Sharper Gets a Facelift

Sharper Image Corp. (Nasdaq: SHRP), the popular retailer of high-tech gadgets and gifts, announced this week that its online store has been completely redesigned in an effort to increase e-commerce revenues.

The truth is, we see these types of announcements every day now, especially from companies realizing they’re behind the curve and missing out on the potential bonanza of e-commerce sales. Day after day, companies put out press releases announcing their plans to build new e-commerce sites and model them after, Dell Computers, or eBay.

How is this Different?

This week’s announcement from The Sharper Image seems more noteworthy for these reasons:

The Sharper Image seems to have a much better than average chance of succeeding through e-commerce because the company’s strategy is based on selling premium products at a premium price, rather than commodity products that are subject to competitive online price wars. In addition, the Sharper Image also has well-established brand-name recognition, and extensive reach through its direct-mail catalogs. These vehicles obviously help drive additional buyers to the online store, much like the model for Victoria’s Secret (also in the news today).

The Sharper Image also has a proven track record of generating sales, not only through its retail stores, but also through catalog sales and over the Web.

Recent Results

Internet sales through grew from $1.6 million in 1997 to $4.9 million in 1998. These online sales accounted for about 2% of the company’s total annual sales of $241.5 million, for the 12 months ended Jan. 31, 1999.

The company reports that online sales from soared during the holidays — up 436% in November and 444% in December.

It’s interesting to note that more than 70% of these online holiday buyers were making their first-ever purchase from Sharper Image. These results demonstrate that even large, well established retailers can reach new buyers through e-commerce.

What Works

Richard Thalheimer, who founded The Sharper Image in 1977 and still serves as chairman and CEO, shared some observations about his company’s e-commerce operations and future plans.

“The Internet is our highest growth area and it’s a huge opportunity that we’re seizing aggressively.”

Thalheimer indicated that the company’s outbound e-mailings to Internet buyers, featuring sneak previews and online offers, have consistently resulted in increased sales.

“We are not a seller of commodities,” he emphasized, “where gross margins are elusive. Instead, our own-developed products enjoy very high gross margins. And because they are unique to us, these items cannot be search-engine price-shopped by customers, nor discounted by other retailers — on the Internet or anywhere else.”

What’s Next

The company plans to launch a Product Auction site later this month. Accessible from the home page, the Auction site is intended to be a major component of the Sharper Image’s overall e-commerce strategy. Thalheimer also mentioned plans to promote the site aggressively through alliances with other leading Web sites, although no further details were announced.

Company Background

The Sharper Image mailed its first catalogs in 1981, expanded into retail stores in 1984, and launched its original Web site in 1994. The company is based in San Francisco, California, and currently operates 87 stores throughout the U.S., and mails millions of catalogs each month.

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