Increasing conversion rates is a huge problem online. Your typical conversion rate is about 2-3% for most online stores. Big retailers (Amazon, Ebay, etal) have a substantially higher conversion rate, but this is because of brand recognition. If you are a smaller retailer, each 1/10th of a point significantly impacts your bottom line.

So let’s examine the possibilities.

You could offer free shipping. Then your question is: on every order? Over \$50? Over \$75? Over \$100?

Or you could offer a percent off each order. What’s a good amount 5% off? 10% off?

The second one is a lot easier to answer as it really depends on your margins and what works for you. The first is a bit more difficult as it depends on several factors – do you ship heavy items? What are you currently charging customers? What is the net effect. Etc.

On one of our sites, our maximum shipping rate is \$19.95 (any order over \$100). Currently, we run a 10% discount on any order – but the customer must enter the coupon to get it. Since not all of them do (about 60% do it), the total impact is lessened by people who do not read what’s on the page or forget to do it or do not understand how to do it. We’ll come back to this later.

Over a given period of time (picked totally at random – but removing a few extra large sales that would have thrown off averages), we have sales of about \$96,000. Total sales over that period are 2,000.  Average order is \$48. More interestingly to me, median sale is \$29.95 and the most common sale was \$16.95.

10% Off Any Order: Assuming 100% of people received the 10% off, we lose \$9,600 on the sales.

5% Off Any Order: Assuming 100% of people received the 10% off, we lose \$4,800 on the sales.

Free Shipping over \$75: Assuming the same, we lose \$6,000 on the sales.

Free Shipping over \$100: Assuming the same, we lose \$3,500 on the sales.

Surprising, to me, at least is the fact that free shipping over \$100 is the best deal (for us) as the fewest people get the discount and it impacts the bottom line the least as well. The most damaging one – the one we currently use – is the 10% off any order.

All these numbers are easy to work out on your own, of course and which you go with really depends on your margins and product line and, of course, what your customers respond to.

But, the real lesson here is: do not automatically apply discounts for the customers. Give them a coupon to use (10savings for 10% off or freeshipping for free shipping) – something they must enter manually. That way, you can expect that only about 60% of people will actually use the coupon so the impact is less, while giving customers the opportunity to use it and giving them that little extra incentive to order.

Other good way to handle a discount is to give the customer store credit instead of actual percentages off. Order \$100 worth of stuff, get a \$10 gift certificate on a future order. Gift certificates, gift cards, etc have a notoriously low rate of return. I’m not sure how effective this would be – as I think a customer would much more appreciate the immediate gratification of an immediate discount rather than a future reward.

Having upgraded my warehouse twice (from 1,200 sqft to 4000 sqft and currently at 6600 sqft), we’ve learned the warehouse layout is probably the most difficult part of managing inventory. With an ever growing product line, properly arranging shelves, rows and items is essential to an efficient business.

We’ve made many mistakes in this regard, and are paying for this mistakes now. So here are some easy mistakes you can make:

• Not anticipating growth (adding new skus, specifically)
• Not preplanning product sizes
• Not arranging shelves properly

I’ll discuss these one by one.

Not anticipating growth

Each time we moved; we had to rearrange our products. When putting items on the shelves again, we never left open space which would allow for future skus that are related (thus making it logical to keep them together). Having to move large sections of boxes/items later is a real pain, and a needless waste of time.

Not preplanning product sizes

This was our biggest mistake, I believe. When we first started looking into shelving, we looked at auctions. We spent about \$100 on shelving that would have cost us about \$1000 regularly. A great deal – always check out local auctions before going to a retail outlet for racking (even if it used; auctions get you a FAR better deal). They were all pallet racking. We fixated on this and continued to buy pallet racking, even though many of the items we carry are very small. This results in not only making items hard to put on shelves but also leads to lots of dead space (air) that cannot be used.

