SKU’s - the more the merrier
Any internet retailer probably knows that a SKU is a “Stock Keeping Unit.” In the world of internet commerce the term usually refers to a product available for purchase on their site. So if a retailer has 500 SKU’s, for example, they sell about 500 different products. Sometimes the differences between two different products may be very slight yet they are still considered different SKU’s. An example of this is Sewell’s line of USB cables - we have each type of cable in many different lengths with are considered different SKU’s.I have met a lot of very small retailers who have between one and fifty different SKU’s. I hear the same thing from most of these retailers - they have a line of products that sells especially well so they don’t want to tie up capital and deal with the headaches that come with a more comprehensive product line. While this strategy may work well in some industries I definitely recommend that anybody wishing to build a solid business on the internet try to beef up their product line.It is not always expensive to add additional SKU’sAt Search Engine Strategies we were presented with the statistic that the average internet retailer stocks 49% of their product line. The other 51% is drop-shipped from somebody else’s inventory. In other words, the retailer takes payment for the merchandise and calls their distributor (or automates this with an XML feed) and places an order for the part. The distributor ships the product to the end-user but makes it appear as if it had actually shipped from the retailer - for this reason drop-shipping is also commonly referred to as blind-shipping. If you have bought many products online chances are that you have received a drop-shipment without realizing it.Overhead does not necessarily rise proportional to additional revenue associated with more SKU’sA lot of people assume that if they are selling $50K of merchandise per month with $20K in overhead that on $100K in revenue they will average $40K in overhead. This is not always (and seldom is) the case. There are two reasons for this - first, if you take a drop-ship approach, your marginal fulfillment costs will fall dramatically because you don’t need to pay someone to package the products, print out shipping labels and make sure the products are shipped by the deadline. The other efficiency gain you will see if you do choose to stock the additional inventory is called economies of scale - as your volume goes up and employees can specialize, the incremental cost of fulfilling an order goes down. This is basic economics.Amazon is a great exampleThe largest internet retailer in the world, Amazon, illustrates this point perfectly. They have over ten million SKU’s available for purchase (source: Internet Retailer). Note that they don’t stock anywhere near this many products - read my post “Why I don’t like Amazon Anymore” for a quick explanation on how different internet retailers sell products on Amazon. Last year Amazon posted sales of $6.9 billion dollars (source: Hoover’s) on over ten million available products for purchase. For simplicity’s sake let’s assume that Amazon had exactly ten million products available.So doing simple math you can figure out that the average SKU generated about $690 per year in revenue. Now take into account very high volume products, such as the Harry Potter series or Lord of the Rings’ DVD’s, which generate several million dollars in revenue for Amazon, and it is obvious that they offer many products which sell very little (or not at all) within a given year. They have not become the largest retailer in the world by exploiting every product they offer - they have become the largest by offering more than anyone else.Depth of the product line is (more) important for niche retailersI presented this argument to a friend the other day who is involved in a lot of small retail startups and he disagreed with me because he thinks the depth of the product offering is not important to a niche retailer who is just going after a small segment of the market. I definitely think this is wrong - the depth of your offering is more important if you are a niche retailer because people expect a specialized retailer to have everything under the sun related to their specialty. Sometimes the smallest iterations of products that are otherwise similar add value to different customers.To illustrate this point I will draw from my experience with Sewell - when we used to add new products similar to products we already carried we worried about cannibalization (new products stealing sales from existing products). Empirically this rarely happens - typically customers know what they’re looking for and as a result our sales typically remain steady for existing products but we convert some customers that would not have bought otherwise. I don’t know an internet retailer that wouldn’t be happy with a bump in their conversion rate which usually happens when they add complementing products, or SKU’s, to their product line.Adding SKU’s helps SEO efforts as wellIf you have one page about a certain product then the search engines generally recognize that and you can generally do well on niche terms (aka “tail terms”) for that product. If you have ten pages about similar products then you have a better chance of the engines thinking you are an authority on that subject and rewarding you with higher rankings on broad terms. Amazon comes up high on many search terms because they may have hundreds of thousands of products in certain categories. The more pages of information you have on any topic the more likely you will be to gain credibility with the search engines on terms related to the topic. As a side note I definitely recommend that you cross-promote products on your site, especially products related to each other.This post is a bit longer then I normally write but I think it is important for any internet retailer to understand that typically when it comes to SKU’s you are better off having more than less. Over time this also creates a barrier to entry to potential competitors - if you are selling everything under the sun related to your industry then a potential competitor would think twice before going head-to-head with you in the market unless they have some perceived competitive advantage. On this note I invite you to keep an eye on Sewell and see what kind of products we add to the store over the next few months 
USB to Pumpkin Adapter
Apparently Sewell has every USB adapter known to man - we are the first company I know of to feature a USB to Pumpkin Adapter.I like working for a small company because we get to do fun things like this at work.
