Dabs.com refines its web store

This case study highlights the importance placed on web-site design as part of the customer experience by dabs.com. It shows the need to upgrade the infrastruc­ture regularly to deliver a satisfactory experience which is competitive with other e-retailers. dabs.com is one of the

UK’s leading internet retailers of IT and technology prod­ucts from manufacturers such as Sony, Hewlett-Packard, Toshiba and Microsoft. The case also highlights some of the strategic issues with operating an e-business as it describes the growth of the company.

1. Company background and history

dabs.com was originally created by entrepreneur David Atherton in partnership with writer Bruce Smith (the name ‘Dabs’ comes from the combined initials of their two names). Their first venture, Dabs Press was a publisher of technology books. Although David and Bruce remain firm friends. Dabs had been 100% owned by David since 1990 but was purchased by telecoms company BT in April 2006 for an undisclosed sum. Dabs.com is a wholly owned subsidiary of BT, but the Dabs branding remains on its site. But BT has used the dabs web site design and catalogue system for its own BT Shop (www.shop.bt.com). Turnover for the 2006 financial year was £160 million (£15 million from else­where in Europe) with a gross profit of £24 million.

Dabs Direct was launched in 1990, as a mail order firm which mainly promoted itself through ads in home technology magazines such as Personal Computer World and Computer Shopper.

dabs.com was launched in 1999 at the height of the dot-com boom, but unlike many dot-com start-up businesses, dabs.com was based on an existing offline business.

In its first year, dabs.com was loss-making with £1.2 million lost in 2000-1, which was partly due to including free delivery as part of the proposition to acquire new customers.

In 2003, the company opened its first ‘bricks and mortar’ store at Liverpool John Lennon Airport and it has also opened an operation in France (www.dabs.fr). The French site remains, but the retail strategy has now ended since margins were too low, despite a positive effect in building awareness of the brand in retail locations.

2. Strategy

The importance that dabs.com owners place on customer experience and usability is suggested by their mission statement, which places customer experience at its core together with choice and price. dabs.com’s mission is:

to provide customers with a quick and easy way of buying the products they want, at the most competi­tive prices around, delivered directly to their door.

Growth has been conservatively managed, since as a privately held company dabs.com has to grow profitably rather than take on debts. dabs.com has reviewed the potential of other European countries for distribution and may select a country where broadband access is high, such as Sweden or the Netherlands. A country such as Italy, where consumers traditionally prefer face- to-face sales, would not be an early candidate to target for an opening. Dabs.com targets the B2B market as well as the consumer market, offering a different version of the site for business users and 60% of sales are from this source. In terms of products, dabs.com has focused on computers and related products, but is considering expanding into new categories or even ranges. Initially these will be related to what computer users need while they are working.

3. dabs.com in 2008

In 2005, dabs.com is a £200 million company with 235 staff, holding 15,000 lines for a customer base of almost 1.5 million and processing around 5,000 customer orders every day. dabs.com has 8m visits a month from around 750,000 unique users. Its catalogue contains 20,000 products with laptops, LCD monitors and external hard drives among the main sales lines.

NCC (2005) reports that dabs.com believes that what its customers require is a dynamic site that provides comprehensive information on its product ranges, delivery charges, returns policy, financing services and rewards scheme. It also provides dabs.tv, a video service that allows customers to see more complex products in greater detail.

Jonathan Wall, dabs.com’s marketing director, sees security as important as part of the customer experi­ence, and to protect the business, he says:

We were one of the first e-businesses to adopt Visa’s ‘Verified by Visa’ 3D secure payment authentication system and we’ve also implemented MasterCard’s SecureCode variant. We’ve always worked closely with both credit card companies and it’s a concern that dates back to our mail order side. The threat of being attacked and defrauded is always in the fore­front of our thoughts.

4. Delivery

To ensure delivery as promised, Jonathan Wall explains the importance dabs.com attach to IT. ‘We invest as much in our highly automated warehouse as we do in our marketing’, says Wall. ‘Our systems use a sophisti­cated combination of dynamic bins and unique product numbering. A lot of the management team come from technical backgrounds. Our back office system was written in OpenVMS by our IT director. Our sales processing system was written in-house.’

5. Staffing

According to NCC (2005), staff skills are viewed as important, from technology staff to product buyers. Wall says:

We pay a higher than average salary, and that means we get a higher level of staff. And we really see the effect of that in the way our buyers and merchan­disers approach the market.

dabs.com switched offline sales in September 2001, after online sales reached half of turnover. This enabled it to reduce costs. Although its consumer sales are online, dabs.com does retain a call centre for customer service and account management services for its busi­ness clients who spend £15,000 or more per year. Excellence in customer service is also seen as part of the customer experience and helps dabs.com reduce complaints to trading standards officers compared to some of its online rivals such as eBuyer.com.

