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From 5 brick-and-mortar stores to just one e-commerce site


January 21, 2005

"Being tiny compared to our competition gives us some advantages," says Don Cohen, managing partner of Tool King, a site that sells home improvement gear like table saws and drywall hammers. While some stores aspire to be ever larger, Cohen sees the value of a nimble size: "We're very responsive to the real needs of the marketplace, and we can provide our clients with usually faster service."

In business since 1978, the Colorado-based company used to operate five brick and mortar stores, but changed its strategy with the advent of e-commerce. "Now we're down to one superstore, because we've decided to reallocate resources toward the Internet," Cohen says.

Tool King's many years in brick and mortar retailing gives it leverage with its many suppliers, allowing the site to scoop up offers that bigger players can't. "We're an opportunistic e-tailer, so we buy a lot of overstock, close-out, and reconditioned product - things that bigger companies couldn't justify," Cohen says. "That's what really distinguishes us - when [shoppers] save a lot of money or get something that no one else has."

The Internet puts Tool King in more direct competition with big merchants like Home Depot. "We had five stores, and Home Depot has a couple thousand," he says, "but when we moved to the Web, everybody has one site."

The Internet allows Tool King to compare its offers with those of the mega-retailers on an item-by-item basis, Cohen notes. "This creates transparency - here's what they're selling, here's how they're selling it." Tool King can respond instantly: "We got to be a few dollars lower, or we've got to add some items - our response time is that much faster and our focus is more clear."

"They're into planning - we're into acting," he says. Tool King's leverage with suppliers allows it to scoop up offers that bigger players can't. The site is adding 100 items every day.

As Tool King reoriented itself toward e-commerce, it shifted its inventory management. "We're going more and more towards drop ship," Cohen says, which enables the company to sell an item without the risk of holding it in its warehouse. "We're adding a hundred items every day now."

The company's marketing budget has changed as well: it now spends about $10,000 a month for about 800 search engine keywords, and also lists itself on Net marketplaces like Amazon, eBay and Shop.com. The site draws about 900,000 visitors a month, with each visitor spending an average of 2.5 minutes per visit, Cohen says.

Despite the company's shift to the Net, it wants to preserve the human element of a hardware store, and so maintains a live call-in center to give shoppers advice. "It's a way of marrying the personal touch with high tech," he says.

Tool King has recently hired Site Brand to help it monitor its traffic. The Site Brand technology identifies new shoppers on the site, and offers them a discount if they purchase that day. Or, if a customer has been browsing Tool King for more than 10 minutes, Site Brand presents them with a toll free number to call for help.

Managing online customers requires a new set of skills, Cohen observes: "This is a thinking person's game."


Source: eCommerce Guide



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