Wednesday, November 30, 2011

How do you manage your small, profitable customers?

I caught up with some friends recently who run a successful bottled juice startup. One of their largest competitors is Coca-Cola, who despite not selling a lot of juice, are amazingly successful at the distribution side of their business and are often in direct competition with my friend's business.

My friends told me the story of a small, local coffee shop attached to a suburban tennis court that they were supplying their bottled juice to. The older clientele of the coffee shop were buying lots of my friends' pomegranate juice and so the owner of the coffee shop approached my friends about ranging more of their products and adding a fridge to stock only my friends' products. They agreed verbally to go ahead with this.

Then the Coca-Cola representative moved in. He offered the coffee shop a free Coca-Cola fridge and an impossible to beat deal on Coca-Cola products for the coffee shop. The coffee shop owner called my friends and sadly explained it was a deal he just couldn't refuse so he wouldn't be able to add the fridge and range more of my friends' products.

On the one hand it's a shame for my friends that they're not able to compete with a company who are willing to make a short term loss on a deal to retain their distribution, but on the other hand it's incredibly impressive that a global company the size of Coca-Cola care about their distribution in a small coffee shop attached to a suburban tennis court, and are able to operate so successfully at such a local level.

How well have you set up your systems and processes to ensure you're putting this much effort into all your small, profitable customers?

Published to Startupsmart.

Monday, November 28, 2011

Roses Only - James Stevens

2 weeks ago I visited James Stevens, founder of Roses Only at their head office in Rosebery, Sydney. I filmed a quick walk through of the their offices and Sydney warehouse.

Thursday, November 24, 2011

Multi-Channel Funnels in Google Analytics

I recently wrote a blog post for the Google Analytics Asia Pacific Conversion Room blog on how we've been using Google Analytics' new Multi-Channel Funnels reports.

It's a fantastic new report, you can read the article here or watch the video below for an introduction.

Tuesday, November 22, 2011

Brendan Forster - Innovation at Google TechTalk

3 weeks ago Brendan Forster came to our offices and gave a TechTalk titled 'Innovation at Google'.

We recorded Brendan's presentation which is embedded below. Brendan's presentation provides a fascinating insight into how a large company like Google drives innovation, and there are lots of fascinating ideas that can be applied to startups. Well worth a watch.

Friday, November 18, 2011

Happy customers

We view customer service as a marketing activity to be invested in rather than an expense to be minimised and we love receiving great feedback from our customers as this tells us we're on the right track.

We love it even more when customer's are so enthused they publicly share their happiness and it inspires them to write a post on customer service philosophies more generally, as Cian McLoughlan, a customer who purchased a gift certificate for his sister recently did on his blog.

Here's Cian's email to us (published with his permission):
Hi there,

I wanted to drop you a quick note to say a double thank you to the team at Shoes of Prey. Firstly thanks for your great product offering and customer service, which I have now used twice to buy gifts for my wife and sister (who were both chuffed to bits). Secondly thanks for providing me with the central theme for my latest business blog post, it was inspired by my interactions with one of your team members and nicely encapsulated for me the changing face of the retail industry.
Thanks to Cian for his kind words and wonderful blog post and congratulations to Susie on providing such great service!

Image Credit

Monday, November 14, 2011

Gabby Leibovich - Catch of the Day, Scoopon, Grocery Run

I was in Melbourne for the day a couple of weeks ago and took the opportunity to make a quick visit to the new Catch of the Day head office and 17,000sqm warehouse in Braeside.

Catch of the Day are Australia's largest online retailer and earlier this year they raised a whopping $80m at a $200m valuation. I've bought quite a few things from them over the past few years including headphones for everyone in our office and significant quantities of wine for the office and home. Their deals are excellent and it's no wonder they're targeting revenue to reach $250m in the 2011/12 financial year, up from $100m in 2010/11. Catch of the Day also run the Scoopon and Grocery Run brands and in the video Gabby mentions they'll soon be launching a fashion retail site.

Apologies for the camera shake, I recorded the video on my iPhone.

Thursday, November 10, 2011

Feedback Requested

Earlier this week we launched the 3D version of our online shoe designer. If you have a couple of minutes to complete our survey below, we'd love to get your feedback on it.

What Price is Right?

