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e-Retail Case Study : RedEnvelope

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By Joanne Neidorf, Jun 8, 2001. Article courtesy Addison Wesley.

(In this excerpt from the book e-Merchant: Retail Strategies for e-Commerce, (Addison-Wesley, 2001, 0-2017-2169-4), authors Joanne Neidorf and Robin Neidorf examine how e-retailer Red Envelope has modified, adapted, and applied retail knowledge within a Web environment.) ________________________________________________________________________________

It began as an emergency service for those who were thoughtful and yet pressed for time—911gifts.com, where gifts ordered by midnight Eastern Standard Time would be delivered the following morning. Although RedEnvelope still has a 911gifts section in its Web-based retail store, the new incarnation of the company aims for total recognition as a unique gift source known for quality, style, and personality.

911gifts.com began in 1997 as the brainchild of Scott Galloway and R. Ian Chaplin. Galloway and Chaplin were co-founders of Prophet Brand Strategy, a consulting firm assisting companies with their electronic commerce and brand strategy efforts.

In the fall of 1999, the company evolved into RedEnvelope Gifts Online. The name refers to an Asian custom of presenting special gifts in a simple red envelope. The "urgency" feature of the assortment had been supplanted by an emphasis on meaningful gift-giving, simplified.

Since the re-launch, several successful rounds of venture capital financing have enabled the company's dramatic growth.

RedEnvelope's management team has years of experience working for traditional and catalog retailers like Williams-Sonoma and its brands (Pottery Barn, Hold Everything, and others). With RedEnvelope, they have adapted traditional retail concepts to the Web environment. At the same time, they have embraced advanced technologies that enhance the consumer's shopping experience and added electronic touches such as e-mail gift reminders, which function elegantly in the Web environment.

1 Strategy

As 911gifts.com, the company targeted upscale customers with more money than time to do careful shopping. Chief Executive Officer Martin McClanan notes that the company's understanding of its market has not shifted in the evolution to RedEnvelope. "We've found that the 'last-minute' aspects of our positioning were not necessarily the most important value proposition to the customer," he comments. "We found that our customers are more interested in a one-stop shopping experience where they can choose from a variety of high-quality gifts at approachable price-points."

What is an "approachable price-point"? Most gifts in RedEnvelope's assortment range in price from $30 to $300, indicating quality but not exorbitance.

McClanan describes the RedEnvelope brand as characterized by four key features:

• Stylish products—Products that are often unique and exclusive, since RedEnvelope works with suppliers and artisans to create gift items; customers know they are getting something special.

• Approachable price points—The range invites shoppers seeking gifts for all occasions, from "just because" or thank-you gifts to special occasion like weddings and anniversaries.

• Limited assortment—Saves the customer time by making it easier and more convenient to shop because there are fewer items to sort through.

• Superlative customer service—Live online customer service, personalized gift cards, on-time delivery, and the ability to send multiple items to multiple addresses with a single order form assure customers that they will be personally assisted throughout the transaction.

2 Assortment Planning

Merchant teams are responsible for developing and selecting the assortment for RedEnvelope. The assortment is organized around the primary shopping categories on the site: Home Decor; Office and Travel; Backyard; Flowers and...
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