Retail sales are sluggish, and high gas prices have put the brakes on consumer spending (and driving). The last cataloger you would expect to be doing well is J.C. Whitney. Yet the auto parts and accessories merchant is cranking, with double-digit growth for the first quarter.
What’s driving the accelerated sales? The company credits it to improved circulation, a renewed emphasis on e-commerce, and good old-fashioned teamwork.
Whitney mails seven catalogs with a combined annual circ of about 25 million: a general auto accessories book, and titles for trucks, motorcycles, Jeeps, VWs, Sport Compact, and a new spin-off targeting RV owners. It also operates a Website and a store in LaSalle, IL.
The 92 year-old firm had such a strong niche following that Automotive Specialty Accessories and Parts (ASAP) acquired it in 2002.
But it was challenged on the metrics front.
“We realized that we were undervaluing catalog results and overvaluing Internet sales, says president Lawrence Marmon.
How? By “not specifically using matchback tools to help us read the results of our efforts,” he adds.
This resulted in “smaller catalog mailings in order to maintain our profitability levels.”
What’s more, Whitney noticed two years ago that its direct demand per book (orders that could be tracked by code to a catalog) was slipping. And yet it knew that more customers were ordering as a result of catalog mailings, and that they were placing their orders over the Web.
“We needed to develop good metrics surrounding this behavior,” Marmon concedes. “We were just adding a flat percentage to the direct demand — it wasn’t a customer-specific matchback. And while that helped, it wasn’t enough.”
So Whitney implemented a matchback program last year, using an outside software service that “told us we were undermailing,” Marmon says.
And that’s when it first saw the true picture.
“Matchback gave us clarity,” Marmon says. “Prior to that, we used percentages to attribute Internet demand to catalog activities. Since then, we’ve been working to refine the rules we use and test different circulation contact strategies.”
That entails allocating sales to e-mail, paid search and affiliates, and linking them with advertising costs.
Meanwhile, “we are now able to get true reads of our mailings by segment,” Marmon says.
The matchback testing also helps the firm determine who not to mail — like noncatalog buyers. “We are seeing that as our file is more driven by new customers from the Web due to the success of our e-marketing programs,” Marmon adds. “The additional segmentation that we will develop from this testing will let us mail more profitably than we are today.”
The company is now finding that on average 40% of the demand attributed to a catalog mailing is matched back sales.
Chatting them up
Whitney employs about 500 people, including 100 in its Chicago headquarters and nearly 400 in a call center/distribution facility in LaSalle. But the key players are Marmon and two vice presidents: Geoff Robertson, who heads e-commerce, and Joe Risch, who is in charge of merchandising.
In 2005, this crew took on the goal of “making ourselves the best e-marketers possible.”
Since then, Whitney’s Internet sales have grown at an annual rate of 25%. This spurt is due, in part, to new technologies like a personalized product recommendation engine and a live chat that have sparked consumer interest.
Launched in April, the chat program has also contributed to greater customer satisfaction, Robertson says.
How does it work?
“A chat window will pop up to the consumer,” he explains. “A button will appear and our representative can tell them certain things based on what the person is shopping for.”
Robertson adds that the firm has had “higher conversions and much higher average conversion value when we’ve connected with the customer. It’s an incentive-based program for our reps and they’re very dedicated. And one rep can talk to multiple people at one time.”
Introducing the live chat was a key strategic move, Marmon says. “We decide when we should talk to a customer,” he says. “We provide customers an opportunity to chat with us when they’re having a problem, when they’re spending a lot of time on a page, or have been on the site for a long time.”
The result? “We’re seeing over 100% improvement in conversion from live chat. It’s like putting sales people in the Internet aisles.”
Hot Leads
But Whitney doesn’t chat with everybody. From a selling standpoint, the site is reserved for hot leads, which are determined “based upon certain behaviors that they exhibit on the site,” Robertson says. “First, we set up rules to identify hot leads. Hot leads are individuals who exhibit behaviors of people with a high propensity to make a purchase.”
For instance, a rule might look for all customers who have viewed 30 or more Web pages. Or it might seek customers who have been on the site more than 20 minutes. If Whitney’s average conversion rate is 2.5%, it might generate 5% from hot leads and 1% from everyone else.
“The differences in conversion rates of the various groups are evidence that the rules have identified customers more likely to buy,” Robertson says.
And what do you do when you’ve figured it out? By interacting with them, the firm has been able to “double or even triple the conversion rates of our hot-lead segments,” Robertson continues. It has also seen 40% increases in average order values. “By interacting with only hot leads, we are able to maximize the time of our chat reps and maintain favorable cost ratios for the program,” he adds.