So, think about what you are selling, not only now, but in the future. Most pallet racking is between 36 inches and 44 inches deep. We’ll discuss problems and issues with this later. Pallet racking shelves are difficult to adjust after they are assembled (especially if you buy used ones!) so we recently purchased these (96 inches long x 24 inches deep x 84 inches tall). Shelves can be adjusted about an inch at a time and can be done in seconds, which makes it perfect when a product line changes or you want to put different stuff on the shelves. Buying extra levels is rather cheap too, so increasing the system from 3 shelves to 5, 6, 7 or more can happen very cheaply.

These are perfect for smaller items as well, but Rick pointed me out to this item as well, which he says is perfect for even smaller items. Look at how many skus can fit into a small area. That’s awesome; but we don’t sell stuff that small. At least not yet.

I guess the moral of this is; don’t get married to one type of shelf. I’d recommend buying shelves as you need them, rather than filling a warehouse with shelving in anticipation of future needs. Changing or moving shelves later on can be really difficult.

Not arranging shelves properly

When arranging the warehouse, I think its best to work from your walls and then move inward. The walls are the most difficult to arrange, and the biggest lost space in the warehouse. We currently have 44 inch shelves against the wall. This is stupid, because it is hard to reach items in the back of the shelf – if indeed items are even sitting back there. Unless you are going to put large box items against the wall, I’d recommend putting shelves against the walls that are about 24 inches deep.

Are you planning on pulling product from one side of the shelf or both sides? Large items can typically all be pulled from the same side, smaller items probably from both sides. I’d try to keep a row consistent; if you make a section with items to be pulled from one side, do it all the way down the line. Other way around as well.

So, if you have a row of shelves where you pull from one side, instead of making an aisle on the other side, back up another row against it. This lets you double your rows without taking up un-necessary room. With my excellent photoshop skills, I demonstrate how much more efficient this is:

Each of these layouts features the same number of shelves and the same number of sides to pick product from. The one on the left has 4 columns of shelves – one against the wall (picked from one side), two in the middle (picked from two sides) and one on the left (picked from two sides).The one on the right has 6 columns of shelves. One against the wall (picked from one side), 4 rows of shelves in the middle (picked from one side each) and a row on the left (picked from 2 sides).

Both setups – if given the same number and types of products – can hold the exact same number of items/skus. The layout on the left takes up about 20% less floor space, allowing you to maximize your total warehouse space far more efficiently. If you have a lot of large products (or ones that you stock a lot of), the layout on the left is more a far more optimal setup (and probably pallet racking is a good idea for those shelves). If you carry a lot of small products (and you can ensure picking from the right AND left sides of the row), then the layout on the right is better for you (and probably normal shelving – not pallet racking) is your optimal setup.

Many companies will have a combination of this of course; but remember – think before you put down rows of heavy shelves that are difficult to move in the future.

Just coming back from a tradeshow, I had some thoughts on what it takes to start up a business and grow a business, looking at it from a pure cash flow basis.

If you are just starting out and do not have a lot of money to spend, you are going to have to resign yourself to carrying items that everyone else carries. Usually from dropshippers. A dropshipper is a company who is willing to ship product for you. They stock, you sell, they ship. The profit margin here is usually low and the costs involved are higher on a per order basis, usually because of shipping fees, handling charges etc. So, you will have a hard time becoming competitive. But; the initial risk is very low.

As you start stocking stuff, costs go up, but profits do as well. Since you buy in quantity, you can get better prices on items, controlling your shipping costs better and maintain a more unique type of product. Less competition always equals better profits.

As you get bigger, you can consider bringing in a container from overseas. You’ll have to buy -a lot- of stuff to do this; but your products are (possibly) even more unique than the previous two options. The downside here is initial investment. It can be very high. I’d have to say (based upon the 2 containers I’ve brought in) about \$20,000 each time. Plus it takes more time to get the stuff in stock. But when you do, you usually have plenty to sell. And the profit margins are higher (about 50% higher than stocking product) – but it can put a crimp in your cashflow if you are not careful.

Here’s the quick and dirty rundown of the concepts here:

• Dropshipping: Low Investment, High competition, Low Uniqueness of Product
• Stocking: Medium Investment, Medium Competition, Medium (to High) Uniqueness of Product*
• Importing Direct: Large Investment, Low Competition**, High Uniqueness of Product

* If you are a good buyer and find the right vendors; it is entirely possible to get product that virtually no one else sells online. Thus a “high” uniqueness is very possible.

