This interview first appeared on The Retail Bulletin and Hoeflmayr will be presenting at the 4th Annual Retail Bulletin Multi-channel Summit 2012 in London on February 6.
German-based multi-channel electricals retailer Gravis is offering discounted prices to special interest groups and companies via password-accessed micro-sites in order to counter the low prices of its online-only rivals.
Germany’s Gravis: stores only part of the mix
For this retailer of Apple products it is a key development in fighting the challenge from pure-play online merchants who are operating at prices that would deliver only a 4% margin for Gravis if it matched them. Its solution is to offer discounted prices to companies and groups such as students and non-profit organisations
Dr David Hoeflmayr, chief operating officer at Gravis, says these groups are then given access to clone versions of the main Gravis site that their members or employees can enter to enjoy better prices than those available on the company’s core site and in-store. This enables Gravis to maintain consistent pricing on its main site and its stores.
It is a growing part of its business with 200 to 300 groups currently involved and year-on-year sales growth of 200%: “It is 5%-7% of our total revenues and is growing faster than the [main] website sales. Companies like offering this to their employees.”
Although these sales generate lesser margin Hoeflmayr says they have the advantage of being zero cost as they require no online marketing and there are also no store rentals to eat into profitability.
Regular online sales have also been growing fast – at 60% year-on-year – which has helped the top-line and offset the fact that group’s store sales are flat, but the margins remain a challenge.
However Hoeflmayr says help as come from the company’s click & collect-type service, which is very popular, and involves 28% of online customers choosing to pick up their goods in-store.
Once the customers are in-store to collect their goods then there is the opportunity for Gravis’ store teams to sell them other products and services: “They come into the store and we can then do the up-selling. The average basket size of these [click & collect] customers is Euros 600, compared with Euros 300 for in-store customers, and Euros 400 for online shoppers.”
The up-selling and in-store services aspects are vitally important to Gravis as it enables the company to boost the 10% margin it achieves on selling Apple products to an average of 18% per customer transaction.
Apple: takes a big slice of the pie
“We offer lots of services such as repairs in-store, telephone hotlines, and one-on-one training that make us more profits. This 30% of extra revenues doubles the profits of the company,” says Hoeflmayr, adding that the group’s two-year extended warranty is taken up by 80% of in-store customers.
This compares with only 20% online, which highlights the benefits that can be accrued from offering high levels of in-store service. “This is why we differentiate by our service. We’ve a branded environment and we help our customers. We’re positioned as a value-added retailer,” he says.
Another new development for Gravis is the use of customer data to gain insight, although Hoeflmayr admits that “we are just learning how to use it and we’re not sophisticated”. It has a good starting point as it has the addresses of 1.2 million customers, 80,000 subscribers to its online newsletter, and 30,000 people who have downloaded its app and receive regular email updates.
Communications to its customer base have to date included sending cards to celebrate the birthday of the ownership of a computer. But initially a more exciting development has been customer segmentation, with high school and University clubs created.
These groups have been offered discounts and this has generated sales of more than Euros 1 million per month and there are plans to further segment, with the company investigating adding a bargain shoppers club, despite the brand’s high-end positioning.