Online Malls Go Beyond Retail Stores

March 15, 2008       Tom Pope      

Nonprofits regularly contact supporters, and those supporters usually go shopping. Online retailers for the past decade have been trying, with varying degrees of success, to marry those ideas.

It’s finally starting to take root.

Shop.org drew in $107,000 just during the 2006 holiday season that went to the Ray M. Greenley Scholarship Fund. Shop.org is as a trade association and division of the National Retail Federation as a 501(c)(6) based in Washington, D.C.

“The results exceeded our expectations,” said Scott Silverman, executive director of Shop.org. “The online mall can be a very effective fundraiser where supporters help fund an organization just by doing what they usually do each day — by shopping.”

Shop.org points to the concept of affiliate marketing, where the organization hosts more than 500 retailers on the site and viewers can click to the retailers of their choice.

The organization is recognized by the vendor running the site because a cookie on the person’s browser identifies that traffic originated from the location. That way the organization obtains a commission from sales.

Most stores give a percentage of the purchase price back to the vendor. The vendor then sends a percentage to the nonprofit. On average, the nonprofit sees around 4 percent, although the amount can range between 3 and 25 percent.

“It’s a turnkey online mall. We do very little work on our part because we’re not experts at running online malls,” Silverman said. “We help promote through public relations while the vendor manages the relationship with the merchants and handles the custom service.” The e-mall product is a combination of a custom brand Web site and support. Usually no software needs to be downloaded onto a “users” computer. The vendor plugs the code unique to each client into the vendor’s generic back-end structure, which is varied to create a brand for the nonprofit.

The vendor seeks the nonprofit’s audience from the nonprofit’s Web site, which is linked to the individual retailers. In exchange, the vendor looks to the organization for promotion such as emailing or newsletters.

With Shop.org, the organization coordinated CyberMonday as a promotional vehicle. “We dubbed the Monday after Thanksgiving as CyberMonday to be the ceremonial kickoff of the online holiday shopping season,” Silverman said. “We reserved the URLs in 2005 and worked with the vendor to turn CyberMonday into a mall event.”

But Shop.org is a shopping vehicle and part of the retail arena. Can other nonprofits expect success? “I don’t think that Shop.org is in the business of retail even though we represent them,” he said. “We’re fortunate to get media coverage because of the tie into the holiday and we can’t expect that other organizations would be able to get that publicity.”

However, Silverman explained that other nonprofits could obtain alternative means to generate media coverage. Success depends on how the organization sends out communication, according to Mike Harakal III, president and founder of Sparhawk Corporation, an e-mall provider in Wayne, Pa.

“The most effective way to get hits to the mall is to get enewsletters that have an effective multichanneled approach with other communication strategies,” he said. “We have figures that show that an organization with effective communication can expect $3 per member annually from the online mall.”

According to Harakal, some clients show averages that range from $2.50 a member per year to $5 and many boost fundraising 25 percent.

Obtaining the figure of $3 per member doesn’t just come from the numbers of hits to your site, according to Harakal. “Promotion of the chance to enter the mall has to be positioned on the home page, where you scroll down to donate, and even when you explain your appreciation for the checks,” he said. “The message needs to go out to drive traffic.”

Harakal considers the most important figure to look for success as being the e-newsletter list. “We’ve shown that most organizations only capture around 10 percent of the actual shopping that members transact,” he said. “The potential is large.”

Success isn’t related to the size of the organization. Consider the effectiveness of the email campaign. When the email arrives, does the viewer get the opportunity to click through immediately with a spontaneous click through compared encountering obstacles to the mall?

Vendors usually help with providing copy for the mall including emails for reminders about holidays. “Success is connected with how much the organization embraces those efforts,” he said. “That will determine how quickly they reach that $3 level —  if they only send occasional emails or communications, they will fare more slowly and not draw as much per member.”