This is part 6 of a 6 part series by Mark Capps on his experiences of leaving Google to start up Sneaking Duck, an online eyewear retailer. Click for parts 1, 2, 3, 4, 5. It was originially published in Power Retail.

Pricing is one of the most important decisions about a product as it encapsulates so much - it’s a driver of customer demand, of margin, of brand values, of strategy and more.

We spent a lot of time thinking through our pricing before launch. Now we have feedback, we can start working out if we did things right. I’ve shared below the thinking behind our pricing decision, and what’s happened so far. Please share your views on how we’re doing.

Current pricing rationale
We charge $180 for a pair of glasses, including coated lenses, case and cloth. The price for each subsequent pair is $90. If your prescription requires ultra-thin lenses then we charge an extra $60, and if you want frames-only, we take off $20.

To get to these prices, I built a financial model, did plenty of competitor analysis, talked to a few experts and - most importantly - spent time with my co-founders working through our strategy.

Our intention is to be:
  • Straightforward, simple and fair
  • Priced to make owning multiple pairs a great deal
  • Better value than offline
  • Make a reasonable margin (i.e. share the cost benefits of being online with our customers)

Straightforward and simple.,
Some companies advertise a seemingly great deal on the window, but when you get the receipt, extras like coated lenses have dramatically bumped things up. We have deliberately decided to avoid this trick and be straightforward. For the same reason, we have ‘whole’ numbers, instead of using the 179.99 trick to give the illusion of cheaper price.

The only price variations we have are for ultra-thin lenses (which cost us a lot more), and a reduction for frames-only. For these decisions, we used a financial model to keep margins close to constant.

Multiple pairs
Our brand is all about sharing the fun we all experience of mixing and matching frames with outfits or moods. Given that many of our costs are per-order, not per-frame, we’re able to offer the second pair at significant discount whilst still keeping a reasonable margin.

Costs that are per-order are: shipping, customer acquisition marketing, website operations & maintenance, order processing, customer relationship management, some packaging and the cost of returns. We outsource the actual lens stock and fitting, so our order processing is mostly by-order – things like ordering from the supplier, delivery to and from etc.

Better value than offline
This is tricky - do we compare ourselves with designer frames that can cost $500 to over $1,000, or to Specsaver’s budget range? With whom do we want customers to compare us?

We consider our designs to be at least as cool as some of the most expensive frames, however our brand isn’t yet established. Additionally, our philosophy isn’t to maximise brand return, it is to price reasonably such that people can own multiple pairs.

We opted to go for a price that is always cheaper than anything but the most budget in-store pairs. This also aligned with what we considered to be a reasonable margin. What is challenging though, is making a fair comparison - e.g. 2 pairs from us costs $270 including coated lenses. Specsavers looks cheaper at “199 for 2 pairs”, until you realise that you have to pay $50 per pair for coatings. Also, we think our designs are much more interesting.

What we’ve noticed
Feedback from customers and non-customers varies enormously, but the average settles at ‘reasonable’ to ‘very reasonable’. However, a couple of people have noted that they’d be more inclined to purchase if the first pair was significantly cheaper. One person said that $180 seems expensive compared to $90 for the second pair. Others have noted that if you’re not pricing on a par with the Big Name brands, you’re not considered as an equal brand. Our sales data suggests we’ve done well on the multiple pairs philosophy as most sales are for 2-3 pairs.

Since launching we’ve talked internally about our pricing quite a bit - is it right? Is the philosophy right? I’d really love to hear your views!

Image credit.

Tuesday, November 8, 2011

Google Plus Brand Pages - Shoes of Prey

Google Plus launched brand pages today and we've created a Shoes of Prey brand page. There are two interactions you can make with the page, you can add it to your circles and +1 it. Adding it to your circles appears to be the closest equivalent to liking a Facebook page, it allows the page to add you back and share information with you. One of the things that looks exciting is as a page, we can categorise people into different groups and share different information with them. That might be handy for when we want to send a message to only our Sydney based fans for something like a Friends and Family sale.

Another feature of Google Plus that might be interesting is hangouts. We could run video sessions discussing different shoe designs and given they're live, they could be interactive. These will all be fun things to explore.

If you see any brand pages doing anything interesting on Google Plus let us know and to add us to your circles and +1 us visit our page here.

Our 3D shoe designer is launched!

