Lessons from Gift Store Marketing
Web Commerce Today, Issue 24, July 15, 1999
Only a small percentage of readers will have an online gift store, but lessons learned from how gift shops solve their special problems are instructive to all types of online retail stores. These are the some of the challenges:
- Bringing traffic to the gift store,
- Stimulating repeat business, and
- Helping gift givers to decide what to give.
To illustrate we'll examine how five leading gift stores deal with these issues.
Brookstone.com (http://brookstone.com) is a specialty gift store whose niche is hard-to-find tools. In addition to a print catalog business, you'll find their shops nestled in dozens of physical malls, with concentrations in California, Florida, Massachusetts, and New York.
1-800-FLOWERS.com (http://flowers.com) has 120 physical stores in the US, and has taken to the web quite successfully. They have expanded to other kinds of gifts as well, using as their slogan, "Flowers are just the beginning."
GourmetMarket.com (http://gourmetmarket.com) is a relative newcomer to the Web, and a "pure-play" Web-only company associated with @Home Network. They offer "the best of food and wine online," and though they're not really a gift store, they have some special features to encourage gift-giving.
Lillian Vernon Online (http://www.lillianvernon.com) is a 48-year-old specialty catalog and online retailer that markets gift, household, gardening, kitchen, Christmas, and children's products. They have 16 outlet stores in Delaware, South Carolina, New York, and Virginia.
911Gifts.com (http://911gifts.com) focuses on gifts, and offers "the right gift right away." Launched in 1997, it exists only on the Web.
1. Finding the Gift Store
The first task gifts stores face -- all stores for that matter -- is to be found in the first place. Considering the competition, this is not a trivial task. I found on Yahoo:
- 117 gift basket companies
- 191 greeting card companies
- 400 flower companies
- 102 stores offering retail gifts
A search on AltaVista revealed:
- 4,609,201 webpages had the word "gifts"
- 5,612 webpages with "executive gifts"
- 41,900 webpages with "gift baskets" (and 25,936 with "gift basket")
- 38,676 webpages with the words "coffee" and "gift baskets"
- 12,734 webpages with the words "executive" and "gift baskets"
With such intense competition, smaller businesses must either move to narrower niches, or get funding so they can advertise effectively to increase their traffic. Each of the stores in our study is fairly well-funded and can afford some promotion techniques that smaller businesses can't. These are some of their approaches.
Banner Ads for Keywords
Search on "flowers" on Yahoo, and you come up with an ad from a florist. Small businesses can experiment with this type of advertising through MSN LinkExchange "Ad Store" for ad buys from $100 to $1,000 (http://store.linkexchange.com/yahoo/). At $20 CPM (cost per thousand banner views), with a 1% click-through rate, this means that each of your 10 visitors costs you $2. You have to get a fairly good "conversion rate" or have a high ticket item to sell if you expect to make money on the first sale. With a 1% conversion rate (the percentage of shoppers who make a purchase), a sale costs you $200 in advertising (ouch!). Pay-per-view can be expensive.
More information at http://wilsonweb.com/webmarket/ad.htm
Alliances with Portal Sites
Alliances with portal sites are expensive, too, though some of these arrangements involve a percentage of the sale, not necessarily a fixed fee.
On AltaVista's Shopping Guide "gift" section, for example, we find links to 1-800-FLOWERS and 911Gifts.com. The Go network has 911Gifts.com and many others. "Featured Merchants" at Excite.com include 1-800-FLOWERS. At AOL.com, 1-800-FLOWERS, 911Gifts.com, and Lillian Vernon are "Featured Stores." GourmetMarket is listed under "Other Stores" at AOL. Brookstone Hard-To-Find Tools & Gift Collection is a "Highlighted Merchant" at Yahoo!, but it takes you to an abbreviated site Yahoo! Store site run by Catalog City.
