-and-mortar in the future.
"The combination of all three channels is very powerful," he said. "But we want to make sure that we're hitting on all cylinders on the catalog and Internet business before we open a store."
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Advice for Internet merchants
To market successfully online, you need to know your audience and what they're looking for. Here are some site design tips from Tony Svanascini, chief executive of Americaneagle.com Inc., a Park Ridge-based Web design and development firm:
- Make the site as easy to navigate as possible. Look for ways to reduce the number of clicks required to purchase a product.
- Include all product options, so that customers can make an appropriate choice.
- Make sure the type is clearly displayed and large enough to see.
- Don't overdo the site's artistry. Too much decoration can detract from the primary goal of selling merchandise.
- Use Macromedia Flash technology appropriately. If it doesn't help sell the product and is simply window dressing, eliminate it. However, it can be used effectively to scroll merchandise, showing more than one angle, for better viewing.
- Give the site a complete review every two years. Technology changes rapidly, allowing for new features. For example, as high-speed Internet connections are becoming the norm, companies can make their Web sites richer with more graphics and technology-based features.
- Increase the average order size by displaying related accessories. For example, if someone clicks on shoes, display a matching handbag.
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