If you worked in any direct marketing business prior to the internet the cost of delivering orders was always expressed separately to the cost of the goods.
It was called “Postage & Handling” or “Shipping” and it was always a profit centre. Here’s a typical US order form. It includes P&H, as well as taxes and a charge for COD:
The reason P&H is a profit centre is simple. The marketers have contract rates for delivery due to the volumes they mail or courier. So they freight the goods at market rates, but pay for the freight at discount rates.
And the customers are prepared to pay for delivery because they are buying the goods remotely. The customers understand that delivery is a price you pay when goods have to be delivered. No marketer in their right mind ever gives away free delivery – it just eats into your margin and starts the downward spiral of death by discount.
And for way too long now I’ve been warning online marketers not to give away their margins in free delivery, unless they were able to include the delivery cost into the cost of the goods and therefore the profit margin.
Now free delivery has come home to roost as the main reason pure play online retailers probably won’t survive. According to Scott Galloway, Clinical Professor at the NYU Stern School of Business, “the pure play model for online retail is dead, due to the rising cost of the last mile” – that’s the cost of delivering goods.
Here’s how much free shipping has increased in the US and it’s not a sustainable model. You cannot run an online business and not charge for delivery costs.
In fact, Scott predicts that unless Amazon invests in bricks n mortar stores, or at least its own physical collection points, it won’t survive. I recommend you take 20 minutes to watch his video explaining his predictions.
There are now online retailers opening physical stores to ensure their survival. And the most profitable online retail sites are those owned by traditional retailers like Macy’s for example. It’s due to the fact people can order online, then collect their goods at the store.
Go figure – who’d have thought a retail store that stocks goods, could also hand them to customers who ordered the goods online when the customer visited the store, just like handing them to a customer who walks in from the street? Amazing!
I seem to remember in the dark ages we used a phone to call a shop and order goods, then we’d drive to the shop and pick up the order. How quaint.
The crazy thing about the delivery cost problem is this – it should never have happened.
If digital marketers just realised that selling via the internet requires direct marketing skills, not digital skills, they would have been way more successful. Everything you need to know to succeed in online retail is in the direct marketing textbooks and education courses.
$billions has been wasted and lost because digital marketers tried to reinvent the DM wheel. And now it’s a case of what goes around comes around – again.
Gotta go – I have to call my local Chinese restaurant and then pick up dinner on my way back from an appointment – how old fashioned of me…
If you spend any time on LinkedIn you’ll understand how the posts into the news feed are changing the way LinkedIn appears – more like Facebook or Instagram than a business media channel.
Here’s a handful of images from those two marketer’s LinkedIn account last week…
Some of you will remember the humble pool services company that uses Google Earth and Street View to build a database.
Well now there’s a way you can use Google Street View to show-off the internal workings of your business.
Called Business View it let’s you use the Google street camera technology to create virtual tours of your business and link these to your website and search results. Just as you crab walk with your fingers and mouse to navigate along a street, now you can do the same through offices and businesses.
Here’s how innovative Brisbane digital agency Orange Digital used it – note the emoji faces and see how many oranges you can spot.
Scott Peers from Orange Digital gives these tips for using the service:
- Feature point for social campaign.
- A reason for people to have a look through your place of business. You can make it fun or interesting in your own way.
- There has been speculation that it may help your business listing be favoured in Google search results. While this is just speculation it is usually the case that if Google make something available for business they like businesses to use it.
- Use a Google authorised photographer – Orange Digital used square-i.co
Tips for the Photo Shoot
- Be prepared – have everything clean/tidy.
- Brief staff and customers so they know what’s going on during the shoot. All faces need to be covered or they will be blurred – having no people in the photo shoot is also an option. Be careful which doors stay open.
- (photo shoot) 1-4 hours depending on the size of the business.
- (editing & development) several weeks to prepare images and get approval from Google.
- $500 to $1500 depending on the size of the business. Need to check with an authorised photographer in your area.
You can contact Scott for further advice if you like.
I work from a home office, so not sure it’s appropriate for my business – you don’t really want to see what’s hidden in my closet…
As those who lived through the first dot.con bubble know, the way to make money was to come up with an idea and con “investors” to throw buckets of cash at this amazing new e-thing. Nobody worried about making money because amazingly in the e-world, profits miraculously appear down the track.
And we all know how the dot.con bubble ended don’t we?
It’s the same principle driving many of the “start-ups” today. Same process – just a funky new buzzword for launching a risky business. How lame does it sound to say you’re opening a new company? It’s much cooler to say you’re launching a “digital start-up“.
