Barty’s Weblog

Yesterday Mighty Ape set a new record for daily sales in January… co-incidence I’m sure.

One of the great advantages of being an online business is that we have access to bucket-loads of business data. As an online store we’re able to track things like daily sales, hourly sales, hourly shipped orders, orders still to be picked, stock on hand, etc all on the fly… in real time.

But one of the downsides of real-time is that the excess data can create an addiction to the F5 key. It’s easy to become a little too obsessed with refreshing key statistics to see how the current hour is tracking.

We’re finding that too much real-time data can be distracting. The “F5 addiction” can develop to the point where observing the data serves no real decision-making purpose… other than satisfying some curiosity.

If data is not going to be used to help make good business decisions then does it really need to be viewed at all? Lately, we’ve started reducing our real-time reporting in an effort to reduce data distractions.  While its nice to be in touch, knowing how hourly sales are tracking is actually not very useful!

Is real-time data too fast? I think it often can be, and as an online businesses, we need to be careful we don’t swamp ourselves with valueless data. Yet another lesson learned…

The only surprising thing about Telecom’s decision today to pull the pin on Ferrit is how long it took.

Telecom blames the current “retail environment” for the failure, yet this isn’t reflected in our own experience. Since relaunching in September, Mighty Ape has broken all sorts of records over the last two month and our January sales are tracking well up on last year (up over 45% so far).

And I’m sure Mighty Ape isn’t the only local web site enjoying success over the Christmas period. So with Ferrit,  maybe something other than the “environment” has gone wrong. The business model perhaps? The web site?

I’d suggest the following as the reasons Ferrit failed to deliver (in no particular order):

The web site failed – the web site while “pretty” on the outside, did not present the content well, nor did it work as a comparison site. The difficulty Ferrit faced was that all the retailers had their own product data, so price comparisons where merely a bunch of (sometimes random) search results. Then there was the old stuff presented as new… cold presented as hot …  a lot of basic mistakes that retailers wouldn’t make, if they were choosing which products to feature in their own stores.

Weekly content fails – Ferrit lacked good sticky content — there was no reason to come back tomorrow or the day after. The front page was changed once a week and the category pages are changed less often. Sites like Trademe are very sticky — i.e. it’s worth visiting often. I still remember pricing mistakes with some of our products on the front page of Ferrit… and we literally had to wait a week for the next site update to get the prices fixed. We were incredulous at the time.

The combination of a poor web site and stale content meant that Ferrit had to heavily advertise to get traffic to their web site — people did not come back of their own free will.

Business model – then there was the business model. The infrastructure needed to support a web site like Ferrit is substantial and when coupled with the very low commission model, it was always going to be very difficult to break even. To make matters worse, New Zealand is small, so they had to penetrate the market very well to just break-even. I’d suspect that the maths were pretty basic for Telecom in the end.

Overall, I think the main reason that Ferrit failed was that it just wasn’t very useful. People didn’t really need it.

We were retailers on Ferrit up until September 2008, at which point we decided that we didn’t need to compete with our own web site. I remember the last sale we participated in, we heavily discounted music… and Real Groovy discounted games. That typified the problem for retailers. Why bother to help something grow so others can compete with you? For us it was purely a business decision.

Speaking of which, I believe a pretty sensible economic decision has been made… finally.

I do have to say that in our dealings with Ferrit, while we’ve had to deal with some pretty “awkward” systems (being awfully polite), the people have always been great! We’d like to pass on our best wishes to all of Ferrits staff…

Last week Mighty Ape broke more records:

• We set a new all-time daily sales record on Tuesday.
• We set a new record for all-time weekly sales.
• We set new records for weekly sales for DVDs, Books & Toys.
• We set a new record for weekly traffic.

Its pretty reasonable to expect that more and more people are shopping online each Christmas and we’re certainly seeing evidence of that.

We’ve had our warehouse processing orders and customer service team answering messages over the weekend to make sure we are not swamped in these last few days before Christmas.

Maintaining a high level of service at this time of year takes a huge effort… and the whole team are certainly looking forward to the holidays!

Last week I blogged about the Blu Ray format gaining momentum, so it’s somewhat ironic that last week we actually set an all-time record for DVD orders in a week.

Sales of DVDs suggest that the DVD format is weathering the recession very well and our sales are significantly up on the same period last year. Its been suggested that during a recession, people tend to stay at home, watch TV, watch DVDs and play video games (all those forms of entertainment offer a higher “bang for the buck” when compared to going to the movies, eating out, etc).

While I’m at it… it should be noted that we also set records for highest books sales in a week and highest toy sales in a week…

Cake anyone?

The Dark Knight was released in New Zealand yesterday on both the DVD and Blu Ray formats and this release has highlighted that Blu-Ray is finally gaining some momentum in New Zealand.

For us, The Dark Knight is the first big theatrical release where the Blu Ray format has actually out-sold the standard DVD format.

While admittedly our customers tend to be early adopters with a gaming bias, it’s still very encouraging to see Blu Ray gaining traction locally.

While I’m talking DVDs, its also interesting to note that even a blockbuster like The Dark Knight can’t knock New Zealands own Outrageous Fortune Season 4 off the  #1 Top Seller spot. Just quietly, we’ve shipped well over 1000 Outrageous Fortune Season 4 DVDs in the first 4 weeks since release (to customers all over the world at that!)

