"E-commerce is the dumbest business model in the world, never start a webshop!" These are the words of Coolblue CEO Pieter Zwart during the Vakdagen Tradefair in Utrecht in January 2018. A remarkable statement for someone who, with a strategy primarily focused on e-commerce, made nearly nine million euros in profit in 2016. How did Coolblue turn the "dumbest business model" into a winning one?
Hardly anyone succeeds in making money from e-commerce knows Black. According to him, this is because all Web stores are essentially the same. "It's always something with a picture, a button and a price," he says. The pictures are the same everywhere, the buttons have to work, so the price is the only remaining means of competition, which inevitably creates a race at the bottom. Yet 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 picture, the button or the price? "None of them," says Zwart. "It's about thinking beyond."
That starts with asking what a customer wants when buying, say, a washing machine. In any case, a physical store is not it, Black argues. "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 surprised it still exists, white goods retail. But what customers want with such products is control over delivery. They need it to be free, for example, and they need to know that it will be delivered to the fourth floor. Even at Coolblue, that realization came later. It wasn't until two years ago that we figured out that this was the bottom line."
From day one, Coolblue set two goals that remain steadfast: make money and satisfy customers. How does that combination fit into a world of "picture, price, button"? It seems like an impossible puzzle to solve, Black acknowledges. "You solve this not by looking for the answer, but by looking for the right question."
That question, he says, is: what is the value of a satisfied customer? Pretty high, because a satisfied customer will come back and recommend you to others, he says. Not for nothing is Coolblue 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. Therefore, the NPS goes up one point with a 9 or 10, stays the same with a 7 or 8 and drops one point with a lower rating. "Having a positive NPS is not enough," says Zwart. "What's important is that it's higher than your competitor's. Only then will you beat them in growth and profits."
A positive rating of 67, a 10% growth over 2016, indicates that there were many nines and tens. The average customer rating of a whopping 9.6 confirms that. 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 take it a step further, you can score a nine or 10. "Just surprise," Black calls this. "We frenetically cram 14 jokes into the delivery box hoping someone will see them," he cites as an example. Another example of going the extra mile is free Sunday delivery. This may seem like a marketing gimmick, but according to him, it is not. "Do you know how often it's Sunday? Every week 14.3% of your life."
Another example is the terms and conditions on the Web site, which look slightly different at Coolblue than at other retailers. It has phrases like "Customer. King.", "Service, our obsession." and "We make no fuss.".
"People who read our terms and conditions have to laugh at least five times," Black says. He considers that very important. "Because only disgruntled people will read them."
Coolblue behaves like a travel agency for customers, Zwart explains. Among other things, this means that physical stores are as important for TVs as pointless for washing machines. "The price difference between the cheapest 55-inch TV and the most expensive one is three thousand euros," says Zwart. "But what is the difference? Figuring all that out is not feasible for individual consumers."
That is why Coolblue's already nine physical stores are not filled with washing machines, but with TVs. The retailer now also has two extra-large XXL stores, which are very successful. "There are several reasons why these stores make consumers happy," states the CEO. Expert advice on an expensive product like a TV is one of them.
"They have also often already made a choice online, but want some additional confirmation before acting on it." The main benefit, for both Coolblue and its customers, is the effect on the return flow. "We sell technically complex products, which inherently means that sometimes there are problems with them. That makes it great to be able to say to a customer: come 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 high street. "Many product groups are switching by as much as fifty, sixty or seventy percent to online," 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 stores and have the ambition to grow from 70 to 100, for example. "Believe me, they will perish." He said earlier that he wants to aim for no more than about 25 branches. "For some models, a combination of online and offline is relevant," Black concluded.
