Online Stores Generating Cash

October 1, 2007       Tom Pope      

A bright welcome greets viewers to the WGBH online shop. The store offers, among other items, DVDs of Agatha Christie television shows, or Simon Schama’s "Power of Art."

WGBH, a public broadcasting station in Boston, started the online store around a year ago, seeking to break through a ceiling of 3 to 5 percent growth in general income. While the expectations aimed at 16 percent, Teri Lamitie, director of online marketing, thinks the actual growth will be somewhat less.

"A growth of 5 to 6 percent is more realistic," she said. "The first year has been a learning curve and we’ll keep improving as long as we learn from the large organizations."

Lamitie is still aiming to hit the right note on how donors respond to the online images. "We were taking cues from other successful stations and discovered a less-than- positive reaction," she said. WGBH originally brought viewers who wanted to pledge and renew right to its thank you catalogue.

"The feedback was significant that the quickness was seen as being too commercial," she said. "Now when they pledge and renew, they land on the donation form before accessing the thank you gifts."

With multiple ways for people to donate, nonprofits are struggling with a new blending of retail stores that show products offered as "thank you gifts" or where the products are meshed with the idea of being part of a donation. As these concepts expand beyond the giant organizations, smaller nonprofits are finding ways to offer stores online. Some groups are revamping to take advantage of the changing e-commerce arena.

WGBH’s store matches items with programming so the store is not like a museum shop, according to Lamitie. Many CDs, DVDs, and logo items reflect particular shows. Umbrellas, CD cases, and coffee mugs or tote bags allow for a variety.

"You’re giving a donation and then you receive a thank you gift," she said. "The trick is to figure what the pledgers want."

Meanwhile, the Arlington, Va.-based The Nature Conservancy (TNC) is in the process of revamping the online store site that has been serving the organization for seven years. TNC receives approximately 10 to 15 percent of sales royalty fees from Corporate Casuals of Concord, Mass., a supplier of custom embroidered clothing for small businesses and organizations.

Recent year figures remain flat, at around $43,000 in gross sales. The store has potential, though. The fourth quarter last year presented interesting results when TNC ran an email campaign featuring the online merchandise store.

"Our total sales were $22,500 of the $43,000 from that campaign," said Megan Stanley, director of digital marketing at TNC. "We can’t estimate revenue for the next few years, as we have not yet implemented a more robust online merchandise strategy. However, we hope to increase these figures by at least 10 percent."

Up until now, TNC would gear up for a season by linking an item with the idea of nature. Since people need clothing for hiking, bird-watching, or travel, the organization obtains clothing items. Other possibilities included reusable tote bags or water bottles for a greener environment.

"Right now we have a couple of dozen streamlined items," she said. "Yet, we want some more nontraditional items for a more robust offering."

In the process of revamping the site, Stanley wants to examine site navigation. "One component is how people find the store on the site," she said. "But, another piece is how we drive people to the site." This part of the process could include placement of ads in the group’s magazine, establishing keywords on search engines such as Google, and promotion of the merchandise in the organization’s local offices. What was the signal for needing a revamping? "We recognized that we could do more," she said. "We want more of a brand awareness."

The revamping should focus on finding out what the constituency wants, where they like to go on the site, and what they see when they first arrive. "We want a seamless process," she said. "The primary way people get to the site is with one click in navigation and we’re trying to determine whether it’s enough or if we should we it make easier."

Two stores run by the American Heart Association (AHA) reflect the strategy of trying to reach two separate constituencies. The Go Red For Women site offers a softer, consumer branding touch point than the Power To End Stroke, according to Kathy Rogers, vice president of cause initiative and integrated marketing for AHA in Dallas.

"We found an interest from women who wanted to buy more merchandise that highlighted their support for Go Red," she said. "The stroke store is targeted to African-Americans at risk for stroke, and the colors reflect those of African logos."

The two concepts are issue platforms where the nonprofit ties in the science, research, and advocacy, according to Rogers.

The AHA designed the mix of items from market research, as well as responses from luncheons and surveys. "We want items to show support for the issues of a heart-healthy life," she said. "Visible pins, ties or purses are examples."