Google Mini and site search
So recently at Sewell we started noticing that as we added more products our site search became less and less relevant.This is a big problem: when I end up on a site I typically use the search built into the site to find what I’m looking for. If there search is no good (and most sites have bad search) I usually go somewhere else unless they give me a very compelling reason to shop with them, which nobody seems to do anymore.I’ve always taken pride in our site search - when we were dealing with a couple of hundred SKU’s it worked great. As anybody who frequents our site knows, we have grown our product line exponentially over the last six months and in the process relevancy has suffered for our shoppers - I was considering software solutions, but finally came across the Google Mini and it made a lot of sense. Here are the reasons:1) The Google Mini is a hardware and software solution that was easy to implement.2) The Google Mini only cost $3K - this may sound expensive, but when considering the ease of use and strain it takes off of our existing servers it is actually quite cheap.3) At Search Engine Strategies they reported that about 33% of purchases online are the result of some type of site search (note: this sounds high to me but even at a fraction of this figure it is compelling to make an investment in site search).4) Google knows search better than anyone else - it’s a fact.All in all we have been very happy with the Google Mini so far. Go ahead and do a few searches on Sewell - you want to see all of the USB to Serial products we carry? Want to see all of our HDMI products? Even though these results don’t say anything about Google, it is the Google Mini running these queries behind the scenes.The Google Mini is programmable with a proprietary XML format - one of our programmers spent a couple of days learning it and was able to seamlessly integrate search into our site. If you would like to use their default search layout you could have the Mini up and running within an hour.
Martha boots the SEO
Well, apparently Martha Stewart doesn’t want an SEO running one of her business units, but David Karandish was about the most gracious loser I’ve ever seen on Martha Stewart’s Apprentice (or Donald’s for that matter).In the boardroom David made a very strong case for Martha boosting her search engine marketing efforts - he’s definitely got huge potential with that account. It was nice to see the profession somewhat legitimized on national television and best of luck to David in the future.
Jagger2 hatin’ on me
OK, so a few days ago I posted about Google’s “Jagger” update and it looks like that was the first of three phases in this update.I wrote that Google seemed to be really favoring fresh content - that definitely seemed to be the case following Jagger1, but many blogs (such as mine) saw a significant decrease in Page Rank with the second phase of the update, so apparently it is not quite as valuable as I thought.I’ll keep you updated on changes that we see going into the third phase of the update which will probably take place over the next couple of weeks (I believe we are still in the middle of Jagger2).
Google’s “Jagger” Update
So Matt Cutts was recently dubbed “The Mick Jagger of Search” and Google’s latest update has been nicknamed “Jagger” by WebmasterWorld… apparently not a coincidence.So what does Google’s most recent update mean to internet retailers? Well, first of all, it looks like Google is discounting the weight of reciprocal links so I would definitely advise retailers to stay away from companies like linkmarket, etc. Google also seems to be favoring freshly updated content even more than they used to - another argument for starting a corporate blog if you haven’t already.An interesting sidenote to this update is that MSN is now showing a page rank of 2 - apparently it has to do with a 302 redirect. Without the “www” preceding it apparently MSN has a PR of 8, but they are redirecting all requests to “www.msn.com” which only has a PR of 2 - I’m sure by now the guys over at MSN have realized what is happening and put a 301 redirect on msn.com (which is a permanent redirect and will pass PR) so expect them to be back up to an 8 in the next update. OK, maybe they won’t do anything - I’m guessing MSN doesn’t care too much about Page Rank.Google’s Jagger update is probably the most drastic update we have seen in at least a year or so - a lot of people claim that Page Rank doesn’t make a big difference in the traffic you will see coming to your website, but that simply isn’t true - there is a strong correlation between a site’s Page Rank and the attainability of certain keywords and phrases in Google - of course there is more to the equation than having a high PR (keyword density, SEO-friendly URL’s, etc.), but it is definitely a significant factor.