You carry even more swag if you are “crowdfunding” or “crowdsourcing” your start-up – WOW, just writing it has an aphrodisiac effect!
But just as they did in 1999, the start-up owners have no plan to turn a profit any time soon, except from selling part of the start-up shares to investors. Many of these ‘business models’ are based on getting lots of users of free platforms – think Twitter, Yelp, LinkedIn et al.
The money will be made down the track by selling advertising based on the volume of users. Just like magazines and newspapers did for centuries. Although people have always paid a cover price for most print publications. But as news is now free online, paid publications are struggling.
The mistake here of course, is to believe users behave like customers and regularly return to shop. Therefore advertisers will be willing to pay to reach these users when they return.
The world doesn’t need any more “opportunities” in which to advertise. So why do these digi-people believe advertisers should make them rich? Why not create something of worth that people will buy? After all, most of their users would not pay for these social platforms if they cost money. One of the major reasons people use them is simply because the service is free.
And financial analysts are now rethinking some of these user-based businesses. On 30th April they took a dim view of the user-based platforms Twitter, Yelp and LinkedIn:
- Twitter share price dropped 25+%
- Yelp dropped 23+%
- LinkedIn dropped 20+%
Read about it here.
As a result, marketing blogger Mark Kolier questioned Twitter’s value as a marketing channel: “What if Twitter isn’t an effective marketing platform?“.
So I ask the question:
Is Twitter the next Myspace?
As regular readers know, Twitter is failing to attract brands in significant numbers. Looking at how it is being used, I suspect it will go the way of Myspace – becoming a niche player. In Twitter’s case a service for vacuous celebrities; movie, TV, music and sports stars/shows; emergency services; journalists; public relations executives; government services; the odd data consultancy and some customer service departments.
Twitter probably won’t survive as a marketing channel for brands – particularly as it still hasn’t made it as one. It is a reasonable channel for individual consultants and publishers to promote themselves, but not for major brands.
You may disagree dear reader – but unless Twitter can become more relevant to big brand marketers and grab more revenue in a crowded advertising market, dominated by Google and Facebook, its future may not be in its own hands.
Lots of users, not lots of business.
And you can retweet me on that…
About two years ago, the UK clothing company Charles Tyrwhitt launched its online store in Australia using printed catalogues.
I immediately became a customer. They’ve regularly mailed and emailed me and I’ve bought a couple times since. Given I work from a home office, I don’t wear as many business shirts as I used to when I commuted to an office, so am not a frequent customer. I certainly don’t have my bride’s shopping genes.
They have been so successful in Australia, they have opened a warehouse here to manage distribution – one of only a handful of countries in which they’ve done so.
Today I received a letter in the mail – in an air mail envelope. It had an English stamp postmarked last Friday. The letter was printed on a heavy stock and came from Nicholas Charles Tyrwhitt Wheeler (imagine filling out that name on an airport departure card). Nicholas is the owner.
The headline was simply “You’re absolutely marvellous“. And the letter went on to explain why, in quite a credible tongue-in-cheek manner.
You can read it here:
There was also a silver embossed $25 voucher, valid for any online purchase until end of June.
When was the last time you mailed your customers to thank them for their business?
If you are stuck in the digi-world, you need to take note of what the successful retailers do – they use a combination of print and photons to engage their customers and increase sales.
They know they limit their profits, if they limit their channels – and given that mail has been successful longer than any other channel in history, they continue to use it. As does Ole Lynggaard, Country Road, Sportscraft, Mecca Cosmetica, Vintage Cellars, Winephoria, David Jones, Coles, Woolworths, American Express, Google – the list goes on and on and on…
There was only one problem with the mailing. On the weekend I ordered a bunch of shirts – even used the online chat for assistance. If I had the voucher in my hands then, I may have been tempted to buy a tad more. (BTW I did take up the promotion code offered on the site, though it had nothing to do with the $25 voucher)
But let’s just assume for a minute, the website did speak to me and offer an additional $25 discount – “Hey Mal, we think you’re marvellous – here’s $25!“. Would it have been a more engaging experience than receiving a letter from the owner of the company? I seriously doubt it.
The letter is far more powerful than a digital pop-up. Science proved that years ago. And it leaves a lasting impact about the brand. That’s not to say I don’t enjoy shopping on the site – it’s one of the best retail sites in the world for user experience. A benchmark for others to follow.
So now I have to go back to the site and spend my voucher – obviously my bride’s genes are rubbing off. She can always justify how much she saves when she buys something she wasn’t going to buy, just because it is on sale.
