News item: A startup-up Internet pure-play retailer announces it is giving away 10 bucks to every customer who shops at its site. A story from mid-1999? Guess again. This item is from a week ago. Right in the middle of 2001.
So is the purveyor of this promotion some kind of e-commerce Rip Van Winkle, just kicking off the sheets after a nap of several years?
Or is this a coolly calculated gamble likely to pay dividends down the road?
History is decidedly not on the side of MySalesStore.com, the Reno, Nevada-based e-tailer behind the pay-to-shop promotion. As we all remember, free stuff used to be all over the place on the Web.
Remember Mothernature.com? That site gave away the farm and then bought it. Mothernature offered a US$20 first purchase for free, free shipping, and when your box of goodiesarrived in the mail, you got a Mothernature pen andnote pad or pill box for good measure.
There are plenty of other examples, of course, and many of them led to the same result. These companies were in damn-the-consequences, full-customer-acquisition mode, ready to give away the store if need be. Which is what they did.
You can’t fool Mother Nature and now you can’t find Mothernature.com online.
MySalesStore.com apparently thinks it has a unique enough businessmodel to escape the fate of its predecessors. And it just might. The siteis trying to borrow a page from the eBay handbook for online profits, neveractually touching the stuff it “sells.”
Instead, MySalesStore acts as the marketing and sales agent for producers and suppliers of home goods. It takes your money and the manufacturer actually sends you the product.
A minor difference? Not really. The fact is that what brought Mothernature.com down was a combination of its insanely high customer-acquisition costs and the millions it had to spend on inventory, warehouses and the employees to move the inventory in and out.
Now, MySalesStore isn’t taking aim at the entire market for Websales, as eBay is doing. At least not yet.
However, MySalesStore isn’t content withstaying an off-the-radar niche site forever. It’s got affiliations withYahoo! Shops and has tied into a charity network that puts its name infront of millions of Web surfers in a positive light.
But maybe the most important part of this particular Web strategyis the timing. When Mothernature.com was luring me with its $20 free stuffoffer, it was one of a hundred similar come-ons.
Now, free stuff — even free content, for that matter — is getting harder to find. That means that this latest offer stands out a little more prominently. But far more importantly, the startup is taking a contrary approach.
Conventional wisdom says slow and steady is now the recipe, that it’s better to be conservative. But conventional wisdom, you’ll recall, is what led to the bubble and then to the burst.
Is free shopping money a solid foundation on which to build a business? Of course not, but in this e-tail environment, where everyone is playing defense, a little commotion is like a refreshing breeze. A real blast from the past.
What do you think? Let’s talk about it.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.
Thanks to Keith Regan for the press and C. Hall is right on! I’m the President of MySalesStore and I wouldn’t be giving away $10 if the arithmetic didn’t add up! Our average order is well over $50 and the $10 “credit” against the first order, including our revenue sharing customer acquisition costs, still allows for a profitable first sale (we have high margins)! And since the customers have to “register” to receive their $10 credit, our house-list is going through the roof! We only pay our revenue sharing partners on sales. Profitable customer acquisition combined with virtual warehousing, low overhead, customer retention, and mining the database equals a winning formula. It’s all in the arithmetic!
The MySalesStore.com is a workable model. Acquisition costs must be part of the profitable equation for e-retail success. Catalogers have been doing it for years. This was never learned by the VCs who funded: Value America, Pets.com, Buy.com, Cyberian Outpost and too many others. They never learned the model must work before you attempt to scale the business. Direct Marketing 101…..Joe Dilesio
I’m the president of RepairClinic.com.
We’re always looking for ways to pump up the volume with promotions. We had several appliance giveaways, however, we had so many people sending in postcard entries (thousands) that we decided to stop the practice. We tracked sales for customers that entered a sweepstakes and found they were far less likely to order a part than the people who didn’t enter the sweepstakes. It’s good to increase your email list, but we’re looking for ways to do it that keep out the chaff and retain the wheat.
I think your timing is great for the promotion …as long as the press doesn’t snigger at you too long for going against the flow.
In fact, your promotion is a common one at brick and mortar stores, it’s just that they’ve been doing it right for so long and so many etailers were giving away the store (or should I say investors life savings) with no regard for the return on the promotion.
Good luck with this promotion and with whatever else you try to make your business successful.
Thanks Joe for the support.
My background is in direct and catalog marketing and you are so right to say “catalogers have been doing it for years”! And the sad part is that there are a ton of books and info to teach the E-Tail generation, but unfortunately, most of them just don’t get it!
P.S. I’ll be at the Golden State Capital Network Conference being held at the San Jose Hyatt. If any of you folks are around, stop by our exhibit booth and say hello!
This isn’t rocket science. The average price for an item at mysalesstore is quite expensive. They can afford to give away the first $10, which comes in the form of a “points” credit, not cash.