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There might be a recession going on, but this past holiday season, many online retailers saw record sales. One of those companies was eBags.
Over the past 10 years, eBags has grown to be the largest seller of luggage and bags online. With 500 brands and over 40,000 products available on its website, eBags set huge sales records this holiday season. Between Black Friday and Christmas, sales were up 32% over last year. Meanwhile, growth is continuing. February sales were up 20% from the same time last year.
I caught up with eBags cofounder Peter Cobb to chat about what eBags is doing to keep the growth continuing, why free shipping isn't so important online and the benefits of not having a warehouse.
Pure play online retail performed really well this holiday season. Can multichannel retailers catch up on the web?
Brick and mortar in our category is really struggling right now. Especially when you've got 200 products and you've got a competitor with 40,000. I think in a lot of categories, online is just such a better business model. We are so bullish on what's happening in the online retail world.
Our model is a drop ship model. We don't have a warehouse with 40,000 bags in it. We go to our brands and ask, what do you have on your website? We key in the information and feature it on our website. When brands sign up we tell them we don't ask much, but we need you to ship same day. This drop ship model is the reason we're alive. We don't have to spend tens of millions buying products and putting them in a warehouse.
How much can e-commerce sales increases be attributed to a general online consumer shift?
I do think there's a general move toward online retail. This last holiday was one of the biggest shifts in people moving from brick and mortar to online. I heard that from multichannel retailers. This was the year people realized online is a more efficient way to shop (depending on the product). Multichannel retailers were hurt by a lack of inventory, and that pushed people online. Also, every year we're pushing how late into the season we can ship product. This year, it was all the way up to the 19th or 20th of December. In the past we just didn't want to risk it. That's all played into better efficiencies and more confidence from consumers. There are also more people that use the internet for research.
What have you changed at eBags in the past year?
From a marketing standpoint, we've gotten better. With our email platform, we've gone from a shotgun approach to 1 million email members to emails that have as many of 15 different segments in an email campaign. We have also instituted personalized emails. Based on what you've clicked on, you'll see products complementary to what you've purchased or clicked on at eBags.com. We've all gotten much smarter at using technology and making a better shopping experience.
How do you organize your massive offering of products?
From a navigational standpoint it's challenging when you have 15,000 ladies handbags. No one wants to wade through 15,000 handbags. Navigation taxonomy is really critical. It's also challenging on the marketing side. How do you create awareness for the products from a brand level? Some people shop from brand, some from product type, some at the price level.
How important are special deals online, like free shipping?
I don't think free shipping is essential, or a requirement. I think it's one of the marketing tools that companies can use. I think there are some consumers that gravitate toward free shipping, but we've done tests where we've offered percent off and where we've done free shipping. We get more results from offering a percentage off. I think it boils down to value and a fair price.
Early on, we realized what was going on with luxury sale sites — Gilt, Groupon, etc. We realized you could sell upper end items, it just has to be a great value. We went to our upper end vendors and told them we'd want really great deals. This year, we convinced many vendors to move sales forward to Black Friday. We ran the sales from Black Friday to Christmas and many of the bigger brands participated. It was a huge win for the customers. We specifically went to brands and said, give us 10 unbelievable products at fantastic prices. We featured those on our site, comparison shopping sites, etc. We used email, Twitter, Facebook and viral marketing to show that we had a great item on sale. All of those things add up.
What has changed in online retail since last year?
A lot of us have gotten smarter on key words. We're monitoring those closely. We've also had fantastic partnerships. This holiday we launched with eBay. We realized they were committed to travel goods and handbags. We worked with ChannelAdviser to add a an eBay store to eBags. Those customers want great value, and our products are on Buy It Now. That launched in November. We were amazed at how the eBay shoppers took to it. It ramped up during the holdays, but it's stayed high in the new year. Part of why it's been successful is because eBay has a bit of an issue with people buying products and not knowing whether they're legit or new. eBay has realized that there are some people who want the security of buying through a known entity but still want to use eBay and PayPal. Our feeling at eBags is that a lot of people go to eBags.com, but some people like using PayPal. Or shop via Amazon. eBags products are also featured on Amazon. Some want to use comparsion shopping engines. We're agnostic on where we are.
How important are comparison shopping engines?
We play in that arena for those customers who value price highest. We want to be price competitive. We see our eBags products in comparison shopping engines, but none of the things I've talked about are 20% or more of our marketing mix. It's really a nice balance. People don't just shop one specific way. Some people like using Nextag or Bing or Shopzilla. Others go straight to Google. Others start at eBay.
How do you break out your marketing mix?
We break it up by marketing channel. We have people for every different channel. We divvy it all up. We have partners, like ChannelAdvisor that help us with the technology. Our 400,000 products are fed into ChannelAdvisor, they repackage that and feed it in to our marketing partners. Each of them has different flavors of how they like to receive information. It's been pretty cumbersome. But now it's not something where our IT people have to drop everything.
What's coming next for eBags?
There are a couple of things we're doing site-wide. One of the things that's nice about technology today is that most people are on broadband. That gives us the opportunity to add bells and whistles that we couldn't do 5-10 years ago. We're ramping up video. We have interviews with designers and brand videos. That's something we're really excited about, that you couldn't even have done three years ago. We're also doing some things to make photographs larger. With broadband you can do that and it doesn't slow down the site.
A big area for us is behavioral targeting. If you came to the site and clicked on designer handbags, next time we're going to show you more of them. And show what others like you have purchased, rather than make you start form the very beginning.
We were just laughing about how we ever got a sale when there was dial up. It took 10 seconds to load each image. We don't have those issues now. You can whip through websites pretty easily.