Merchants look at this as the advertising cost of a sale much like they treat the payment made to an affiliate, but the cost must be passed on to the customer. People shopping for gifts aren't looking at prices first, they're looking for the "right gift." But think of the payoff if you can find low-cost advertising methods that work.
Related articles:
J. William Gurley, "The Soaring Cost of E-Commerce," Fortune, 8/3/98
Bob Tedeschi, "Online Merchants Grow Uneasy as Web Portals Sell More Goods Themselves," New York Times, 4/12/99
"eMerchants Less Enthralled with Portals," eMarketer, 4/12/99
Connie Guglielmo, "Thumbs Down On Portal-Play Deals," Inter@ctive Week, 5/7/99
Affiliate Programs
With all current focus on affiliate programs, I was surprised to find that only two of the five gift stores in my study were using affiliate programs. Both Brookstone.com and 1-800-FLOWERS offer affiliate programs administered by LinkShare. Brookstone pays a 4% commission while 1-800-FLOWERS pays 6% (more for higher sales volumes). I feel that these commissions are too low to be attractive to many webmasters looking for affiliates.
Setting up an affiliate program and selecting an appropriate commission is not easy, but if you can find the right affiliates, the cost per sale is likely to be substantially less than either banner ads or portal alliances. Who would be an appropriate affiliate for Brookstone? They have a number of lawn and gardening tools that would be of interest to a gardening site, for example, and their unique travel items would fit well on many travel sites. But finding the right affiliate match for their corporate gifts and bedding and bath sections would be harder.
More info at: http://www.wilsonweb.com/research/associate.htm
Customers Assist You
1-800-FLOWERS has a simple, and inexpensive way of encouraging customers to do their marketing for them. They invite you to send a "virtual bouquet" to a friend, and now your friend becomes aware of 1-800-FLOWERS, too. This is much like the virtual postcard that's been around for years. While 1-800-FLOWERS' virtual bouquet is a bit more complex (you can select a bunch of flowers to go into your choice of a vase), you might consider what kind of virtual gift you can encourage your clients to send.
You can find a shareware or freeware CGI program to run a postcard program and have your developer install it fairly inexpensively. Here's one we set up for Hatchet Lake Lodge (http://www.hatchetlake.com/postcards/), to get site visitors to help promote this executive fishing lodge in northeastern Saskatchewan.
Gift Registry
You may feel that it takes some nerve to e-mail your friends to inform them of your gift registry at a certain site. But, hey, you're only a bride once -- hopefully. A Bridal Registry works for certain kinds of online stores, such as GourmetMarket.com that sells specialty cooking utensils. A softer, gentler form of this is Lillian Vernon's Wish List Registry. If people pester you about what you want for your birthday, shop online and then tell your relatives to check out your wish list. Your friends give your name on the site, and then have access to the list of products you've selected. A gift registry is another method of getting your customers to get their friends to come to your site.
Getting people to your site initially is the first step. But getting them to come back is vital, too.
2. Stimulating Repeat Business
Unless your store can get repeat business, the high cost of customer acquisition will kill you, so savvy merchants find multiple ways of getting their customers back into the store.
Newsletter
Three of the five stores in our study offered a monthly newsletter with "access to special offers" and "tips." But none of the stores made it easy to sign up for the newsletter; you also had to "register" and give quite a bit of information about yourself. Requiring shoppers to register cuts down the number of newsletter subscribers dramatically. Sure, you'd like to get more information about the shoppers in your store, but it's counter-productive to create a hurdle that keeps you from marketing to them over time in order to build their trust.
As an alternative, why don't you ask for their e-mail address only? If you need more information, ask for it on a second screen that pops up after they've submitted their e-mail address. That way, even if they don't answer the additional questions, you've got their e-mail address and subscription to your newsletter.