Europe is the next challenge: the company launched dabs.fr in France in 2004. But all will depend on its ability to adapt quickly to any changes in customer behaviour.

dabs.com published these customer service statis­tics in March 2008 for the previous 28 days:

• Average wait time for chats: 10 seconds
• Average email response time: 5 hours (based on working hours).

6. The 2003 site update

In 2003, dabs.com achieved year-on-year profits rise from £2.5m to £5.1m and sales rose from £150m to £200m. It predicted the growth will continue, with sales reaching £350m in 2005. dabs has about one million unique visitors monthly and adds a further 30,000 new users every month. This success has been achieved in just 4 years from the launch of its first transactional site in 1999. The site reassures each visitor, by the scale of its success. On 5 December it read:

• 1,098,412 customers
• 37,093 orders in December
• 21,289 products available for sale.

dabs.com’s marketing director, Jonathan Wall, talking to IT Week (2003), explained how the initial growth occurred, and how future growth will be sustained: ‘We dominate the PC hobbyist/IT professional sector, but our business must evolve. We want to cast our net further so that we are appealing to people who are inter­ested in technology as a whole. New customers need a new approach. We have built a new environment and a new web site for this target audience.’

In mid-2003 dabs.com launched a site to help it achieve sales to the new audience. Research was used to help develop the new site. The usability of the existing web site was tested and the new concept was also shown to a focus group. After analysing the responses dabs.com created a pilot site, which the same focus group then approved. In total, the new site took 10 months to develop and was an investment of £750,000.

7. The 2005 site update

NCC (2005) says Wall makes the business case for the new site as follows:

Our new site will take us right up there to the top of the field, You have to try and stay ahead. We’ll have guided navigation, still quite rare on a UK site, which will help customers to find what they’re looking for more intuitively. Early e-commerce customers knew that they specifically wanted a Sony Vaio laptop, for example. New customers just know that they want a laptop that’s small and fast and costs less than £1,000. Guided navigation means they can search according to a product’s attributes rather than specific brands and models.

Since the average selling price of laptops is going down, slim margins are decreased further. Wall says: ‘Selling electronic equipment on the web has tradition­ally been passive but by redesigning our site we’ll be able to show customers what another extra £50 spent on a laptop will buy them.’

Although the previous site was updated only 2 years ago, he describes the need to keep ahead of competi­tors as ‘a cat and mouse thing’.

But new site advances must be combined with competitive prices, Wall says:

Online customers are price-loyal, not retailer-loyal. The customer is only as loyal as the cheapest price they can pay for a product. It means your competitors are only ever one click away. We have to do every­thing to keep our customers on our site. Getting them to pay that price to you, rather than your competitor, means that you’ll need to exploit the constantly- evolving benefits of digital technology to make their buying experience on your site as fluent and satisfac­tory as possible.

8. On-site search capabilities

Part of the new site is improved on-site search capabil­ities from Endeca, which powers the search of Wal-Mart and Circuit City sites in the US. Search is important to increasing conversion rates, and so increasing sales, since if a user is not presented with a relevant product when they search, they are likely to try another retailer.

The search capability should strike a balance between delivering too many results and too few. Channel Register (2005) reports that dabs.com hopes to increase conver­sion rate by up to 50% by updating the site’s search and navigation features. Current conversion rate is 3.5% and it is hoped this will be increased to nearer 5%.

Endeca’s new search allows users to select products by attributes including price, brand and even size and weight. This method of narrowing down the search should result in the customer being left to choose from a list of 10 or 20 products rather than hundreds.

Another aspect of the business case for the new site is to ensure the customer makes the right decision since product returns are costly for dabs.com and annoying for the customer.

Jonathan Wall explained: ‘When we launched the website in 1999 people knew what they wanted. Now we find a large tranche of customers might know the type of product they want to buy but not which model they want. The new site is about guiding them through the process.’

9. Accessibility

Since dabs.com has tech-savvy customers, it has to support them as they adopt new ways of browsing. Dabs.com found that by 1995 nearly a fifth of its users were using the Mozilla Firefox browser, so a further requirement for the new site was to make it accessible to users browsing with a range of browsers such as Firefox, Opera and Apple’s Safari.

10. Marketing communications

Marketing communications approaches used by dabs.com are summarized in Mini Case Study 9.3 ‘Electronic retailers cut back on their e-communications spend’. For customer acquisition, the main communi­cations tools that are used are:

• Search engine marketing (the main investment)
• Referrals from affiliates (this has been reduced)
• Online display advertising on third-party sites (limited)
• PR
• Sponsorship (shirt sponsorship for Premiership team Fulham).

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).