Ebiz Start-up: Selling Online Is Hard Work

Seven months into the operation of his new ecommerce store, Pat Coughlin’s goal of reaching $1 million in sales is nowhere in sight — but that hasn’t curbed his enthusiasm for the online venture.

Coughlin, longtime owner of a successful jewelry store in St. Clair, Mich., won an eBay contest to launch a ProStore in 2006, and he made significant investments in the project: Hired six people, purchased new computers and equipment and planned a $100,000 advertising campaign. Coughlin’s goal was to generate $1 million in new sales at Americandiamondimporters.com within 12 months.

Personnel and operating costs have chewed up more of Coughlin’s budget than he anticipated, and those additional expenses have cut into the monies earmarked for online advertising. The company has generated about $200,000 in sales from the website since its launch, and Coughlin feels that by the business’ one-year anniversary, the online endeavor will be breaking even.

In hindsight, Coughlin said, he thinks they could have launched the site with less staff support, but that would have had negative consequences.

“We could have done it without hiring all these extra people, but our website would not be anywhere near what it is today as far as the professionalism, the pictures, the writing,” he said. “We would still be just getting started if we did not hire all those people to get us going. I did not realize how big a factor labor cost would be.”

The only thing Coughlin says he would have changed? His ambitious goals and high expectations.

“I would not have gone so high so fast, but based on how much jewelry is sold on the web, I felt [and still feel] strongly that our product was the best value out there,” he said. “I assumed that people would just come knocking down our door, trying to get the diamonds and gold and watches and so forth, but it does not quite work that way.”

Coughlin acknowledged it’s hard to make an immediate splash in a competitive online environment.

“If you are a traditional brick-and-mortar [store] just trying to sell your everyday product out there, you are going to have to give it some time to make it really work for you. And know that the advertising is expensive,” he said.

Americandiamondimporters.com, like many online businesses, faces a competitive environment on the web, and popular advertising keywords are pricey. Because he aims to maintain visibility near the top of the sponsored listings at the search engines, Coughlin pays, on average, about $1.30 per click. Those costs range from 10 cents to $5 per keyword.

When seeking the right jewelry keywords that will drive sales, Coughlin says the team continues to try to home in on “the right niche and the right market where the conversion rate is high enough that it makes sense” to spend the advertising money.

Coughlin has “no regrets,” but acknowledges a newfound awareness of how hard it is to generate a sustainable business online. His reality check has not deterred his excitement for his new sales channel, however. He is in the process of several key additions:

He now uses Paily.com, a third-party verification service, to add another layer of credit card fraud protection. Coughlin said fraud attempts are rampant: “It’s unbelievable how much they try to steal from us. Luckily, we have it under control, but holy cow — every night we get orders from people who are not legitimate. It just blows me away.”

Paily.com helps to determine if online sales are legitimate. Coughlin said Paily essentially offers an insurance policy of up to $30,000 on a sale to protect the merchant from fraud: “If they tell us the person is good and the charge is fine and we send the product, but it turns out to be illegitimate in some way, Paily guarantees us up to $30,000 per occurrence.” It’s an additional cost of doing business and another slice off an increasingly-thin profit margin, but Coughlin said the peace of mind is worth it.

Americandiamondimporters.com has launched a loyalty program to encourage repeat business. Each month, the business randomly selects a group of people in its email newsletter database and sends them coupons for discounts of $100, $50 or $20 off their next purchase.

The site expects to launch some rich-media features to better display the intricacies of its jewelry. These new features will offer multiple images of jewelry pieces and allow customers to zoom, pan and closely inspect the quality of the item.

“Since jewelry is a three-dimensional product, it would help the customer to be able to see multiple views,” Coughlin said.

In addition, he noted rich media will enable Americandiamondimporters.com to create a distinctive shopping experience.

“Most websites out there selling jewelry have just a single product view,” he said. “This will help us stand out from the pack.”