When sales at his wholesale business started to wane, Eli Mechlovitz decided to take a direct approach.
Mr. Mechlovitz and his family had been selling glass and tiles wholesale in the New York area for more than 20 years. But as the real-estate bubble began to burst, the company’s retail clients started losing shoppers and slashing orders.
So last September, the co-owner launched a specialty Web site, GlassTileStore.com, to sell custom tiles and mosaics directly to consumers. The site allows customers to see close-up images of tile and mosaic designs. And they can call in for a design consultation.
“People always want to redo their kitchens,” Mr. Mechlovitz says, but with the economic slowdown, they “aren’t willing to go out and spend a lot in a store. They are looking online for deals.” He says some of the products they sell online cost as much as 50% less than what they would at a retail store.
The move seems to be paying off so far. In August, the Web site sold 20,000 square feet of mosaics made of glass and stone, as much as the wholesale business typically sold in a busy month, Mr. Mechlovitz says. The wholesale side of the business will continue to operate as well, he adds.
Where the Shoppers Are
With inventories growing and sales at retailers continuing to shrink, an increasing number of wholesale companies are cutting out the middleman to some extent and turning to the Web to hawk their products — at wholesale prices — directly to consumers. The hope is that consumers who are hesitating to, say, buy that new tile in the home-improvement store will be enticed to do so when they see it for substantially less online.
But shifting gears from wholesaler to Web retailer isn’t seamless. The biggest obstacle: Wholesalers are generally not accustomed to dealing directly with consumers. So they are being forced to learn about customer service — how to answer questions, for instance, and ease consumers’ concerns, offer advice and fix problems. And they are getting a crash course in consumer advertising to get themselves noticed online.
“Web sites need development, Web marketing…search engines need to recognize your site,” says Bruce Clay, an Internet business consultant in Moorpark, Calif. “In an e-commerce world, this is something a wholesaler [may be] ill prepared to handle.”
Mr. Mechlovitz admits that selling online is “definitely more work.”
Before, he says, interacting with customers mainly meant receiving orders from repeat retail clients and setting up delivery. Now, workers must interact daily with individual consumers, helping them with tile selection and answering design questions — tasks that used to fall to the retail clients who dealt with the customers.
With the online business, the company answers about 50 to 100 customer phone calls a day. The site receives about 50 orders daily, with the average order going for $300 to $500. That’s a big change from the wholesale operation, which typically processed a handful of bulk orders per month worth thousands of dollars each. The online business generated about $700,000 in sales last year, while the wholesale business had sales of about $600,000.
To get its name out there, GlassTileStore.com pays for services from companies that specialize in pay-per-click ads, search-engine optimization and Web graphics. Mr. Mechlovitz says he spends about $5,000 monthly on maintaining the Web site and online advertising.
“Wholesalers new to the e-commerce world need to make a strong investment in infrastructure that supports all aspects of customer service, technical support, product support, returns,” says John Metzger, chief executive of Metzger Associates, a Boulder, Colo., communications firm that helps companies create online business strategies.
Whereas retailers wouldn’t typically fuss over one or two broken items in a large shipment, he says, “if something is broken, the consumer expects it to be fixed right away and they want someone to help” them fix it.
Customer service has been key for the online business of C.D. Diam LLC, a wholesaler of loose diamonds and other jewelry.
When Yomesh Shah saw sales from his family’s 30-year-old New York business stagnate in August 2007, he launched an online site, B2Cjewels.com, to reach a wider audience. But because most people were unaccustomed to shopping for big-ticket, personal items such as engagement rings over the Internet, Mr. Shah says, the company’s main challenge was to make customers feel confident and secure about the site — and the products.
First, Mr. Shah carefully selected the products offered online. “We stuck with the basics — pieces people had already tried on at stores [and] were now online looking for a better deal,” he says.
To personalize the items for budget and taste, the site allows customers to create their own rings, earrings and bracelets — leading them through a step-by-step process of picking a metal, setting and stone.
To make the customer feel more comfortable with the Web site, Mr. Shah, a gemologist by training, created a glossary of terms — such as alloy and aquamarine — as well as a number of tutorials to help customers learn more about diamonds, pearls, gold and gemstones. The diamond guide, for instance, talks about cut, carat, shape, certificates of authenticity and the proper way to care for your jewelry.
“We put every possible detail about the product,” Mr. Shah says.
He also created a customer-service team of three people with experience in both gemology and jewelry manufacturing, whom customers can talk to over the phone. To further help assuage concerns, all purchases have a free 30-day return policy.
“Customers can examine the product and make sure they are completely satisfied,” Mr. Shah says. He adds that “we’ve seen a return rate of less than 3%.”
Since August 2007, the company has had more than $500,000 in sales from the site. Last year, it had $25 million in overall sales.
Mr. Shah says the key to getting those sales was quickly realizing “that just making a great product or site wouldn’t really help. The most important thing is to get the word out there about our business.” So B2Cjewels.com explores every possible advertising channel, including posting on blogs about the jewelry industry and buying pay-per-click ads.
Indeed, getting noticed is one of the biggest issues for the wholesalers expanding to online retailing. With the wholesale business, advertising often means simply supplying a retailer with catchy displays for a store.
“It’s like being a store out in the woods,” says Mike Zippelli, chief executive of mattress and bedding wholesaler Classic Sleep Products Inc. and its online store Abed.com. “If no one visits it, it doesn’t matter how good your products and prices are.”
Mr. Zippelli’s business, stung by the decline in home sales and a slowdown in consumer spending, tried to make up for declining mattress sales at retail clients and expand its brand recognition by launching an online store about six months ago. It also uses the site to sell discontinued products at a discounted price.
Because it didn’t have previous knowledge of running an online site and interacting with individual customers, the Jessup, Md., company hired two full-time employees to focus on customer service and two others to work on Web-site design and advertising. Mr. Zippelli says the employees spent months experimenting with different page designs and pay-per-click advertising to see which pages received the most clicks from Web users.
They also post comments and links to the company’s Web site on various blogs and even place certain products on auction site eBay to drive traffic back to Abed.com. The site spent $350,000 on advertising in 2007.
The mattress company’s online sales are at about $2 million a year, which is still a small percentage of its wholesale sales. Last year, the company had total sales of $30 million. But “our big goal is to extend our brand image and strengthen the recognition of our company,” Mr. Zippelli says, “and that has definitely worked.”
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