Don’t overoptimize
Every internet retailer I know wants to come up high in the search engine result’s page (SERP) for keywords related to their product line. This makes sense - with organic search engine traffic (ie, not sponsored links) there is no marginal cost as there is with pay-per-click.The problem is that you’re not alone - all of your competitors understand the value of coming up high in the SERP’s so they are also optimizing their pages. One trap that I have seen a LOT of internet retailers fall into is over-optimization.I know it’s tempting - you want to do everything exactly right on your page and you end up using the keywords you are targetting several times in hopes that the engines will think you are the authority on that keyword. There are 2 problems with this approach (called keyword stuffing):1) Your copy doesn’t read well. In many cases your customers will think that it is either dynamically generated or written by somebody who does not speak english well - either way it turns them off.2) The search engines are smart enough now to recognize when people are doing this and they have an over-optimization penalty (OOP). They know that no reasonable person would have a page so optimized for a keyword or phrase and hence it must be somebody trying to game the engines.That being said, there is nothing wrong with understanding how the engines work and optimizing your site for them. Just make sure that what you are doing is not excessive and that it is something that you would do in the normal development of a site. I suggest that you check out some good SEO websites, build a decent link campaign and write natural, flowing copy (check out Sewell Direct - we have some awesome copywriters that know how to make it flow).
Web 2.0 - Give me a break
OK, I think everybody is going a bit overboard with all of the buzz words lately on the internet. It’s really feeling like “the boom” again - Henry Blodget’s even back in the picture (look forward to a post on why I don’t think that’s a bad thing).One catch-phrase that has really started bugging me lately, though, is Web 2.0. Here is a definition from Wikipedia:
Web 2.0 refers to a perceived transition of the World Wide Web from a collection of websites to a full-fledged computing platform serving web applications to end users. The proponents of this thinking expect that ultimately Web 2.0 services will replace desktop computing applications for many purposes.
Why do we have rename the whole internet because of an evolution of technology? This doesn’t make any sense to me. Do we constantly rename everything in our lives just because we have made them better? Are our brains not large enough to conceptualize the idea that technology is evolving - do we really have to name these technological shifts?That being said I am a big fan of the implications of this new shift in application hosting. As bandwidth limitations are lifted I predict a trend towards (or a return to) client-server technologies. To get a glimpse of what I’m talking about read about Jeremy Zawodny’s 30 day webmail challenge.Kind of ironic, isn’t it? Bill Gates frees us from the mainframe and 30 years later (I’m crossing my fingers here) we realize that Larry Ellison was right all along. That’s how I’m hoping it will play out anyway.
The importance of linking
It’s amazing - no matter how much I try to learn about internet marketing I am continually impressed with how little I really know.OK, I am overstating my ignorance a little bit. I do know most of the basics and quite a bit beyond that. This past week, however, I was reminded how important building inbound links is to an effective search engine marketing campaign.Here’s the background: a couple of months ago I met a guy at a show who owns a very successful internet retail site. In talking to him (and researching his company a bit on the internet) I realized that he spends very little on cost-per-click ads but he has a ton of traffic to his site.His secret is very effectively building quality links - now this is not a magic, overnight silver bullet - it takes a lot of time and money to launch a full link-building campaign. What he has done is basically built a ton of inbound links with anchor text for competitive terms he wants to show up high on in the search engine results page.And it works - it works REALLY well. He is number one on Google for terms that he could easily spend a few hundred thousand on with only a PPC campaign. I don’t know how much he’s spending but I’m guessing it’s a whole lot less than that.I know I am oversimplifying the issue (there are obviously other things that he has done with his site to optimize it), but I wanted to remind everybody just how important quality inbound links are.If you are looking for a reference for link-building feel free to email me.
A follow up on Google’s philanthropy
I just wanted to follow up on my posting about Google.org. One thing that I want to stress is that I like their approach to philanthropy much more than most companies.The amount of money they have committed is not trivial, but I think more important than that is their mission - for instance, the Acumen fund they are investing in is “a non-profit venture fund that invests in market-based solutions to global poverty.”This is proof that when it comes to charity Google “gets it” while others don’t (just like with search). The solution to poverty in developing nations is not sending them a bunch of money or food - it is teaching them and helping them implement democracy and capitalism.I just wanted to clarify that I am most impress not with the amount of money that Google has committed to philanthropy but their approach to solving the world’s problems. I hope that one day I will have the resources and ability to be involved in microfinance abroad. I believe that by bringing the fundamentals of capitalism to poverty-stricken nations even for-profit companies can help solve the world’s most pressing social issues.