** Keep in mind that no matter what you sell, if its popular enough the big monsters of competition will always be there (Walmart, Home Depot, Target, etc), but you have less competition from other small to medium businesses. And that is key.

Last year, Mother’s Day week was our biggest non-christmas day in terms of both orders and number of boxes shipped out. That was 170 shipments out the door. Given our size, that’s pretty good, I’d say. And I kept saying last year that if we did about 80 orders/day on average, I would barely even try to grow the business, just maintain its current level and be perfectly happy there.

This year; things have changed quite a bit. I’m being a little more ambitious. We’ve added several new lines of product (bathroom and a greatly expanded kitchen line as well) and while that hasn’t paid off (quite yet!), all the work done last year is paying off in droves. This week is, again, Mother’s Day. We shipped out 299 boxes on Monday and we did another 177 boxes today. For comparison, our busiest Christmas shipping day was 400 boxes. So, quite an improvement and an accomplishment!

It was unfortunate that the Hardware Show was in Orlando this week, which made it virtually impossible to attend; but all in all, I think it was worth it. A very hectic work week though. Our new employee has been doing great (only here a month and knows location of just about everything that regularly sells). But still, I don’t think we are quite set up for such a volume of orders. Running around like headless chickens; that was everybody today and this week. Fun, fun!

I’m hoping for a little bump from the new sites we’ve just put our products on; such as Sortprice.com (can be seen here and also here). We’ve also signed up with PriceGrabber. I’m not a big fan of comparison shopping sites (the conversions are low), but we got a bunch of free clicks and will see if the conversion rate is steady or somewhat decent. 2007 is shaping up to be a good year.

Can’t do it without all the wonderful (sometimes not) customers that shop with us and visit. And especially to those that recommend us to their friends/family. I know we get a few of those!

After a long wait, we’ve finally implemented product videos onto one of our sites. Pretty simple to do, through You Tube. The compression makes the color look a little odd, but it serves its purpose. Here’s a quick link to a product so you can see a sample of how we’ve implemented videos. It’s pretty simple really (well, for any site other than a Yahoo Store).  Thanks to Don for working on Good Friday and getting this completed for me. It works great and easy to use. Don is always good at that!

I wish YouTube had an autoplay feature and an auto-repeat feature as well. The videos for these items are only 10 seconds long and have no sound. I see no reason for them not to start working without any interaction.

There are days when I wonder “Is copywriting worth it?” The big stores, Amazon, Target, Walmart, et al, do not invest any time in copywriting for products. They take the simple “just the facts” approach to an item, completely overlooking ambience, personal impressions, etc when displaying the products they sell.

I pay someone to write content for me that does just that – add ambience to a product. Sometimes, I wonder if its worth the expense and extra time it takes to put product online. Occasionally, that question is very difficult to answer; other times it is much more simple.

Today, my copywriter sent back about 200 product descriptions to me, taking me about an hour to put them online and in their proper categories - finally fleshing out the new line of products I mentioned in an earlier post. Well, no less than an hour later, someone comes onto the website and purchases about 15 of those products and a few others as well.  As Borat would say, “Nice”

So, when I ask myself in a week or so, “Is the expense worth it?” I’ll have that answer once again.

Quick turnover is the lifeblood of the retail business; too much money tied up in inventory is a killer, and anything that helps speed up turnover is a good investment. I think that’s a good lesson for today.

This idea stems from a new line of products we’ll be carrying in one of our webstores. Specifically (shameful self promotion) shower curtains. Along with the curtains, we’ll also be offering tissue box covers, lotion pumps, waste baskets, etc. We haven’t put the full line on the website yet, but while getting dimensions and pictures of each of the items, I was hit by a brilliant (?) idea – and I noticed that even sites like Target.com does not implement (or is implemented very poorly). Here is a link to a page in question on Target. Notice that the item is a “frog shower curtain”. Scroll down a little on the page and check out the section “Guests who bought this item also bought” There are 7 other items there.

