"Outpost said it plans to increase its gross margins by as much as 50%"
Cyberian Outpost warming up
E-commerce firm sees big margin improvement
By Darren Chervitz,
CBS MarketWatch
Last Update: 4:58 PM ET Feb 3, 1999
Today on CBS MarketWatchFed
SAN FRANCISCO (CBS.MW) -- As some online retailers try to attract
customers by selling computer products at or below cost, Cyberian
Outpost said it plans to increase its gross margins by as much as 50 percent.
The company, whose fourth quarter closes at the end of February, is targeting long-term gross margins of about 15 percent, up from the 10 percent reported in the third quarter, said Chief Financial Officer Katherine Vick.
Speaking at the NationsBanc Montgomery Securities high-tech conference in San Francisco, Vick said part of the margin increase should come as the company grows and enjoys a better bargaining position with suppliers, while the rest will come through advertising.
The CFO implied that the at-cost and below-cost initiatives being
launched by competitors like Onsale and Buy.com weren't sustainable, calling the strategy a "short-term issue we need to deal with."
Robert Simon, venture partner at Menlo Park, Calif.-based Sierra
Ventures, agreed with Vick's assessment and said the company appears to be well-positioned in a very competitive market. "They have the cash to weather any type of suicidal challenges that may be thrown their way."
Instead of using price to grab customers, according to Cyberian Outpost Chief Executive Darryl Peck, the company will use branding and customer service. The company's offbeat commercials, one of which showed a pack of hungry wolves attacking a high-school marching band, have already garnered plenty of publicity. Peck said traffic at the site surged as soon as the commercials ended when they aired during Sunday football
games.
The company, which gets all goods ordered before midnight to the
consumer the next day, has also been rated as the No. 1 online retailer for customer service by Bizrate.com, Peck said.
Peck said Cyberian Outpost launched late last year a next-generation Web site that will use one-to-one marketing technology from Broadvision to create "a unique retail experience" every time a customer visits the store. For instance, customers who spend a lot of time in the site's printer section but don't buy anything will see printer promotions on their next visit.
The new tools aren't yet being used on the company's 260,000 customers. "Some of this stuff is so powerful, it will take us weeks and months to really learn how to use this technology," Peck said. Darren Chervitz is a reporter for CBS MarketWatch. |
