“E-commerce is the dumbest business model in the world, never start an online store!” These are the words of Coolblue CEO Pieter Zwart at the Vakdagen Tradefair in Utrecht in January 2018. A remarkable statement for someone who made almost nine million euros in profit in 2016 with a strategy that mainly focuses on e-commerce. How did Coolblue make the “dumbest business model” a winning model?
Almost no one succeeds in making money with e-commerce knows Zwart. According to him, this is because all online stores are essentially the same. “It's always something with a photo, a button and a price.” The pictures are the same everywhere, the buttons have to work, so price is the only competitive tool left, which inevitably creates a race at the bottom. Nevertheless, twelve hundred people order a washing machine from Coolblue every day, making them the online market leader in that product group. Is that because of the photo, the button or the price? “None of them,” says Zwart. “It's about thinking further.”
That starts with asking what a customer wants when buying a washing machine, for example. In any case, it's not a physical store, says Zwart. “Consumers know what a washing machine looks like: square, white and ugly. It's not like you're going to try it out in the store. I'm amazed that it still exists, white goods retail. But what customers want with such products is control over delivery. For example, they need it to be free, and they need to know that it comes on the fourth floor. Even with Coolblue, that realization only came later. It wasn't until two years ago that we found out that this was the essence.”
From day one, Coolblue has formulated two goals that are still firm: making money and satisfying customers. How does that combination fit into a world of “photo, price, button”? It seems like an impossible puzzle to solve, Zwart acknowledges. “You don't solve this by looking for the answer, but by looking for the right question.”
According to him, that question is: what is the value of a satisfied customer? Quite high, because a happy customer comes back and recommends you to others, he says. It's no coincidence that Coolblue is all about the net promoter score (NPS). Last year, it was 67, the highest score in the Netherlands, according to Zwart. This is because customers rate their experience with a nine or a 10, because only those customers come back and recommend the webshop to others. That's why the NPS goes up one point with a 9 or 10, stays the same with a 7 or 8, and falls one point with a lower rating. “Having a positive NPS isn't enough,” says Zwart. “What's important is that it's higher than your competitor's. Only then can you beat them in growth and profit.”
A positive value of 67, a growth of 10% compared to 2016, indicates that there were many nines and tens. The average customer rating of no less than 9.6 confirms this. How do you achieve such a high rating? “That's about what the customer expects,” explains Zwart.
If you meet those expectations, you score a seven or eight. If you go one step further, you can score a nine or ten. “Just amazed”, Zwart calls this. “We convulsively cram 14 jokes into the delivery box in the hope someone sees them,” he cites as an example. Another example of going the extra mile is free delivery on Sunday. This may seem like a marketing gimmick, but he doesn't think so. “Do you know how often it is Sunday? 14.3% of your life every week.”
Another example is the general terms and conditions on the website, which look slightly different at Coolblue than at other retailers. It has phrases like “Customer. King.”, “Service, our obsession.” and “We're not making a fuss.”
“People who read our terms and conditions should laugh at least five times,” says Zwart. He finds that very important. “Because only disgruntled people will read it.”
Coolblue acts like a travel agency for customers, explains Zwart. This means, among other things, that physical stores are as important to TVs as they are pointless to washing machines. “The price difference between the cheapest 55-inch TV and the most expensive is 3,000 euros,” says Zwart. “But what's the difference? Figuring all that out is not feasible for individual consumers.”
That is why Coolblue's already nine physical stores are not full of washing machines, but with TVs. The retailer now also has two extra large XXL stores, which are very successful. “There are various reasons why these stores make consumers happy,” says the CEO. Expert advice on an expensive product like a TV is one of them.
“They've also often made a choice online, but want some extra confirmation before acting on it.” The most important advantage, for both Coolblue and its customers, is the effect on the return flow. “We sell technically complex products, which inherently means that there are sometimes problems with these products. That's what makes it great to be able to say to a customer: drop by the store with your product!”
Although Coolblue is now convinced of the importance of physical stores for some product groups, Zwart is not so positive about the future of the shopping street. “Many product groups are switching online with up to fifty, sixty or seventy percent,” he says. According to him, the number of stores will continue to decline sharply and chains will disappear. Especially the players who aim for a large number of locations and have the ambition to grow from 70 to 100, for example. “Trust me, they will die.” He previously said that he wants to aim for no more than about 25 branches. “For some models, a combination of online and offline is relevant,” concludes Zwart.