How can we improve the customer experience here?

A forum topic the other day brought something to my attention something that I did not realize was so pervasive. We all know that if you sell a Garmin GPS Device, you are going to have a set description for it – probably provided by the manufacturer. The only difference will be – where does it appear on the page and what font are you using. The question is – is this spam?

In Google’s eyes, I’m pretty positive the answer is “yes”. In another sense, I want to make the point that simply using manufacturer description is a terrible way to build your new webstore.

Let’s start with point 2. I went to shopping.com, and searched for a Garmin product. I’m not in this field, I don’t sell these products, I just know that a product most likely to have the generic manufacturer description is an electronic device. (Obvious reasons).

So I come up to this page. As of this post, 48 stores sell this same product. Seems like a good start. Let’s take a little bit of the product description.

The StreetPilot c-series GPS navigators feature a simple touchscreen interface

And search Google, Yahoo, and MSN and see how many sites have that exact phrase on it. We’ll search using quotes. Google shows 629, Yahoo shows 544, MSN shows 318. Again, as of this writing. So, if you are new to selling this particular product, you are up against -at least- 300 other websites with this same description. And they were here first. You are immediately in competition with homedepot.com, shopping.com, ebay.com etc for this product with absolutely no unique reason why a shopper could come to you first. Price? Hah! You’d do much better for yourself to completely rewrite this product description to be more tailored to your site. It can take a little bit of time and a good writer who knows what they are doing, but it is worth it in the long run. Make yourself unique.

On this same topic, I noticed that many splogs (spam blogs) also use these manufacturer descriptions for their spam content. Which will lead me to my next point.

Is this spam? I define spam as useless content that is not unique and appears all over the internet. Article submission is spam. Copying DMOZ is spam. Reusing Google SERPs to make a scraper site; that’s spam. So, using manufacturer descriptions? Spam. That’s a little gray for me and I’ll let Google/MSN/Yahoo decide for sure; but, if you were a budding ecommerce store, do you want to play the game? Let’s say Google decides one day that these mass produced, easily available descriptions are spam. You’re done. If you prepare ahead and rewrite your stuff now, you’ll be ahead of the game – which is where you want to be. Stay out of any future crossfire.

Play it safe now; safe in the future.

Since we’ve recently been hiring and I’ve been receiving quite a few resumes, I’ve began to wonder if they teach resume writing in school anymore? I know I learned the basics in high school. Maybe they don’t do it anymore. Alas. Here are some common mistakes and irritants that make me put down a resume immediately. I’m sure many employers would agree:

1. Resume is too long. If your resume is 5 pages long, I won’t read it. They are boring. Make it 2 pages at the most. If you can fit it on a single page, even better. I don’t need (or care) about your work history from when Nixon was president.
2. Spelling. This is basic. If you hired people, you did not hire “personal” you hired “personnel”. Yes, I have a resume in front of me that says “Hired personal” Ugh.
3. Lack of experience. I’ve put my ad on Craigslist to save money. I get replies from people who do not even possess the basic skills I am looking for. While your telemarketing experience is nice, its not really suitable to driving a forklift. Get me?
4. Funky email addresses. Hey. Call me discriminatory. If your email address is funkypotsmoker@aol.com I probably will not be giving you a call for an interview. At least for professional purposes, I’d maintain an email address that isn’t sexychick69@yahoo.com. Even if you are sexy chick 69, I really don’t need to know nor want to know.
5. Moving to the area. If you are not currently living in an area where you are applying for a job, I’d note that you are in the process of moving and when you will be available. Yes; its easy to email and ask. But its a lot easier on me to know ahead of time. Easy on me, means more chance of an interview for you.
6. Unknown tasks. I get resumes in with people whose tasks were “do cycle counts each morning” What is this? It may have been important, but at least make what your experience is understandable by everyone. I think I’d also avoid putting mundane tasks such as “daily bank deposits” on your resume. While I understand that it denotes a certain level of trust from your former employer, your mad driving skillz are not very important.

That’s the main tips from the current crop of resumes. If other employers have others, please feel free to comment. I’ll add them to the post.