Lessons From Luxury

Struggling dot-coms can learn from sites selling to the rich.

The rich are different. So are Web sites that sell to the rich. Just ask Bob Paquin, who, as chief operating officer of Blue Nile Inc., last year sold $50 million in diamonds online by figuring out how to build a site that appeals to the well-to-do.

What does Paquin know about selling to the rich that the rest of us dont? In the real world, its easy to figure out what the wealthy want: top-notch goods and services provided in a "high-touch," face-to-face environment.

Online, not surprisingly, the ideas similar. Whether youre pitching luxury cars, wealth management services, diamonds or gifts, experts say, to attract and satisfy the wealthy, you need to design your site in such a way that you quickly establish yourself as an online expert, make users feel as if theyre part of an exclusive club, avoid obnoxious cross-selling techniques, be willing to provide services through a number of channels—not just online—and always listen and react to customer preferences. It doesnt cost a lot more, experts say, but it can take a bit longer to tailor a luxury site.

While some sites, such as eVineyard Inc.s recently acquired Wine.com, have struggled to find the formula, other sites, such as Blue Niles, RedEnvelope Inc.s and Mercedes-Benz USAs, are establishing themselves as successful sites for the wealthy.

And, as it turns out, in the current dot-com downturn, even e-commerce sites whose customers budgets run more to beer than champagne will do well to start thinking and behaving like luxury sites, experts say. Thats because even some of the more successful mass-market e-commerce sites are quickly discovering its not enough to compete largely on price.

Even Amazon.com Inc. CEO Jeff Bezos, for example, recently told financial analysts his site needs to focus more on creating a welcoming presence for online visitors by spending more time on customer services. And thats not unlike what luxury Web sites have been doing all along.

The trick, said Gartner Inc. analyst Geri Spieler, in Stamford, Conn., is to think like a service site, not just a selling site.

"Theres a difference between high-end luxury sites and Amazons," Spieler said. "Amazon is a site for everyman. A high-end site is more of a service environment. Theyre going to take me by the hand and make me feel very exclusive and remind me that not everybody belongs to this club. Thats what youre aiming for."

Ask the experts

Thats certainly what seat- tle-based Blue Nile was aiming for. The company started in May 1999 with a simple premise: Men buy the diamonds, but men—or at least some men—are uncomfortable in a showroom, particularly when they dont know anything about the stones.

So the companys founders figured the Web could bring a virtually unlimited number of diamonds to buyers, who could then get educated and choose in the privacy of their own homes.

How do you persuade someone to buy diamonds online? The answer, Paquin said, is by establishing yourself, within seconds of a customer landing on the home page, as an expert in the field. And that, he said, is the key to selling absolutely anything on the Web, not just luxury goods.

"You have seconds when a customer lands on your site to convince them or send them away. You have to present a clear message of who you are and what your value proposition is," he said.

Blue Nile reinforces the idea that its an expert diamond seller by educating buyers. Everything from the most basic facts to a detailed gemologist- level look at the stones is available to users, who can continue to click until theyve had enough.

Blue Nile makes it easy for visitors to navigate this vast treasure chest of information. The site uses prominent images of diamonds to avoid cluttering the page with distractions.

Continuing that theme, the company established other hard and fast rules. Purchases should be no more than three clicks away, while specs should be a single click away. And all the information on the site has to be in context—a buyer looking at loose stones should be able to get information about settings a click away. "A confused user wont buy. Hell leave, so it has to be clear and easy at all times," Paquin said.

To ensure that the site stays simple and easy for busy users to navigate, Paquin and his team engage in continual fine-tuning. They study the sites logs to learn where people bail out and where theyve been. They make sure the home page is freshened often and updated with the right holiday promotions. And they regularly bring in focus groups to get feedback on the site and on planned modifications. "We try hard to let the consumers tell us what we need to do," Paquin said.

One thing theyve learned: The wealthy dont like pointless cross-selling promotions getting in the way of what theyre trying to do online. Paquin guards against that, something that even sites targeting nonaffluent shoppers could learn from.

