Why tackle cyberspace alone? Careful selection of Internet partnerships can boost your online prospecting and sales

By Reported Donna Loyle

Putting aside for a moment the criticisms about its overall business model, Amazon.com offers numerous lessons for Web retailers—namely, the inherent beauty of Internet partnerships.

Indeed, Amazon set the standard for this mainstay in the e-commerce world, and numerous catalogers have adopted these principles to great success.

In fact, 10 percent of all Internet sales and 3 to 5 percent of all online catalog Web sales come through affiliate sites—and these numbers are rising rapidly, noted two consultants at the recent Direct Marketing Association Annual conference in Chicago. In their seminar entitled “Internet Partnerships: Understanding the Key to Catalog Growth,” John Deneen, president of SiteForm, and Mark Swedlund, partner of W.A. Dean and Associates, offered case studies and effective strategies for forging profitable partnerships.

Affiliate Programs

Affiliate deals are the simplest forms of Internet partnerships, says John Deneen. Partner companies simply put one another’s links on their Web sites, and offer commissions to one another—usually 5 to 15 percent—if customers who come through those links buy.

For example, Amazon offers other Web retailers a 5-percent commission on a sale if the customer came to the Amazon home page from another site. But if the affiliate site linked directly to one particular book on Amazon’s site and the customer buys that book, Amazon shells out a 15-percent commission, says Deneen.

Another example: Bedding and home furnishings cataloger Domestications, a Hanover title, offers on its site a link to ArtSelect.com, which sells custom-framed prints and other wall art. Shoppers who want to buy wall art to match their new bedspreads simply click on the ArtSelect link, which takes them to a page that’s still under Domestications’ banner, but is actually on ArtSelect’s Web site. Domestications offers affiliates an 8-percent commission.

“Simple affiliate programs such as these are the easiest to set up and maintain,” Swedlund says.

Sponsorships

A second and equally viable partnership plan is for catalogers to sponsor appropriate Web content sites. For example, eNature.com, an environmental content site, offers links to catalogers such as Harry & David, REI and the National Wildlife Federation. In this way, eNature offers environment-related products on its site, without actually establishing a catalog division. And its catalog partners gain new prospects from among eNature’s visitors.

“Early indications show that online customers don’t consider this type of marketing intrusive like they do with pop-up ads,” says Deneen.

What’s more, this strategy is not limited to consumer catalogers. Officials at Moore Medical Supplies, a business-to-business cataloger, set their sights on smaller-sized medical trade associations with Web sites.

So far, more than 20 such groups have signed partnership agreements with Moore Medical, including the National Association of Emergency Medical Technicians (NAEMT). Site visitors to www.naemt.org, which is primarily an information resource, can click on a shopping link that connects them to an offer page under the banner of NAEMT/Moore Medical Supply Shop. NAEMT members get $5 off a first order of $50 or more, and orders of more than $100 are given free shipping and handling. When customers click on the “Start Shopping” link, they’re redirected to the home page of Moore Medical Supplies.

“This shows that you don’t have to partner with big Web companies or portals,” says Deneen. “For some catalogers, like Moore Medical, it makes more sense to go after the smaller organizations and sponsor their content-related Web sites.”

Online Malls

Some Web sites act as online shopping malls, offering goods from various merchants. CatalogCity, which boasts 4 million registered customers, is one such platform. It aggregates more than 350,000 products from more than 600 vendors, including catalogers such as TravelSmith, Blair, Bombay Co., Chef’s Catalog, Hammacher Schlemmer and J. Crew.

A word of caution: Products from these catalogs are shown side-by-side on the CatalogCity site. For example, a recent click on “home furnishings” pulls up products from Gift Warehouse, Bits and Pieces, Barrons, and others.

CatalogCity offers a universal shopping cart and one shipping and handling charge per order, although products are shipped from the individual catalogers’ warehouses.

The company charges catalogers annual hosting fees, ranging from $2,500 up to a whopping $500,000. Meanwhile, the commission fees work in reverse relation to the hosting fees. For example, for the $500,000 hosting fee, the cataloger/client is charged no commission on sales. CatalogCity guarantees merchants that for every $1 they spend in hosting fees, they’ll get $5 worth of orders per year. Therefore, for that $500,000 annual hosting fee, the cataloger is guaranteed sales of $2.5 million per year.

For those selecting the hosting fee of only $2,500, however, CatalogCity’s commission rate is a hefty 40 percent, and guarantees annual sales of only $12,500. (For the complete rate chart, visit the home page for Catalog City’s parent company, www.altura.com; click on “Become a Merchant.”)

A more recent addition to the online mall category is none other than The Sharper Image. The cataloger’s Galleria program, launched in July, enables non-competing catalogers to place links on Sharper Image’s site. Participating merchants include Spiegel, Barnes & Noble, Sephora and Dell.

To mitigate the chance that Sharper Image customers will buy only from an affiliate, Sharper Image set up a loyalty rewards program that includes purchases from its Galleria partners. Here’s how it works: Purchases from The Sharper Image earn customers 10 percent back in Sharper Image dollars to be used for future purchases from any of its channels, including online, in-store, catalog or direct response. Purchases from selected Sharper Image Galleria online stores earn customers 5 percent back in Sharper Image dollars.

“This is a bold move on Sharper Image’s part,” notes Swedlund. “They’re saying, in essence, ‘We’ll reward you, even if you don’t buy from us.’ This is truly a creative co-marketing solution.”

What You Need to Know

While you can run such Internet partnership programs completely in-house, Deneen and Swedlund recommend outsourcing. “If you do it yourself, you have to find, purchase and implement software to track affiliate sales; hire specialized personnel to recruit other sites; and hire technical troubleshooters to handle the inevitable problems,” says Swedlund. “It most cases, it’s just better to outsource.”

The following firms specialize in this service: Be Free, (befree.com); Performics, (performics.com); Commission Junction, (commission junction.com); and Linkshare, (linkshare.com). These companies charge start-up fees ranging from about $1,300 up to $10,000, says Deneen. In addition, they charge commissions varying from 2 percent of gross sales to 25 percent of the commissions paid to affiliates (monthly minimums often apply). And some require exclusivity; that is, you can’t use another outsourced provider.

Deneen’s advice? “Compare and negotiate.” Swedlund agrees, adding that due diligence can pay off. “Expect that 98 percent of your affiliate site sales will come from just 2 percent of your partners. In other words, you’ll have to kiss a lot of frogs to find your prince of a partner.”

For More Info:

John Deneen can be reached at (773) 334-8030, or by e-mail: john@siteform.com

Mark Swedlund can be reached at (707) 823-8836, or by e-mail: markswed@aol.com