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Driven to improve merchandising | |
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Another area of focus for J.C. Whitney is its merchandise selection. The company has increased the amount of new products it offers by 50% during the past two year, Marmon says.
How does it know what products customers are looking for? Research. “We asked our customers about our business, about product selection, good pricing, and product availability, which is critical,” Marmon notes.
In line with this, Whitney hired an outside firm earlier this year to survey customers and noncustomers. “The noncustomer group were people who had recently bought automotive accessories, but not from Whitney,” Marmon says.
J.C. Whitney added about 70,000 SKUs this past year and, with offshore partners, “we can move quickly to add products,” Some of the new markets for J.C. Whitney include ATV, wheels and tires, tools and garage. “After we build up the Internet, there could be an ATV catalog,” Marmon says.
With new markets come new products.
He noted that the largest new product addition is in the wheels and tire category. “This is a lower margin category, but with a very large [average order value],” he says. “Other categories that we’ve expanded include RV parts and accessories, ATV and UTV parts, fuller assortments in suspension-related parts, and tool and garage products. They all come at different margins. Some of these programs are being directly imported by us.”
In fact, the RV market is so important that Whitney launched a 60-page catalog for it in May. Plans call for four drops per year and annual mailings of between 1 million to 2 million.
“There are 8 million RVs in the U.S.,” Marmon says. “It’s a good business for us because 80% of them are towed, and trucks and towing equipment are a sweet spot for Whitney.”
It’s still a bit early to gauge the success of the RV catalog, but Marmon says has high hopes for it because it serves a “real enthusiasts’ market.”
Whitney has also boosted its average order value by adding new product assortments with higher prices.
“Specifically, this includes wheels and tires, RV parts, and some higher end accessories,” he says.
Another factor is “the added focus on our cross-sell and upsell programs.”
Speaking of average order value, J.C. Whitney has seen “significant growth in this key metric year over year through improved call center and site functionality,” Marmon says.
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Improving in-stock position | |
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But new products and markets aren’t enough. Whitney also aims to have the best in-stock position possible. A significant selling point for the company is more than 80% of what it sells is in stock. The 20% of goods it doesn’t stock are heavy items that can’t be shipped easily, or are custom-manufactured products.
“We depend on our vendors to drop-ship about 20% and we’re working on improving our vendor delivery time,” he says. “Retail competitors can’t perform in this area because they don’t have the shelf space and staff isn’t set up to handle drop-ship products.”
Why is speedy fulfillment so important? When car and truck enthusiasts have a new vehicle, they want to don’t like to wait around for accessories they’ve ordered for it. A consumer who buys a new truck likely spends about $1,800 in the first 18 months to customize the vehicle, Risch notes.
That means Whitney needs to have products in stock and available when the customer wants them, or he’s likely to go to a competitor, he says.
What else is the firm doing? In May, it launched a private-label credit card. And starting this month, it will offer holders of this credit card no payments for 12 months for any purchases over $1,000.
“Without a doubt, we’re moving at a faster speed than this business has in the past,” Marmon says. “If we don’t, someone will pass us. We don’t want to be a company copying everyone else. We’ve tooled our business so we can react quickly. Our goal is to exceed our customers’ expectations and improve profitability all the time.”
Meanwhile, Whitney has been investing heavily in marketing and IT. It has had an office in India since 2006 — it handles IT and Internet development, product data cleaning and loading, and marketing activities. “We first brought a small staff here to learn our business and then they went back and trained a larger group,” Marmon says. “We’ve now expanded the size of the group and the functions they perform us.”
The report card?
What Whitney has accomplished in two years is “nothing short of remarkable,” says Love Goel, CEO of investment bank Growth Ventures Group and chairman of Whitney’s board of directors. “Consumer spending is at its lowest in four years, auto sales are down 3% and retail sales are down 1%. In that environment, J.C. Whitney has grown by 15%-20% over the past three months. Our view is the team is doing an extraordinary job and is focused on the right things.”
He adds that Whitney has been burdened with lofty expectations, and that continues to exceed all of them. “It’s a testament to the quality of the team we’ve got,” he says. “As the business shifted to the Internet, we were slow to respond, but we’ve more than made up for it. Whitney has made the transition from being a direct-to-consumer catalog to becoming a true multichannel merchant.”
Marmon echoes the sentiments. J.C. Whitney is “a compelling story about the transformation of a legacy catalog merchant to a world-class multichannel marketer,” he says.
And the parent company, ASAP? “We intend to be the consolidator in our category,” Goel says.
ASAP also owns Stylin’ Concepts, a marketer of accessories for light-duty trucks, SUVs, minivans, and sport compact autos. It hopes to acquire “a few businesses to add to our portfolio, possibly one or two retailers over the next 12 months,” Goel adds. “We’re in the market looking for companies to acquire.”