Outrageous Fortune is proving to be one heck of a Kiwi success story… all four seasons are now in our all time Top 10 sellers.

I just spent two weeks in Australia on a mix of business and holiday. I must confess one of my main motivations was getting to The Gabba to watch the (once) mighty Black Caps take on the Aussies in the First Test. Even though the result wasn’t great, watching cricket at The Gabba was a great experience (its a fantastic ground for watching sport and television doesn’t do the ground justice).

The second part of our trip was spent on the Gold Coast. Its been 20 years since I’d been to the Gold Coast and that place has just exploded. While there I took the opportunity to catch up with one of Australia’s biggest entertainment distributors to discuss any opportunities in the Australian market.

After these discussions, its getting very very hard to ignore the much bigger market across the Tasman (especially since we already have infrastructure and staff in Australia running our www.gpstore.com.au site).

Australia here we come…

If you read the newspaper or watch TV its hard to avoid all the doom and gloom right now — I must confess I do my best to avoid all depressing news (as previously mentioned).  There’s a lot of talk of share markets plunging… and surging… and then plunging some more.  Its depressing stuff.

There’s a lot of talk of consumers cutting back on discretionary spending — and as an e-tailer of entertainment products, that’s depressing stuff too.

So how tough are times right now?

Well, we’ve noticed five trends which highlight that times are indeed tough…

1. Sales of video game consoles have slowed — as predicted the sales of big ticket items are slowing and we’ve noticed a drop in the sales of Xbox 360, PlayStation 3 and Wii consoles.
2. Downsize me – customers are spending more carefully. We’ve noticed more customers are buying the standard versions of games/movies over the Special Editions…
3. Price points matter – we’re seeing uplifts in the sales for games priced under $100, while games priced at $129.95 are effectively dead ducks. Consumers are more price sensitive (meanwhile some distributors are raising prices due to the exchange rate. Hmmm?).
4. More price matches – customers are more price sensitive. We’re noticing more price match requests as many people are feeling the pinch.
5. People are buying entertainment for consumption at home –There was an article on Time.com which suggested that the entertainment sector doesn’t suffer like many industries do when a recession hits. We’ve noticed even in recession, our sales are growing.

Luckily for us, point 5 is enabling us to largely ignore all the gloomy talk. We set an all-time daily sales record last Wednesday and rolled out the cake (one of our traditions is that any new sales record = cake!). The good news doesn’t stop there — October 2008 smashed our all-time best month record for orders placed.

It seems that when the going gets tough… the tough still want to have some fun!

I recently noticed that Ferrit are promoting that they are now accepting credit cards from the USA, UK and Australia. This sounds like a cool idea — its a good way to get a few extra sales from ex-pat Kiwi’s etc. More sales = good.

But there is a down side … Ferrit sellers have no protection from credit card fraud. So how’s that going to work?

The NZ Herald posted an article on Sunday about the “huge jump” in credit card fraud in New Zealand. Articles like this represent the tip of the iceberg of the real problem — most online fraud committed in New Zealand is done with a credit cards stolen from overseas.

There’s no doubting that Credit card fraud is a major issue for New Zealand online stores. It’s something we have to be very very vigilant about.

To make life a little more difficult, there’s very little protection against fraud for the local online stores — there’s no Card Security Code and no Address Verification System. Actually, New Zealand online stores are one of the least protected species on the planet!

But the news is even worse for sellers on Ferrit. They don’t even get access to the credit card numbers used on Ferrit. Yet they are 100% responsible for any chargebacks incurred. That’s a risky proposition.

The Ferrit sellers are fully reliant on Ferrit filtering out the fraud (hopefully Ferrit have hired more people to do this). The Ferrit sellers are very much flying blind.

So with Ferrit now accepting credit cards from the USA, UK and Australia, the question has to be asked…

Did Ferrit just open a can of worms for their sellers?

The NZ Herald reported this week that indie music retailer Real Groovy has gone into receivership. The article points out that Real Groovy was suffering from increased competition for the sale of new Music from both JB HiFi and The Warehouse. To make matter worse, they compete with Trade Me for second-hand sales, which appears to have been their core business. And lets not forget about those other “bad” words: music and downloads.

From the outside, Real Groovy typifies that many “once-great” specialist stores face increased threats from new technology and fierce overseas competitors. It seems obvious that Real Groovy was getting “hurt” by JB-HiFi, The Warehouse and Trade Me… but what could Real Groovy have changed to solidify its place in the market?

From my experience as an Indie, I’d suggest that we independents need to:

1. Face up to the brutal facts early.
2. Change our business model until we find an advantage/gap (ie do things better).
3. Out-execute the chains to “own” that niche (ie move faster!)
4. Rinse and repeat (ie keep moving)

Indie stores can have significant advantages over chain stores when it comes to speed. The key thing is the ability to keep finding an advantage/niche to own…

GPstore was a great great example of a store needing to change. When confronting the brutal facts we could see a train wreck in 2-3 years time (from increased competition and the effects of the internet).

We decided it was vital that we broaden our reach and our product range — so that we are not reliant on revenue from games alone. This allows us to remain very competitive in the games market and still have the potential to grow elsewhere. We’re making it very very difficult for the overseas chains to squeeze us out of the market.

It’s change… or die.