High Performer Series: Drsfosterandsmith.com

A Foster & Smith catalog is a familiar sight at the home of a pet owner. Whether a household includes dogs, cats, birds, reptiles or other animals as pets, Foster & Smith has been a resource for more than two decades for pet owners to purchase supplies and products.

Three veterinarians launched the company in 1983 — Dr. Marty Smith and brothers Dr. Race Foster and Dr. Rory Foster. When the veterinarians realized it was difficult for their customers to easily locate products in their Northern Wisconsin area, the men launched a small catalog. The catalog became so successful, the doctors transitioned from running the clinic to developing the catalog. Millions of catalogs are now printed each year by Foster & Smith.

In the late 1990s, the company launched a website, Drsfosterandsmith.com, that has become a significant online business. The site boasts 1 million unique visitors per month and generates about $125 million annually, accounting for 57 percent of the company’s total revenue.

Gordon Magee is Internet marketing and analysis manager for the company.

PeC: Why did the company start a catalog?

Magee: They started out in a very small way and used the catalog as a customer service. Things went quite well for them. Of course, there was no Internet in those days, back in the ’80s.

As things grew, they got involved with catalog conferences and so on. People asked them about how they put the catalog together and why they devoted so much of their catalog to pet information. They really wanted to equip their customers with knowledge to take good care of their pets.

So, from very early on, they chose to dedicate quite a bit of space to pet education within the catalog. That really caught on. That was kind of their niche early on. Around 1998, the website rolled out. Things went really, really well with that — to the point where today, we do about 57 percent of our business online.

PeC: Such a significant part of the overall revenues are coming from the website now. Was there resistance from the staff about this new channel?

Magee: There really was not. I think [that’s] because the company grew up with kind of a family atmosphere, not a corporate atmosphere — and that atmosphere remains. It was very much a team concept.

The creative department that we had (and continue to have) was one of the great assets for the Internet because we had it as a built-in part of the operation. We did not have to farm anything out to develop or create for the website; being a catalog company, we already had people who knew how to write copy and people who knew how to handle images and people who knew how to do layout. It was a matter of simply getting a website built. That really became an integral piece of all that we are doing in the website.

PeC: Does the company dedicate more resources to the catalog or the website?

Magee: In a company like ours, doing 57 percent of its business online, you can sort of fall prey to a myth that the Internet is this monster thing out there driving the sales. In reality, in most cases for catalog companies, the catalog is still king.

Even though we do a huge chunk of our business online, a portion of those sales done online are still catalog-driven. People get a catalog and choose to order online. A number of years ago, some major companies thought about cutting back on catalog mailings, and they discovered when they did that, that their sales dropped like a rock. They were looking at numbers [that seemed to show] their website percentage was growing as a percentage of their business but they had not done what is called “matchback” to determine where those sales really came from — and they were still coming from the catalog.

So, for a catalog company like ours, the catalog is still the driver.

PeC: You are saying there is a closely interrelated, co-dependence between the catalog and the website. Correct?

Magee: Absolutely. It comes down to what is best for the customers and what their customer experience is. Many people want that catalog to flip through and see what is there, but then they want to get on the phone or they want to get on the Internet to put in the order.

It may vary with an individual where one day he needs to make a call because there is an item he has a question about. Sometimes there are more technical things people need answers about that are better handled on the phone than on the Internet. As well as we try to describe things online, there are times when you just need to ask a question.

So, it really comes back to customer experience and how to help customers get what they are looking for, as opposed to what we would like to sell them.

PeC: Do you sell at other online locations?

Magee: We do. For example, discontinued products that are new, but which we have discontinued, we will sell on eBay. It is a very small percentage of our overall sales. We also sell on shopping comparison sites — Froogle, Yahoo Shopping and so on. Those are very effective venues because there are certain people who are comparison shoppers and they want to be able to compare directly on one site what prices and values they are looking at on the product.

PeC: Is it worth the effort for you if it’s such a small portion of the overall revenue?

Magee: It is a consistent and smaller number, but what it does is reach a specific market segment. I think in any retail business, there are certain kinds of buyers that you look to reach, some of which are more intrinsic to a person’s business than another.

Very often, there are certain products that are specifically price-sensitive. There are also inventory-sensitive products or maybe there are some products you cannot get in some places that you could get from us. There is also that certain kind of buyer that really wants to do a comparison with multiple retail sales companies and others may have a specific kind of loyalty. That world is changing,frankly, because the world of the Internet has really made comparison shopping easy. There is a certain segment of buyer that uses those comparison shopping sites, and you want to be able to reach that segment — because if you are not there, you are not going to get that sale.

