Smartbargains still kicking post dot-com

DSN Retailing Today, April 19, 2004 by Mike Duff

BOSTON -- Pure e-commerce players were the toast of the town in the late 1990s but then generated as much excitement as flat beer after the millennium turned. Yet, several pure players have survived in the supposedly doomed sector--and not only because they have die-hard backers.

Smartbargains.com is a pure player that is turning an EBITDA profit these days, said Carl Rosendorf, president and ceo, by building on a unique relationship with a traditional retail business. The site was developed as an alternative product conduit by established liquidator Gordon Bros. but has evolved since then to become a multidimensional Internet store.

Gordon Bros. established Smartbargains.com in early 2000 and launched the site in October of that year. Carl Rosendorf, former evp of Barnes&Noble.com, has been president and ceo of Smartbargains.com since June of 2001.

Rosendorf told DSN Retailing Today that Gordon Bros. developed Smartbargains.com as an additional strategic solution for the retailers, banks and other parties with which the company works. However, Smartbargains.com became so sufficiently successful that it rose to another level. The company today has received funding from Highland Capital Partners, General Catalyst Partners, Maveron LLC and AOL Time Warner Ventures, Aziza Johnson, a company spokesperson, noted. "After it founded Smartbargains, Gordon Bros. went into the venture capital world," Rosendorf said. "At this time, Gordon Bros. has a minority interest in Smartbargains."

Rosendorf was at the helm to help the company survive the dot.com bust. He directed the development of marketing relationships with key Internet traffic hubs such as MSN, AOL and Google and the evolution of strategic relationships with manufacturers of brand name and designer labels to supplement and stabilize the product assortment.

During his tenure, Smartbargains.com also increased the number of product categories it offered. Since early in 2004, it has launched several new product categories, including a shoe outlet featuring more than 500 styles of men's and women's shoes by brand name and designer manufacturers.

Smartbargains.com also is rolling out a media center that includes a range of CD and DVD titles. The media center permits shoppers to create custom discount CD and DVD packages.

The Smartbargains.com Web site lets shoppers browse in a variety of different ways. It emphasizes the idea of frequent visitation by having click-throughs such as Bargain Bin and Last Chance. Or shoppers can click on a category, such as home decor, which lists 14 segment subcategories from Candles and Collectibles to Slip Covers and Wall Decor, as well as a seasonal category--at press time Spring Home Makeover--and a bargain Category, Recent Markdowns, again to emphasize the site's treasure-hunt element. Visitors also can shop by category, which includes all the segments as well as New Arrivals, Bargain Bin and Last Chance organized for home goods, and Shop by Room, Shop Rugs by Size or Shop for Gifts. Visitors can also browse Lighting by Style.

Customers can also search by brand, and those include such labels as Prada, Hugo Boss, Ralph Lauren, Fendi and Gucci.

When shoppers click on the site, a pop-up offers a subscription to Smartbargains newsletter, which gives those receiving it first crack at bargains.

Rosendorf said the typical Smartbargains demographic is a female--about 70% of customers are women, with the greatest strength in the 35 to 55 age bracket. The target customer's household income exceeds $50,000 year.

"We have a very sophisticated consumer who wants the best brands and great savings--an off price bargain hunter," Rosendorf said. To reach the customer, Smartbargains uses online marketing and e-mail to acquire customers cost effectively, said Rosendorf, as well as the marketing relationships established with AOL, MSN, Google and other virtual third parties. It also works on its newsletter connection with customers so that now over one million bargain reports are sent to subscribers weekly.

The success that Smartbargains.com has achieved has been based on a sensibility about the buying opportunities in the marketplace that is a legacy from Gordon Bros., said Rosendorf, and on a management that has been assembled from e-commerce professionals.

In 2004, Smartbargains' business strategy will focus on the bottom line and profitability, with revenue growth being driven by improving product selection, technology and supplier partnerships.

The Internet continues to provide opportunities for selling goods and services--particularly goods. The American Customer Satisfaction Index demonstrated that e-tail companies get better marks for customer satisfaction than established competitors. E-commerce had an aggregate score of 80.8 versus 74 for all of retailing in the fourth quarter of 2003. With a score of 84, retailing led all other tracked e-commerce segments in the study, including auctions, brokerage and travel. On a company basis, Amazon.com led all retailers--virtual and bricks and mortar--with an index of 88. The study's authors characterized Amazon's score as coming close to the customer satisfaction ideal as has any company in the 10-year history of the index.