Barty’s Weblog

Its official. Today is the last day of summer and the weather is pretty bleak out there. But judging from our web traffic today, it seems that rain is better than sun — our web traffic is tracking 30-40% higher than a typical sunny Saturday!

We find that Saturdays are our typically the quietest day of the week for Mighty Ape and we’re starting to notice that the weather can have a real impact on the weekend sales (but less so during the work week). For example, last weekend was a little wet, and sales were up significantly on the two previous weekends. Initially we thought it was us, as one of our site tweaks had obviously made a massive impact… but eventually, we realised that the weather had played the biggest part in increasing our sales for the weekend.

Retailers have long known that the weather can play a role in determining sales and I’m very interested to track how the sales from this rather bleak weekend compare with an average summers weekend. Just how big is the impact of bad weather on online sales?

Did I mention we’re looking forward to a really wet winter.

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!

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!

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.

Just a couple of weeks after our re-launch, we’re pleased to report that books are emerging as a strong category. The book category has swiftly over-taken the music category and moved into 3rd — games (of course) are number one with DVDs second.

Its interesting to see that we’re selling a wide variety of books, but as we predicted, the science fiction genre is especially strong for us, followed by childrens books.

We’re still novices when it comes to selling books, but we’re learning rapidly. One of the things that has surprised us is the varying “quality” of some books. While most paperbacks are as you would expect, some of the hard backs are *very* cool (in terms of size, page quality, number of colour images etc).

Books such as the recent Robbie Deans book or Footrot Flats: The Long Weekender are exceptional books, but it is very difficult for us to present them well online. In a physical store you can pick them up, feel the weight and instantly appreciate the excellent value they offer.

While apparently “a picture says more than a 1000 words” — online this really isn’t the case. It’s much more difficult online to show how great a product actually is. This is going to be one of our many challenges moving forward.

Speaking of moving forward, we’re very happy to have weathered all the post-launch bugs — we’re now back to working on our boat speed…

With the recent launch of Mighty Ape, the question our suppliers often ask is… “Where are you going to promote it?”. My response is usually something along the lines of “Well we’re not going to do a Ferrit!”.

Initially, our focus is on getting our web site and our service working for our customers (which actually comes right after us getting our web site working!).

As a family company, we don’t have deep pockets like Telecom, so we know we have to develop a product that works better… preferably way better. We can’t win on advertising spends, but we can win on content, usability, better service, usefulness etc.

Our amibition is to be good enough so that we’re worth talking about. While we wish it was that easy, being worthy of a recommendation to friends is a big ask. But if our customers are 100% satisfied, then heopefully they’ll tell their friends and so on…

Its really about winning one customer at a time. The hard way.

This is the strategy that worked for Trade Me… and its worked for many other highly successful web sites. Actually, when was the last time you saw an ad for Trade Me, Google, You Tube or Facebook?

To execute this strategy, we’ve invested a huge amount of time in getting the web design right (so people find what they want), getting lots of stock on hand (so people get their stuff quickly) and built up a great customer support team (so people get all the help they need).

After only a few days, we’ve had some excellent feedback and data that we can use to improve the site and we’re really looking forward to focusing on getting the foundations right so we can promote the site…

But in the mean time we’ve got a stack of small bugs to fix, quirks to iron and an endless list of improvements to make. Busy busy times!

Since the launch of Mighty Ape our web servers have been running hot and we’ve been forced to sit on our hands while we quickly arrange more capacity.

Our current servers have been coping mostly fine, but a traffic spike from a newletter would have resulted in bad performance issues (or worse).

Today we’ve added a nice new web server to our server pool. This means in theory(!) the web servers should now have no problems with any traffic spikes we can throw at them.

What did we call our new server? Bubbles!

Since the “soft” launch of Mighty Ape we’ve been baby-sitting our web servers as they’ve been hit with a lot of extra traffic — a lot more than we expected actually.

The load on our web servers has been constantly high — not only are we getting more visitors, but people are staying for a lot longer than we expected. Just to compound things, the site is also getting “spidered” by our friends the search engines.

The irony is we’ve spent many months fine tuning our database structure and servers. We expected the database servers to struggle with the extra 900,000+ products. In fact, the database was redesigned twice in development until we finally got it right.

So far we’re happy with the performance of the database servers (in fact “Kong”, our master database server, has been having a holiday compared to the thrashing he got pre-launch!)… but roll on Monday. On Monday we’ll be rushing out to buy more web servers!

(P.S. – Go the mighty Warriors! Good luck to Ruben and the boys…)

GPstore has evolved! Early this morning we launched our new web store… www.mightyape.co.nz

Check it out.