E-tailing's Future? Just Follow Cupid's Arrow
By Ellen Neuborne
I never used to like Valentine's Day. It's such an obvious marketing ploy. And I never did meet a guy who could get it right. But in the Internet Age, I'm changing my view, thanks to the success of the e-merchants who make Cupid Day theirs. As the rest of the e-tail community struggles, the few that try to cash in on this ridiculous event find themselves growing, and even turning a profit. It's enough to make a virtual company positively lovable.
But even better than their individual success is the collective vision they represent. The Valentine's Day merchants are worth watching not just because they've figured out how to capitalize on a Hallmark holiday but because they're highlighting the future of e-commerce.
Take FTD.com, an online merchant that makes money. The e-tail arm of the famous national florists network just came off its second profitable quarter and is on track to stay in the black. What's the secret? It's not the blessing of Saint V., says CEO Michael Soenen. It's brand: The name FTD has been synonymous with flowers for 90 years. "Our reputation is our strength," says Soenen. "We can deliver a great product, and customers know this."
Brand is a tremendous driver of online behavior. That wasn't as clear in the early days of the Internet, when many online merchants were pure plays. But now, as the rest of the retail community has caught on to the new technology, consumers are voting, and brand matters. "It has a much stronger pull on the Internet than anyone expected," says Soenen. And that's not going to ease up anytime soon.
For another example, see 1800Flowers.com, a rival in the online flower business. It has a second important lesson for the e-commerce community. Want to be the go-to e-merchant? CEO Jim McCann has this advice: Spend a couple of decades in the trenches.
Before the phrase dot-com was coined, McCann was running a virtual business -- first via the telephone, then by catalog -- in addition to retail stores. The online channel simply offered a new army of customers he was already prepared to serve. In the week before V-Day (which, by the way, still trails Mother's Day as the busiest), McCann and his team will be gearing up. They'll be managing the ballooning staff, running the catering operations to feed 5,000 people four times a day, and sending 75 staffers from the Long Island (N.Y.) headquarters down to Memphis to work side-by-side with longtime partner FedEx. "We have combat experience," he says.
That ability to manage the crunch is another key element in online success. Nothing else matters if the item didn't get there on time -- especially when it's a gift for the likes of Valentine's Day. "You may get a couple of extra days out of Mom. But if you're late on Valentine's Day, you're dead," says McCann. "Institutional knowhow works in our favor."
Don't get the wrong idea from these examples: The key to online success is not flowers. Indeed, 1800Flowers, poised to turn its first profit in June, is on the road to success thanks largely to its expansion into nonfloral items. Over Christmas, more than half its revenues came from food and other nonblooming gifts.
THE INEPT SINK.
The really good news about FTD.com and 1800Flowers is that neither is unique. Many retailers have great brands and the ability to manage under pressure. They'll be the ones to make good money online. There has been a lot of talk in recent weeks about what went wrong in e-tailing, the many promising online efforts that failed to stay afloat. But surveying the landscape, you would be hard-pressed to find failures that had either great brand names or a knack for managing crunch periods.
Building an online business will not be as quick or cheap as many originally thought. But neither is it hopelessly hard. As the holiday unfolds, give a rose to your sweetie, and be sure to give thanks to St. Valentine. He may have saddled us with an annoying and materialistic holiday. But he has also given us a window on e-commerce's bright future. For that, we can celebrate.
Neuborne comments monthly on Net marketing issues for Business Week Online. Have a question or a comment? Let her know at email@example.com
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