Tuesday, January 20, 2009

How to grow quickly on the web.

In recent years, sales growth at online computer retailer Newegg.com has been explosive – the site posted $1.5 billion in annual sales in its first 6 years of operation after it launched in 2001. In 2004 and in 2005, annual e-commerce sales rose by 30% and 40%, respectively. "Our actual sales versus our projection was slightly below our expectation, but we are quite pleased with our improved product margin growth and this was largely due to our continued focus on product selection, customer support and logistics," the company says.

Inc. Magazine recently distinguished Newegg in its list of America’s 500 Fastest-Growing Private Companies. It’s one of four companies in the list’s 25-year history to qualify on growth merits while also recording $1+ billion in annual sales. Newegg.com is the second-largest online-only retailer in the United States (after Amazon) with more than 10-million registered users. At its award-winning web site, www.newegg.com, customers can shop for a comprehensive selection of the latest high-tech products, view detailed product descriptions, pictures, how-to information and customer reviews, and interact with members of the technology enthusiast community.

The online retailer’s core demographic are younger gamers and IT do-it-yourselfers who grew up with computers and the Internet, like the latest in computers and computer games, and are often employed as information technology workers. “We recognized an emerging segment early on,” says Howard Tong, Newegg vice president of marketing. “We sell to the individual who would rather install more memory on their own computer than always buy a new one or have someone else do the installation.”

Newegg launched as a site primarily selling computer components to video game players. Informational content on the site comes largely from customers themselves who post product reviews and ask and answer questions on the site’s community forum. “People will ask, ‘What’s in your system? What graphics card did you use? What power supply?’ These guys love to talk to each other,” says Bernard Luthi, vice president of merchandising at Newegg.

As evidence, he points to the more than 1,000,000 reviews posted to the site since its launch, including more than 250,000 in the past year. Newegg's customers can video their reviews and upload them to the site. While Newegg employees participate in forum discussions, they don’t recommend products. And the company doesn’t measure the value of the forums and reviews by whether they directly drive purchases.

“It’s about getting closer to that customer, making sure we’re giving them every opportunity to give us feedback. That’s what drives our business,” Luthi says. He’s convinced the strategy is working because more than half of new customers are referred by other customers and because the company grew again by more than 25% last year to $1.9 billion in online sales.

Newegg created pages on both MySpace and Facebook because “we heard from our customers that’s an area where they live on a daily basis,” Luthi says. Sales from those sites remain small, though growing, and the conversion rate of clicks from MySpace and Facebook is slightly higher than average, he says. “You have a community of like-minded people that have self-identified as interested in certain things and you have an opportunity to be in front of them in ways that have meaning for them.”


Jay Sea said...

Good post today. Thanks.

john cotter said...

Glad you found it useful.