Nonprofits are not required to obtain extra computer equipment. The only thing necessary is to maintain an email capability. When members approach the site, they view 400 to 500 pages of an e-mall that is built and branded to look like the organization, including the graphics. The vendor acts as the host from the nonprofit through to the pages of the retail sites.

The effectiveness of Harakal’s approach is exemplified by the nonprofit dLife, a Westport, Conn.-based health resource on diabetes. dLife is a foundation to support a television company with a charity platform for diabetes education.

“They have a 200,000-member opt-in email list,” Harakal said. “They have a 28-percent click-through ratio every time they send email out and they have a television show each week that promotes the mall.”

Tom Karlya, president of dLife, thinks the $3 per member might be conservative. “We have a 2.3 million member mailing list and are present in Rite-Aid stores,” he said. “We will do better than an organization that just sends out emails.”

Should no transactions occur, the vendor doesn’t send a bill. “This is appealing to a charity,” Karlya said. “Resources on the foundation side are so small we could never afford to handle this if it wasn’t a turnkey operation.”

Part of Karlya’s excitement came from the test of the process. “We obtained $24 from some internal people who bought some material without any publicity,” he said. “We don’t have a goal of a certain number of people buying purchases because we’re too new,” he said. “But we would like to get $30,000 within the year. That’s something attainable, yet it could be a conservative figure.”

At the Students Against Destructive Decisions (SADD) Inc., the Marlborough, Mass.-based nonprofit wants a mall that fits the demographics of the audience, according to Deborah Burke Henderson, director of operations. So viewers to the 400 retailers installed last July will spot stores like Barnes & Noble, Amazon.com or Macy’s. But they won’t see on the floor plan retailers of alcohol or tobacco. “If it has a SADD name, it has to reflect our message,” Henderson said.

Henderson was impressed by the vendor at a SADD conference this past July when young people went to booths about the organization and had the chance to visit the e-mall. SADD received a check for $225, which primarily resulted from that four-day period.

“I don’t feel a concern about any limits by the vendor should a small amount of activity or money occurs,” she said. “Even with a small exposure from our employees, purchases of $110 came forward to us without a problem.”

Publicizing and connecting to the fundraising is a prime way to strengthen the e-mall. For some organizations that lacked a fundraising approach, the e-mall can be a way to maintain a consistency.

The only coordination, according to Henderson, is the promotional approach, but the vendor helps with the content. “All of the tedious work is done by the company,” she said. “If we could get people to interact with the mall, they could see it as a new way to support SADD. It’s a challenge to remind them in a nice way about going to the e-mall.”

So what’s the difference between regular ecommerce where a nonprofit has an e-store and the e-mall? “If someone is managing ecommerce, they are using the Internet, but that’s where the similarities end,” said Kimathi Marring, cofounder and executive vice president of business development for Mall Networks, an e-mall provider in Lexington, Mass. “Often the e-stores are selling items related to the organization like mugs and that is a limited market.”

On the other hand, the e-mall offers items of relevance for supporters like books, travel, or even computer supplies and appliances. Running shops isn’t the core competency of nonprofits, according to Marring.

“Nonprofits have to worry about the inventories and credit card numbers or service-related issues with the e-store,” he said. “But the online mall facilitates a connection between the supporter and the retailer while the vendor handles the coordination.

Yet with the online store, the income for fundraising has the allure of a higher margin with the products. Look beyond the individual margin, Marring explained. “Viewers to the estore might purchase a T-shirt for $25, but the emall shoppers are likely to spend $100 to $150 over a number of items, so you have to think of the actual average sale as being higher.”

He also explained that some items with appliances could cost the shopper $1,000 to $2,000, which would increase the income.

 However, he couldn’t give an amount of hits that would bring in X range of income. “In general, retailers obtain low conversion rates of hits to purchases of 3 to 5 percent,” he said. “But some 20 percent figures can be attributed to driving the people to the site who know what they want and know what the site has to offer.”  NPT

NonProfit  Times
The Leading Business Publication For Nonprofit Management