7 weeks ago we announced the launch of the beta version of our 3D designer. We've been working on adding more design options to the new designer and late last night we switched all the links on the site over to the new 3D designer. Conveniently we were also featured on the large US women's fashion site Daily Candy overnight!

Any additional feedback on the 3D designer is most welcome.

Monday, November 7, 2011

Online video boosts conversions

I blogged earlier this year about custom reports in Google Analytics and one of the key pieces of information that came out of my experimentation with these reports was the performance of video on our website for boosting our conversion rate.

The table below shows the top 9 pages on our site by goal conversion and the number of page views each of those pages received, with the far right column showing the ratio of conversions to page views.

As you can see our leather page, the highlight of which is our leather videos, ranks by far the highest. Visitors to this page are 7 times more likely to convert than normal visitors who visit our designer page.

The data isn't perfect, users who are looking to convert are more likely to explore our website in detail but the leather page converts 2.4 times as well as our FAQs page or 4.5 times better than the deep parts of our old gallery (page 4), so clearly it works really well.

This makes sense. One of the challenges we have on our site is that we're trying to sell $300 pairs of shoes off a pretty average 2D drawing. We're working on a 3D version of our shoe designer which will help alleviate this, but another way we can get the quality message across is through video on our website.

We recently put together a video showing how our shoes are made and we've added video content to our wedding shoes and bridesmaid shoes pages.

What other areas of our site do you think we should add video content?

Posted to StartupSmart.

Friday, November 4, 2011

Startup opportunities in the traditional fashion business

@superzac passed on this excellent blog post explaining why "Fashion 2.0" businesses should stop trying to build the next marketing/sharing platform and instead focus on improving the traditional parts of the fashion business that have not experienced great innovation. I won't summarise the post as it's well worth a read in it's entirety.

The point I wanted to add is that many entrepreneurs with a tech background try to avoid startups with physical products because it’s outside their realm of expertise. That's potentially a mistake. The physical parts of many traditional industries, including the fashion industry haven't experienced a great deal of innovation. While it’s been a steep learning curve for us operating in this space it's been very rewarding and the fact that it's hard means we have less competition and are creating more significant barriers to entry than many purely tech businesses have.

If you're contemplating ideas for a startup don't be put off by businesses with a physical component to them. There are pros and cons to doing this but I suspect the pros will outweigh the cons with many of these ideas.

Image credit

Thursday, November 3, 2011

House of Fraser - Multi-channel retailing

An interesting move by UK fashion retailer House of Fraser, they've set up a buy and collect concept store in Aberdeen, an area where they were receiving a lot of online orders but couldn't justify a full store.

More details here.

via @nottinghillg1rl and @disneyrollrgirl.

Wednesday, November 2, 2011

Experiential retailing

Jon Bird wrote an excellent story on Online Retailer titled 'The End of Stuff'. In it he discusses how consumers are moving away from conspicuous consumption and instead are spending more on digital experiences, both digital and physical. He cites as evidence the explosive growth of Apple's App Store and Flight Centre's impressive 24.5% expected profit increase in the most recent financial year.

We're also firm believers in this trend. The growth of experience sites like RedBalloon of which we're part highlight this.

Traditional retailers are also capitalising on this trend. Woolworths' new grocer chain Thomas Dux is a simple and fantastic example of experiential retailing. Rather than walking into Woolworths to buy a packet of corn chips off a standard store shelf, walk into Thomas Dux and you'll see a beautiful centre aisle display of corn chips where you can taste them, try them with salsa and where, when I took this photo, they suggested picking some up for the football finals in September. When I took this photo they were also serving slices of smoked salmon pizza cooked using ingredients all available in store.

And most of all, the trend towards mass customisation sits with consumers moving towards experiences. Why would you want to buy a normal pair of shoes when you can have the experience of designing your own shoes and have them made for you? Why settle for off the rack shirts and suits when you can design these yourself too? And you have a number of great companies to do this with like Blank Label, YouTailor, and Indochino who are all doing well in the space, as well as Sydney based Joe Button and InStitchu who have both launched recently. And why settle for a standard chocolate bar when you can select the ingredients?

Mass customisation businesses are no longer just small businesses. NikeID turned over $100m in revenue in the niche category of custom sneakers last year (I love their product).

What other examples of experiential retailing have you seen?

Posted to Power Retail.