"We very much did not want to set ourselves up like an Amazon, which is sort of like a department store. If someone wants to look at diamonds on our site, thats all hell see. He wont be bombarded with information about pearls," he said.

Apparently, its working. "They are clearly selling diamonds, and theyre using action verbs to do so, like buy and shop," said Steve Telleen, an analyst with Giga Information Group Inc., in Santa Clara, Calif. "Blue Nile doesnt water down its message, which is very effective. This is a very simple site, without a lot of extras, and it works."

Smooth ride for the rich

Another company that is connecting online with the well-off by establishing expertise and designing around their needs is Mercedes-Benz USA. According to Astrid Fontaine, the Montvale, N.J., companys general manager of e-business, 65 percent of last years Mercedes buyers in the United States went to the mbusa.com site to do research before purchasing.

Besides giving visitors popular but standard features such as a vehicle configurator and a trip planner, the Mercedes site also goes out of its way to be an authoritative source on luxury automobiles. Visitors can get not only specs on Mercedes cars but also comparisons with other luxury vehicles, thanks to an extensive library of third-party information from Kelley Blue Book, Road & Track magazine and others. This is a strategy, Fontaine said, that all sites can use to give themselves credibility and to give buyers convenience.

Another key, she said, is listening to online customers and giving them what they want. For example, her team got a number of requests from users for brochures they could print out, so the site now lets them do that. And buyers wanted Mercedes-logoed paraphernalia—hats, sweatshirts, key chains—so those are for sale on the site now, Fontaine said. In fact, she said, business is brisk at the personal accessories area.

And mores coming. This summer, Mercedes plans to give its high-end customers the feeling that theyre part of an exclusive online club by beefing up its owner-only area, creating a password-protected place where users can get access to Mercedes credit card information and a cars service history. Owners can sign up for e-mail reminders about service. For example, they can be notified online about the days and times service appointments can be scheduled. The bottom line: Mercedes, Fontaine said, is using the Web to enhance what is already a close relationship with owners, maintained up until now by telephone and mailings. "The Web is just another way for us to stay in touch," she said.

Keeping in touch with high-end customers—or any online customers—is key, analysts agree, whether its through live chat service, regular e-mail or even snail mail. Combining multiple communication channels has been the strategy at RedEnvelope.com, an upscale gift site that, three years after its launch, is now expanding its business to include catalogs.

Now the site and the catalog—and brand advertising—all work together to attract and serve high-end customers, said Martin McClanan, CEO of the San Francisco-based operation.

The company has 400,000 customers, and McClanan said its on track to be profitable at the end of the year, although he wouldnt disclose revenues.

Without an established brick-and-mortar presence, he said, the company has had to work hard to create a brand and a reason for well-off customers to shop there.

There are four keys, he said.

The first is to simply make sure the site can do what it promises. In RedEnvelopes case, all of the merchandise it sells—other than perishable items—is stored in a warehouse and is available to be shipped the day its ordered.

Next, customers are given three ways to talk to the company: phone, live chat or e-mail. Up to 30 percent of customers choose live chat, with the remainder split pretty evenly between e-mail and the phone.

Then the company "reinvented" the sites navigation, choosing to focus it on gift-giving events rather than on specific products. Categories include occasion (Mothers Day, Valentines Day), recipient (for him, for her) and lifestyle (the romantic, the spa seeker). Finally, McClanan said RedEnvelope decided to invest in quality content. The company pays particular attention to making sure the photos it uses are high resolution.

"Thats your store, your merchandise. You have to take time with it, just like you would if you were working on your store windows," McClanan said.

Overall, however, its multichannel approach has been the most important element of RedEnvelopes strategy, he said. "If you were completely tied to online, youre in a pretty horrible environment. Being strictly online is not a great way to sell an upscale brand."

Of course, not all luxury sites are doing everything right. Gigas Telleen said even successful luxury sites such as Mercedes have a tendency to rely too much on flashy technology and a big brand name to attract users.