The process has brought in close to $400,000 during the past three years. These transactions are called donations as 100 percent of the revenue goes to AHA.

Part of the success is attributed to thinking through each step of the online transaction to make the experience user-friendly, according to Rogers. The viewer should see fields complete with information regarding the transaction, such as sales tax. Vendors can help the nonprofit by making sure shipping times are appropriate and are listed for the visitor.

"We first saw that the process was taking too long for the item to reach the individual," she said. "We found some issues about the pricing of the product and we had to develop a price that would help shipping without hurting the interest of people."

Sometimes an online purchase can feel like a premium-related donation. Isn’t the online purchase similar to a premium? TNC wants to improve the connection between the person arriving on the site and becoming a member or donor, although the exact synergy is due to be part of the revamping process. "The retail items are not a direct connection with premiums because the viewer can’t purchase the exact items as members," Stanley said.

The AHA’s idea of integration plans to reach out to new customers by asking them to sign up for the monthly newsletter, which allows the organization to relate news and advocacy issues on a regular basis. The AHA believes the online store helps the organization with new ways to link consumers with the mission and inspire consumer passion in a cause, such as wearing a red dress to show support.

"This is not a donation strategy — it’s a mission strategy," Stanley said. "The message is you bought something from the store, so we want to get you more engaged in heart disease as an advocate in the community."

However, beware of the perception of commercialism, warned WGBH’s Lamitie. "Often the shopping-cart experience gives the feeling of commercialism," she said. "The experience should be more of a simple form with the thank you gift as being secondary."

Coordinating Inventory On its Web site, TNC shows Patagonia fleece jackets, baby bibs, and wide tote bags. Yet the office isn’t stuffed with cartons to be shipped to donors.

"All merchandise is shipped in few days by our third-party vendor," said Stanley, "No inventory or stock is handled in-house."

While many nonprofits avoid this route, the smaller online stores can benefit from such a relationship. Yet to open a store without a physical front, the one-stop vendor relationship has to be special.

"The vendor has to have space for the inventory and that could become an issue if the vendor doesn’t want to devote space for the items you choose," AHA’s Rogers.

The AHA went to a current vendor when the Web store first opened in 2004, and found the vendor was looking to become engaged with more nonprofit business.

"One of the hardest things is deciding on how many items to order and the size of the order affects the cost," she said. "When we first launched, the response was bigger than we thought and we ran out of items."

The timing of the shipment should be a vendor responsibility, but the vendor had not done that before so AHA faced a challenge. "We were in the midst of looking at this new operation," she said. "And they were just getting into the business so they were willing to work with us."

The vendor was able to deliver quickly. The questions are: how much can the vendor make this a turnkey operation, and how much input would the nonprofit have with the product mix.

"Most nonprofits are working with some premium company already," she said. "Many of them are trying to get more business."

WGBH uses a manager in-house to coordinate hundreds of items used as premiums. On one hand, a warehouse in Arizona is used, while a commercial company that distributes DVDs and CDs is called on for other situations.

"We have many thank you gifts, tickets, insignia and the specific situation determines which place is used," said Leslie Barbera, senior marketing manager. "Maybe a CD is packaged with a DVD so we might choose to have one vender rather than two," she said. "In another case, an insignia tote bag may be purchased at a figure cheaper than the shipment fees from Arizona."

Yet the warehouse in Arizona deals with many other PBS stations and the high flow of business in March, November and December is understood. "They can do an interdepartmental transfer if we desperately need certain items," she said.

Plan so that the vendor buys ahead of time without charging for storage. "It doesn’t matter if we use five or 400 items," she said. "They have such a huge network they can absorb the overflow so we don’t have to deal with dead stock."

Flexibility is important. Most times the station doesn’t know which products will be the most popular until the first airing of a program.  "We may need to order more the next business day or the schedule may change," she said.

Software helps with real-time transactions. According to Lamitie, an online customer relationship management package can be used for donation and thank-you gift pages.

The gifts are processed in real time through a third-party merchant account. "In the past, we had to download files in-house, and then decrypt them and upload the files before processing charges," she said. "That took time and more rejected credit cards occurred compared to this real time application."   NPT

NonProfit  Times
The Leading Business Publication For Nonprofit Management