PeC: How do you market your online endeavor?

Magee: My portfolio is broader than just Internet marketing, which is broad enough by itself. I also handle media placement, television, radio and public relations. So, all of those things mesh together in terms of an overall marketing strategy along with our core marketing tool, which is the catalog.

We do space ads. We do what we call FSIs, free-standing inserts. We do other kinds of alternate media placement, whether it is catalog stuffers or ride-alongs in other people’s catalogs or products that are mailed out to their customers. We have done some small radio tests. We do direct-response television buys as well, and create our own commercials. So there are all of those things.

On the Internet side, we do paid search, pay-per-click marketing and search engine optimization as well. We do have an affiliate program as well. We do major email marketing.

PeC: Does it take a large team to pull off that level of comprehensive, integrated marketing?

Magee: When a company is smaller and it does not have the personnel and therefore, potentially does not have the expertise, it is difficult to do all of these things at once. So, for medium- to smaller-size companies that are just rolling out, it can be kind of overwhelming.

I think if a person starts with one venue and grows that expertise and then rolls into the next one, it kind of builds until you have the expertise. You would be amazed at what you can do with a relatively small staff.

I have got three people that work for me and we are about to bring on a fourth — and that’s it for the Internet marketing department.

PeC: Are there particular things that distinguish Foster & Smith from other pet supply and pet care companies?

Magee: The roots of the company are really core to the whole branding — not only philosophy, but reality. The company was started by veterinarians who have committed their educational and professional lives to good pet care and animal care. Their philosophy of wanting people to take good care of pets, for example, really permeates the company.

PeC: If I am not mistaken, I believe I have heard Dr. Smith say they were the first veterinary clinic in the United States way up here in the northwoods of Wisconsin to offer free spaying and neutering for pet owners, in order to help out with pet overpopulation. That philosophy of good pet care from the very beginning has been built into the company.

Magee: That expertise side of things is our differentiation. We have a site called Peteducation.com and it is basically commercial-free. There are certainly references to products in there, and it is not that we will not add some more over time, but we try to keep that relatively commercial-free so people and educational institutions can go to the site for articles about how to care for their pets. Those are written by either Dr. Smith or Dr. Foster or by two other veterinary people are on the staff. Being pet care experts is our core niche in equipping pet owners to take good care of their animals.

PeC: How many products does Foster & Smith offer?

Magee: We have about 15,000-16,000 different products.

PeC: Do you manufacture products or acquire products from other companies and resell?

Magee: It is a blend of multiple things. There are certainly products that we develop on our own that would not necessarily be new to the pet care world — dog food, for example. Our vets decided they wanted to make the best-quality dog food they could make and got together with nutritionists and created our own private-label dog food brand.

We do not personally manufacture things, but our private-label products are made for us by specifically chosen manufacturers we have confidence and trust in. We also go to the normal kinds of tradeshows where there are pet product manufacturers displaying their products. We send our buyers in there to look in our variety of pet categories for specific products that we think would be safe and healthy, and fit within our product line.

We do have a warehouse here in Rhinelander along with our distribution center. In some cases, we drop ship some items that we do not warehouse here.

PeC: Do you use a custom shopping cart or an out-of-the-box solution?

Magee: We built that in-house.

PeC: Do you face an issue with shopping cart abandonment?

Magee: Yeah. I think everyone has that. There is a certain sort of built-in abandonment rate that is not unusual and not unhealthy. It really depends industry to industry in terms of what percentage is healthy or not, of what it is going to be for each individual company.

That relates in part to the buying cycle. If a person is buying a major appliance and doing that online, that buying cycle, the decision cycle, is going to be longer; that shopping cart may get abandoned and parked for a long, long time or swapped out multiple times. If you are buying dog biscuits, it is such a different thing, so you probably are going to have a different kind of abandonment rate.

There is a bit of a trade-off in that. You kind of have to know what your rate of abandonment is or what is normal for you. We try to work on that, but at the same time, if you walk through a retail store and you pick up a shirt and hold it up and try it on and put it back on the rack, you have abandoned that thing that you picked up and held. On the Internet, picking up and holding something is putting it in your shopping cart. I do not think that the [business] person should be overly alarmed about that abandonment rate unless it gets too high and you can see what is going on there.

PeC: What type of web analytic package do you use?

Magee: We use Coremetrics for that. It is a very good tool. There are some other good tools out there. WebSideStory, WebTrends or Omniture are also good tools for the same kind of things.

