TheGift.com – Jeff Swearingen – Store Review

by Bill H.

By Paul Lang, Editor, Sell It!
April 10th, 1999

With annual revenues in the neighbourhood of $8 billion, the US gift market is not surprisingly a tempting opportunity for many Web entrepreneurs. Take for example Jeff Swearingen. Although he only opened his Web store, TheGift.com back in March 1998, he is already looking forward to achieving revenues of $1 million dollars this year.

Like many people contemplating selling on the Web, Jeff had no retail or Internet experience and has had to learn as he went along. In this interview Jeff gives us some valuable insights into how he has built his successful online business.

Lang: Why did you decide to open a Web store?

Swearingen: I hate to shop and have fallen in love with the convenience of the Internet. More and more, I see people using the net to solve their problems. Those of us who use the net on a daily basis continue to find that there are solutions to problems ranging from finding directions to a restaurant to making a stock trade to getting form 1284328HGJFUY&&# from the Internal Revenue Service without going to a government office.

For me, buying gifts has always been problematic. I never know what to get for someone, and then gift wrapping and putting something in a box and mailing it is really a pain. We’re not the cure for cancer, but we’re an example of a company that’s trying to make life easier for our customers.

Lang: What were your goals when you opened your store? Have you achieved them?

Swearingen: There is so much hype about the Internet these days. People always ask when we’re going public or how many millions of hits we’re receiving. Since I’m quite certain that the shine will wear off of the Web, our goal remains to provide great products and services at reasonable prices for our customers.

The companies that have all sizzle and no steak will find themselves struggling when the infatuation with the Web wears off.

Lang: What server and shopping cart software are you using and why?

Swearingen: We do some strange things, like our on-line gift registry and dynamic affiliate program and there just isn’t anything on the shelf that could do everything that we needed.

We use the entire Microsoft suite for our applications: NT, SQL Server, IIS, Active Server Pages, Visual Interdev, etc. Since we have some unique functions, we have developed our own shopping and administration platform. Our only off the shelf application is Cybercash for credit card processing.

Lang: How much did the store cost to build? How much to maintain and promote? Swearingen: We’ve spent about $500,000 in development. Our maintenance cost is primarily our development staff of 2 full time and some contract programmers. Our servers are in Baltimore and only cost in the $500 – $1,000 / month range. We only spend about $5,000 / month in advertising right now. Instead of spending all of our funds on advertising, we’ve spent to develop technology to enable affiliates and strategic partners. With competition increasing in the on-line market, we’re seeing more and more opportunities to promote on-line without millions of dollars.

Lang: What were the major problems/challenges you faced?

Swearingen: Wow, where to start… one of the major problems is that this world is so new, there are not many success models to look at. Everyone knows AOL and Amazon because they’ve spent so much money to make themselves known. I used to wonder how AOL stayed in business when I collected several hundred of those omnipresent AOL diskettes in 1995 and 1996. I think their average acquisition cost was over $100 / customer. We just don’t have the funds to play like that. So, we’re looking for unique ways to acquire customers without unleashing the bank vault.

Other than that, there’s competition, evolving technology, Internet Explorer 3.0, a fledgling market and trying to spend more than a few minutes a day with my daughter.

Lang: Looking at your store now, what aspects are you especially pleased with and what do you feel could have been done better?

Swearingen: I’m very pleased with our site overall. I think we could do a better job explaining what we do and why someone would want to shop with us.

We’re about to release our third major revision to the site. We also just hired a former JCPenney executive to help with our product selection and presentation. Our company is filled with great minds in business, technology and marketing, but none of us have ever worked a job in retail. When we interviewed her, we couldn’t answer any of her questions about our merchandising strategy, so we hired her.

Our next release will also enable a customer to ship different items to different addresses, using different shipping methods, different gift cards and different gift wrap on each item.

Lang: What are your plans to develop the store over the coming 6-12 months

Swearingen: Obviously, we plan to evolve our merchandising strategy right away. We’ve also developed a technology that allows us to provide private label shopping applications for our strategic partners. All sites are looking to integrate e-commerce into their sites, but not everyone wants a warehouse, call centre and customer service. We can offer what we already do with someone else’s front end on it. Look for sites selling our products and services soon with a “Powered by TheGift.com” icon on the screen.

We’re further developing our affiliate program with a co-branded presentation and functions to enable the affiliate to create links to specific areas of the site. It’s very important to automate these processes, or you’ll get crushed.

We’re developing member services, such as a reminder service that lets our members key in important dates they don’t want to miss. We’ll be glad to remind someone about his or her nephew’s birthday with an e-mail. We may even have a special offer for them… The “sticky” factor is of critical importance for all Web sites.

We’re extending our gift registry concept. We started with an on-line wedding gift registry and have now opened a baby gift registry. Obviously, the products on our site are targeted at these applications, we now have over 500 patterns of china, crystal and flatware for sale! We’ll also develop a general gift registry to follow a customer through their important life events.

Lang: Why did you decide to launch an affiliate program? What software are you using to manage it?

Swearingen: We saw the success that Amazon was having signing up affiliates. As I mentioned, everyone wants to enable commerce on their site. However, the book programs pay only 5 – 15% commission and their average ticket is very low. We pay 20% and have an average sale of $85.00. An affiliate program is no-risk for the merchant since it’s a pay for performance model.

I would warn anyone who thinks that they can put a thousand banners to Amazon, eToys and TheGift.com on their site and make any money. Our affiliates who are successful are the ones that take the time to truly understand what we offer and relay this to their customers. If you’re not providing any value, a customer WILL NOT BUY anything and more importantly WILL NOT RETURN.

There seems to be a great proliferation of sites like www.reallybigsuperdupermegashoppingcenter.com. If anyone reading this is considering joining our affiliate program, or any other, please take the time to integrate the offering into your site. Our sites that feature a seasonal product, or even a description of our service outperform the “banner farms” by a factor of 20 : 1.

We developed our own tracking system. I would have loved to use a 3rd party service or product, but we have too highly specialised of an application.

Since we have a gift registry, our affiliates are paid not only on referred sales, but also sales from referred registries. If someone creates a wedding gift registry with us and has $1,000 in product purchased from it, we need to be able to credit 20% of the total amount to the affiliate.

Lang: Which methods have you used to try and promote your store? Which were most / least effective?

Swearingen: The least effective method for us has been run of site banners. I think the user has been trained to avoid anything in the shape of a banner. We bought some very low cost banners across a network and generated very little traffic and sales with it.

Our most effective promotions are our dedicated affiliates and partners. When we work together, we both succeed.

We’ve also been very happy with the performance of GoTo.com. If you have not seen their bidding search system, I highly recommend it for highly qualified reasonable cost traffic.

Lang: What are your top tip(s) for anyone considering opening his or her own Web store?

Swearingen: Jeff’s top ten tip list for budding Web entrepreneurs:

  1. Plan on everything taking longer than you think it will.
  2. Plan on everything costing more than you think it will.
  3. Automate everything that you can.
  4. Have a specific mission. Don’t try to own the world, it’s too late.
  5. Become a TheGift.com affiliate ;-)
  6. Never buy run of site banners.
  7. Subscribe to the I-Sales discussion group
  8. Test, test, test. Then test again because the rules may have changed.
  9. Figure out what your customers want and give it to them.
  10. Have fun – it’s a great time to be in the business.

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