Gift-type products are best sold with pictures combined with text. So when you collect the e-mail address, why don't you ask the shopper's preference of HTML or ASCII e-mail? Currently about 30% to 40% prefer HTML e-mail which lends itself to including product photos. Don't over-do it with many pictures. One will do. Then each month send them information about new and interesting gifts you offer. Make your newsletter fun, interesting, and short. Your goal is to become this shopper's gift store of choice when gift-giving time comes.
When gift-giving seasons like Christmas come along, you'll want to offer specials to entice customers into your store. Amazon.com and Drugstore.com, for example, offer new customers a one-time discount of $5 to $15 off the total sale.
Used creatively, your monthly newsletter may be the most important single tool you have to help visitors get acquainted with and then bring them back into your store ready to buy -- inexpensively!
Gift Reminders
Four out of five of the stores in our study offer some type of gift reminder service to help customer remember important birthdays and other occasions. A form asks for the gift recipient's name, relationship, occasion, date, and (perhaps) suitable product type. The merchant e-mails registrants a month before the occasion with a reminder and gift suggestion, followed up with a reminder a few days before the occasion. This feature is best for gift stores, but if certain products in your store's line make good gifts, it might work for you, too.
A reminder service is fairly sophisticated. You'll need a programmer to develop a form that writes to a database. Then each day you instruct the program to send out a customized e-mail reminder to each shopper on the days specified. The message might go like this (with merged fields in CAPS for illustration):
"Dear SUSAN,
"This is just a reminder that you COUSIN DEIRDRE has a birthday coming up on MARCH 22.
We have a variety of gifts for people interested in GARDENING that you can find at our website. This month we have a sale on ...."
Product Selection Guides
Purchasing gifts is one of those troublesome tasks where you seldom know exactly what to get. That's why you put it off -- and will welcome any help you can find. Each of the five stores we studied offered some kind of gift finders, some rather sophisticated.
Top 10
Several sites offered a list of the "Top 10 Gifts" or "Favorite Gifts," the idea being that if others think its good, then it must be. You know what it's like to try to find something for the person who has everything. You grasp at straws. Even if you don't have gifts in your online store, you can use a "Our Most Popular Products" category, and people will look twice, since popularity attracts.
Browse by Category
Another approach is to give people some categories and subcategories in which to browse. The names may be suggestive of the interests of the gift recipients and trigger an idea. Your catalog should be easy to browse and easy to search. Instead of multiplying hierarchies to click down through, consider having two or three layers at the same level, such as:
TRAVEL & AUTO
Executive Luggage
Travel Innovations
Travel Comfort
Dashboard Accessories
Tool Kits
Or use an abbreviated two-line format such as that on Yahoo's top-level menu:
RECREATION & SPORTS
Sports, Travel, Autos, Outdoors...
Gift Search
The slickest tool is the Gift Search. The shopper enters the occasion (birthday), the relationship (girlfriend), price category ($25 to $40), and perhaps department (jewelry). Then the server searches through all the products using these characteristics and comes up with a number of matches. To offer a gift search on your site, you need a shopping cart system driven from a relational database that can be programmed. Each popular gift is then coded for its appropriateness in various categories, and the product that is displayed on the results form is the product that matches in the greatest number of categories.
1-800-FLOWERS offers alternate gift finder tools. Their Giftology feature suggests gifts by sign of the Zodiac. Gift Guru advises you on what various categories of gift recipients "really want." Gift Impossible, for the person who has everything, lists several unique products that NO ONE has (or perhaps needs). The idea here is to keep shoppers looking at a variety of your products from different angles. The longer they look, the more they'll see, and the more they see, the more likely they are to connect with "the perfect gift."
If you have a gift store, I've given you a lot of food for thought. If not, some of these ideas are adaptable to many kinds of stores.
As the Web gets more and more competitive, only the sites that keep innovating and pushing the envelope will stay at the head of the pack. Don't let your sales strategy become static and predictable. I hope you'll find new ways of bringing visitors in, bringing them back, and enticing them to purchase your products. Consider these lessons a gift to your site from the gift stores of the Web.