PeC: Are there kinds of sentinel analytics reports to which you turn as key indicators, or things you find to be of more value in an analytic package?

Magee: There really are. The analytics packages that are out there now are so thorough. It was just very helpful as the old saying goes, “It’s like drinking from a fire hose” at times. There is just too much information.

You really do need to filter down to the key things that you need to look at, as called in many industries, key performance indicators. Some of them are just common sense. Not to oversimplify it, but as you have mentioned, we sell over $100 million online, probably $125 million this year I suppose and, yet, what I want to look at in the morning is how many sales did pay-per-click have? How many sales did our email program have? How many sales that our shopping portals have? How many sales that our trackable television commercials have?

So, I go right to “What did we sell?” Once I determine that a sales line is not good, then I am going to back and look and see, how many visitors did we have? Is something going bad with our conversion rate? If the conversion rates are normal or maybe an email did not go out at some point, then I will go and find out what those kind of issues are.

But the first thing I want to look at is, what are the sales numbers. That is the bottom line. If there might be an issue, I can go look at abandonment rate and so on, but that is really not the core issue.

Then I might want to do a comparison of last year. Analytics is the very first place to start. Do not get too enamored with all the bells and whistles at first, because there are so many bunny trails to go down, you can get lost. I think it is only after you have just looked at the common-sense business metrics that anyone would look at in any business that you go into some of the other things.

PeC: Are your SEO efforts handled internally or does the firm help you with that?

Magee: It is a key priority. We work at that all the time, really every day. We do have a company that we work with that provides advice and reports to us. In our case, I have also done a lot of personal research on how to do SEO better. There is an amazing amount of information out there on the Internet so you do not have to be a pro at it to get started and to make some excellent gains in that area.

PeC: Is there a specific keyword strategy you use for your pay-per-click advertising?

Magee: You need to drill down to a very specific level. It is a doable thing if you just use common sense. We manage thousands and thousands of keywords on multiple search engines. If you begin to think logically like a searcher instead of like a marketer, it helps you determine what kind of keywords to bid on. How would a searcher actually spell something? So, you build out your keyword list to a great degree based on the kinds of things that people will type in to search for products.

PeC: What should an up-and-coming online entrepreneur know about building a successful business?

Magee: One is, know you are and stay with who you are. You can build a customer base from that. Know what your core values are, know what you are trying to accomplish and stay with that. Figure out how to differentiate yourself from others in a very healthy, ethical and customer-centric way.

Secondly, related to that customer-centric portion is, really look out for your customer because at the end of the day, making sales will never make a successful company. You have to make customers and today, with the Internet, loyalty lasts about as long as the next click on a website. It does not mean that people are bad at all. It means they have more options than they used to have and that is good. That is good for the customer. It makes all of us better to have to work hard at doing what we do best.

Also, you can do more than you think you can do, even if there are these great big players out there. You do not have to intimidated. In the retail world, we are well-known in our niche, but this is basically a homegrown company. Most of the talent that is here came right out of Rhinelander, Wis.

So, you can be successful if you work at it and do it right for your customer.

What is a high performer?

Five sites have built dynamic businesses in unique niches

Some people may define that purely based on gross revenue numbers or by having a 30 percent pretax profit margin. Others might say a high performer is a company that dominates its market sector or boasts a double-digit conversion rate.

We are all familiar with the success of Google, Yahoo!, eBay, Amazon and other sentinels of online commerce. However, rather than focus on the handful of ebusinesses you might read about in The Wall Street Journal on a regular basis, we felt it was important to showcase online businesses we see doing a terrific job in highly-targeted niche markets.

The five businesses we are showcasing will not be considered among the 10 highest-grossing revenue sites on the web. However, each of these has built a successful business. What one thing do they each have in common? The owners built their businesses around a passion. As you’ll see, those passions run the spectrum of diversity — they include bow ties, appliance parts, horse tack, organizational products and pet supplies.

Each of these sites generates millions of dollars — from $2 million to $125 million in gross revenues — and has stood the test of time by operating for the better part of a decade.

These high-performing sites have proven that online success isn’t reserved for businesses in Silicon Valley. From small-town Vermont to Southern California to rural Massachusetts to the woodlands of Northern Wisconsin, our five high performers show that success has no boundaries.

If there are central themes to each message from the featured businesses, they are: Success generally comes to people who love the products they sell; be the expert in your niche and, above all, take customer service very seriously.

The five sites we will showcase include: Drsfosterandsmith.com, Organize.com, Appliancepartspros.com, Doversaddlery.com and Beautiesltd.com.