"People who use luxury sites must not have visual impairments, since few of the sites are equipped for text or audio," Telleen said. "They must have fast modems, since the sites tend to be loaded with extra gadgets and graphics. And they must have lots of time on their hands because most of these have superfluous default intro screens."

While there is much that mass-market e-commerce sites can learn from luxury sites, some of the issues facing e-commerce businesses targeting the wealthy are unique. For one thing, experts say, while its possible to use the Web to build closer relationships with existing well-off customers, it can be hard to use it to attract new ones.

E-business officials at J.P. Morgan Chase & Co. learned that the hard way. The well-known private banking company that specializes in handling very wealthy clients was recently forced to give up on its online customer acquisition push, though its Web site, jpmorgan.com, continues.

When Morgan launched its online effort three years ago, said CEO Glenn Smith, of New York-based Morgan Online, the premise was solid—the Web was hot, and a Web presence was a necessity. And part of the companys Web effort—giving clients access to many of the same Web tools the Morgan investment team uses—was very popular, so much so that some thought the company might be giving away the store.

But acquiring new clients online proved difficult. Private banking is a high-touch business, Smith said, and requires loads of hand-holding and time spent interacting. "People want to speak with a real human being and deal with someone directly," he said. In other words, the company had trouble signing up new customers online.

So when J.P. Morgan merged with Chase Manhattan Bank at the end of last year and inherited a large customer acquisition team, Smith had to make the tough decision to close that part of his online operation, laying off about 100 people earlier this year.

Smith doesnt look at this as a failure but rather as a fine-tuning of the companys original strategy of catering to high-net-worth individuals. The companys Web site, complete with tools to educate clients, is continually evolving, he said. "But this is a high-touch, high-feel business. Its hard to do that on the Web," he said.

Besides the difficulty of signing up new well-heeled customers online, luxury sites also face a challenge getting wealthy clients to execute transactions online. Some wealthy individuals, experts say, fear security or privacy lapses. As a result, some luxury sites have basically given up on setting themselves apart as transaction-based e-commerce sites and are essentially being designed as high-quality brochureware sites.

"The Net as a sales channel is getting to be somewhat commoditizing," said Andrew Bartels, an analyst at Giga Information Group Inc., in Cambridge, Mass. "Service is a personal thing ... so creating a site thats really valuable is hard to do because youre up against the fact that people simply tend to view your site the same as everyone elses." So, Bartels said, sometimes its best to not even try to offer transactions online and simply stick to what you do best: give targeted information to your high-end clients.

A case in point is Rolls Royce-Bentley. The English-based luxury car company sold only 585 high-end Bentley cars in the United States last year. Bentleys typical buyer is a 45- to 55-year-old male worth between $18 million and $40 million who already owns six or seven cars, Bentley research shows.

Even with a few more dot-com millionaires springing for new Bentleys, the bulk of the companys clientele is still not likely to even think about buying a car online, said John Crawford, a director with the companys North American division, based in Auburn Hills, Mich. So, although the site, rolls-royceandbentley.co.uk, attracts a fair amount of tire-kicking visitors, its designed as a static destination. No flash. Not even much color. And its never likely to replace the car companys huge customer relationship division.

"We dont have an [online] concierge service," Crawford said. "Our buyers have staff to do that sort of thing."

But not all luxury sites are targeted at the extreme high end of the luxury market. For most luxury sites, such as Blue Nile, getting customers to actually buy things online is a real possibility. The key to attracting a high-end clientele is simply being able to think through all the contingencies that customers might face.

Blue Niles typical customer—an about-to-be-engaged man—waits until the last minute to buy a diamond online, Paquin said, then needs it Friday afternoon for presentation that evening at dinner. Thats a delivery date youd better not miss, he said. And what if she says no? Thats where Blue Niles customer service kicks in. "He can return it, of course. But, mostly, we get a lot of exchanges."

Clearly, although the rich may be different from the rest of us, occasionally they make mistakes, just like everyone else.