Where’s my credit card…
Those of you who reside in Australia, will know the phenomenal amount of money our big 4 banks make. Since the GFC they’ve become some of the world’s most profitable financial institutions.
The profits come mainly from fees and interest rather than innovation. For example, one bank makes $millions per annum on the late fees it charges people who subscribe to Christmas hamper services. You know the hamper services – they target low income households on Struggle Street. They sell them expensive finance in the guise of a hamper, paid for under a weekly lay-by system.
But often the hamper customers don’t receive their welfare payments in time for the automatic payment for the hamper. So the banks charge an ‘overdrawn fee‘ despite the fact the money arrives from the government in their account, a day or so later. This happens so often the bank creams $millions every year, while the poor sods who have to pay off the hampers are penalised.
But enough bank bashing – it’s too easy.
More often than not, you’ll find innovation occurs in smaller organisations, like credit unions for example. Here’s how a couple of credit unions have changed some of the fundamentals of bank marketing.
Community First Credit Union in Sydney, pioneered the revolution in financial services retail outlets, now copied by many of their competitors. The first stores had an espresso machine, juke box, meeting pods and more.
And they created the country’s first online concierge – Lisa. The idea is simple. Dozens of videos of Lisa are recorded and loaded into a database. Each video is an answer (often humorous) to a typical financial question or keyword.
When a visitor enters a question or keyword for Lisa, the relevant video plays the answer – similar to the early days of Subservient Chicken. CFCU tracks the questions and keywords to gains insight into their members and prospects. Then they post ads on the site based on this knowledge. Another case of small data making a big difference.
The videos have been updated a couple times, although not for a while now. A sad reflection on society is that almost half the questions are “adult” in nature, to which Lisa’s answer is “did you learn that on the Discovery Channel?”
CFCU also launched a Pink Visa card that supports The McGrath Foundation – a worthy charity that funds nurses for women living with breast cancer.
In the year of the launch, Lisa attended the annual McGrath Foundation Ball in a dress made from Pink Visa cards.
Another innovative credit union is Railways Credit Union in Queensland. They have just launched a new home loan service. It lets you build your own home loan. The idea comes from the insight that, under certain circumstances, people want the flexibility to occasionally skip a home loan payment.
This doesn’t mean they don’t make the payment, they just want flexibility around when they make it. For example they don’t make a payment in December because of Christmas, or in the month they want a holiday, or if they have an accident, or a baby. You can check it out here.
I must declare a hand in these. My agency created the CFCU executions, while I consulted to leading Brisbane agency Orange Digital for RCU.
Small Data Rules OK!
But both these brands demonstrate you don’t have to have the biggest budgets to be innovative and stand out in a competitive market like financial services. You just have to listen to that small data provided by your customers to ignite a few ideas.
I’m off to refinance my home loan – wonder what my bank manager has to offer – apart from exorbitant fees?
I consult to a couple of brands in the meal delivery business. And those of you in the industry, will know how difficult food photography can be – particularly cooked meals or ice cream. The lighting can melt the stuff in minutes.
Recently I undertook an analysis of various suppliers in the industry, to see what they are up to online. I looked at small and large brands – including those like Dish’d and Lite n Easy – that import frozen food from Eastern Europe and Asia to flog locally. Surprisingly not many people are aware of this food fact.
There must be only one food photographer in the country
What became clear during my review was that there is obviously only one food photographer in the whole local market. Every shot is taken on shabby chic timber or a wooden cutting board.
Some are even taken on cutting boards on timber table tops, or possibly floors. But the shots are so alike you could swap the logos around and not tell the difference between the brands – just like you can with real estate ads.
For a supposed creative industry it appears stocked with inbreeds. Hardly an original thought, photographically speaking. All the brands are following fashion so all the brands look the same – and none stand out from the pack.
Just so you know, food folk: “Let’s do what they do” is not a strategy for success. A bland brand bodes badly for building big bucks.
Here’s a few examples for you:
Dinner Ladies: shabby chic just like the others…
Even my good friends at Dietlicious had a couple of guilty shots:
Mind you, if you want to lose excess weight quickly and feel a million dollars, I can recommend a Dietlicious cleanse.
But I do encourage the meal delivery industry to try something different with photography. Differentiating your images from your competitors will help you stand out in a cluttered market.
I’m trying something different with my eating habits. Am pairing my food with my wine. You see dear reader, I now only drink twice a week – once for 3 days the other for 4 – so I have to watch my food consumption.