“E-commerce is the dumbest business model in the world, never start a webshop.” No, this is not a quote from shopping street fan Hans van Tellingen. These are the words of Coolblue CEO Pieter Zwart, during the Webwinkel Vakdagen tradefair in Utrecht (The Netherlands) last January, and directed at a room full of e-commerce professionals. A remarkable statement for someone who, with a strategy that was mainly focused on e-commerce, made a profit of almost nine million euros ($10.4 million) in 2016. How did Coolblue, a consumer electronics retailer based in the Netherlands, manage to transform the “dumbest business model” into a winning model?
Hardly anyone manages to make money in e-commerce, Zwart knows. According to him, this is because all webshops are essentially the same. “It’s always something with a picture, a button and a price.” Those pictures are the same everywhere, the buttons mainly need to just work, so the price is the only remaining means of competition, which inevitably creates a race the bottom. And yet, twelve hundred people order a washing machine at Coolblue every day, which makes it the online market leader in that product group. Is that due to the picture, the button or the price? “None of them,” Zwart says. “It’s about thinking beyond these.”
And that starts with the question of what a customer wants when buying, in this case, a washing machine. They certainly do not want a physical store, Zwart argues. Because consumers know what a washing machine looks like. “Square, white and ugly. And it’s not like you’re going to try it out in the store. I’m amazed it still exists, white goods retail. But what customers to want with such products is control over the delivery. For instance, they need it to be free, and they need to know it will be delivered as high as the fourth floor. Even at Coolblue, that realization came later. “It was not until two years ago that we learned this was the essence.”
Coolblue has formulated two objectives from day one, which still stand firm: making money and satisfying customers. How does that combination fit into a world of “picture, price, button?” It seems like an impossible puzzle to solve, Zwart acknowledges. “This is not solved by looking for the answer, but by looking for the right question.”
And according to him, that question is: what is the value of a satisfied customer? Quite high, because a satisfied customer will return and will promote you to others, he says. There is a good reason why the net promoter score (NPS) is what it is largely about at Coolblue. Last year, it was 67, the highest score in the Netherlands, according to Zwart. This is due to customers rating their experience with a nine or 10, because only those customers will return and recommend the webshop to others. That is why the NPS goes up by one point with a 9 or 10, stays the same with a 7 or 8 and drops one point with any rating below that. “Having a positive NPS is not enough,” Zwart says. “What’s important is that it is higher than that of your competitor. Only then will you beat them in growth and profit.”
The positive value of 67, a growth of 10% relative to 2016, indicates there were many nines and 10s. The average customer rating of 9.6 confirms that. How do you achieve those high ratings? That is all about what the customer expects, Zwart explains.
If you meet those expectations, you score a seven or eight. If you go the extra mile, you may score a nine or 10. ‘Simply astonish’, Zwart calls this. “We frenetically stuff 14 jokes into the delivery box in the hope that someone sees them,” he mentions as an example. Another example of going that extra mile is the free Sunday delivery. This may seem like a marketing gimmick, but not according to him. “Do you know how often it is Sunday? Every week, 14.3% of your life.”
Another example is the General Terms and Conditions on the website, which look a bit different at Coolblue than at other retailers. It has phrases such as, ‘”Customer. King,” “Service, our obsession” and “We don’t make a fuss.”
“People who read our General Terms and Conditions have to laugh at least five times,” Zwart says. And he considers that important. “Because only people who are dissatisfied are going to be reading those.”
Coolblue behaves like a customer travel agency, Zwart explains. This means, among other things, that physical stores are as important for TVs as they are pointless for washing machines.
“The price difference between the cheapest 55-inch TV and the most expensive one, is three thousand euros,” Zwart says. “But what is the difference? Figuring all that out is not doable for individual consumers.”
That is why the already nine physical stores of Coolblue aren’t filled with washing machines, but with TVs. The retailer now also has two extra-large XXL stores, which are very successful, according to Zwart. There are various reasons why these stores make consumers happy, the CEO posits. Expert advice with an expensive product like a TV is one of them.
“Also, they have often already made a choice online but want some additional confirmation for their choice. And they like being able to pay for a product in cash.” But the main advantage, both to Coolblue and its customers, is the effect on the return flow. “We sell technically complex products, which inherently means there are sometimes problems with these products. That makes it great to be able to say to a customer: ‘I see you live in Amsterdam, why don’t you come by the store with your product?’”
Although Coolblue is now convinced of the importance of physical stores for some product groups, Zwart is not too positive about the future of the shopping street. “Many product groups are shifting to online by as much fifty, sixty or seventy percent,” he says. According to him, the number of stores will continue to decrease strongly and chains will disappear. Especially the players who aim at having a large number of branches and have the ambition of growing from 70 to 100, for instance. “Believe me, they will perish.” He already mentioned earlier that he wants to aim for no more than about 25 branches. “For some models, a combination of online and offline is relevant,” Zwart decides.
Coolblue ranks No. 89 in the Internet Retailer Europe 500.
This guest post was originally published by Paris Retail Week, which is being held Sept. 10-12. The article is reprinted with permission.
The original Dutch version is viewable at https://retailtrends.nl/.
Amnon Vogel is editor at RetailTrends Media, the Dutch source for information and inspiration for professionals in retail, including the monthly magazine RetailTrends and the bimonthly magazine Etailtrends.