With more consumers, competition and channels, e-commerce is only growing more complicated and overwhelming. Sometimes, all you want is a frank conversation with someone in a similar position to ask them for advice.
Welcome to that conversation.
Our ongoing blog series, Ask a Retailer, will seek to share insights from e-commerce retailers across various verticals.
This installment features Aaron Leon, CEO of LD Products, a successful retailer of inkjet cartridges and office supply products. Having founded the company and shepherded its growth for the past 15 years, Aaron brings a unique perspective to building and maintaining online sales for an expanding business.
Hi, Aaron. Thanks for joining us today. Before we dive into LD Products’ e-commerce strategies, tell us a little about yourself and the company.
Hello, thanks for having me. I founded LD Products while attending the University of Southern California in 1999. LD Products owns and operates a few different websites, with 4inkjets.com and LDProducts.com being the largest. We’re an online retailer of primarily aftermarket printer supplies. We have 165 employees in our Long Beach, California, headquarters and fulfillment center, and we process around 120,000 customer orders each month.
LD Products has experienced some significant growth and several iterations since its founding. Can you walk us through this process?
We had very humble beginnings back in 1999. But time has flown by, and we’ve consistently reinvested profits into the business. We’ve made several competitor acquisitions over the last six years, including a major one in 2008 that nearly doubled our volume. We’ve also embraced growth across all the major marketplaces, including Amazon, eBay, Rakuten.com Shopping and Newegg.
Earlier this year, we expanded our inventory to include office supplies, which brought our SKU count from around 9,000 to more than 50,000.
Since our inception, we’ve been a niche printer supply retailer, and the shift into full-line office supply has allowed us to increase our average order volume (AOV), as well as provide something to our business customers in between their usual ink and toner purchase cycle.
The process of building a successful business varies widely among different product verticals. How have you approached the process of customer acquisition? Do you focus on repeat customers?
We’ve been selling online for more than 15 years, so we have a sizable repeat business segment. That being said, customer acquisition is extremely important to us. The largest line item on our P&L — other than the cost of goods sold — is customer acquisition costs. If you aren’t investing in new customer acquisition, you’d better be getting ready to retire.
We spend heavily to acquire new customers online and also invest in keeping those customers happy and returning back to our sites to shop. We have our own call center that’s open seven days a week and is staffed by 65 happy, caring customer service reps. We also have lenient return policies that give the customer a full year. Basically, we do whatever it takes to keep our customers happy. We often don’t make any money on a new customer’s first order due to the acquisition costs, so we have to ensure our customers stay satisfied and are primed to return for additional orders. We sell consumables, so we know that if we treat customers right, they’ll keep coming back for more cartridges and office supplies.
What about marketplaces?
We started selling on the first marketplace, eBay, back in 1999. After a year or two, we decided to focus on selling direct through our own websites. In 2007, we circled the wagons and tried to figure out how we could be competitive on eBay again. We built a team that just focused on marketplaces sales. It’s been a great success and, over the years, we’ve added our largest marketplace channel (Amazon), as well as Rakuten.com Shopping and Newegg.
Do you devote more energy to one of these marketplaces over the others, or do you just distribute your inventory to as many as possible?
We’re completely agnostic as to where we sell our LD-branded ink and toner cartridges. If a tech buyer loves buying through Newegg, they’ll find our cartridges there. If they’re an Amazon Prime member and want their LD toner in two days with free shipping, they can find our products on Amazon. We feel customers know what’s best for them, and we try to be wherever they want us to be.
Considering the nature of your products, how much do you worry about diluting your brand? Is that a concern?
We own the LD brand and procure the products from our own factory as well as international contract manufacturers and suppliers. We aren’t worried about being on too many marketplaces because we’re the sole retailer of our products. We’re a little unique in that regard. We’re the manufacturer, as well as the retailer, so we set pricing across our own websites and marketplaces. We feel that whatever marketplace or channel people prefer to buy from is a customer’s choice to make, and we’ll be wherever they want us to be.
That being said, it’s a huge undertaking, and we have a large staff dedicated to managing marketplaces. Adding over 40,000 SKUs of office supplies brings on a whole new set of challenges from a marketplaces standpoint, and we’re in the midst of getting a grip on it. ChannelAdvisor certainly helps keep everything manageable by having it all in one portal and providing tools to make the workload scalable.
How did your expansion into office supplies come about? How has that inventory shift affected your e-commerce strategies?
We’ve been selling ink and toner for 15 years and have a large returning customer base that we remarket to via email. One day I had to buy vacuum bags online, and several weeks later received a newsletter about vacuum bags. I thought to myself, “Why in the world do I want this newsletter about vacuum bags? How do I unsubscribe?” It hit me that to other people, I sell a mundane product like vacuum bags that most people don’t need to reorder until six to twelve months later. No matter how great we made our newsletter by adding relevant content, our customers just don’t need ink until they need ink. It didn’t matter how big of a discount I could offer. They’re not coming back for more until that little “Ink Low” message pops up.
By adding a full line of office supplies, we can keep our customers engaged and purchasing other items from us. While not as profitable as our LD brand of ink and toner cartridges, it keeps LD top of mind when they do run out of ink. It increases our AOV and allows us to start competing with the big boys like Staples, OfficeMax and Office Depot. We’ll always be focused on ink and toner, but instead of just being an ink and toner niche player, we want to be a full-line office supply webstore that specializes in — and is the expert in — ink and toner.
What have you learned from the expansion process?
We quickly learned how complicated it is to go from one product line with all similar attributes to 40,000+ SKUs with thousands of different attributes across hundreds of categories. The office supply umbrella encompasses a lot more than pens and pencils! We have a robust catalog team that has been busy selecting appropriate attributes for each category and has been writing fresh descriptions and product titles.
We also learned that you have to really do your homework when pricing new SKUs. If you just mark things up over cost or down from the MSRP, someone out there will find the ones that you’ve priced wrong and take advantage of it. We have a lot of automated reporting that looks for those types of issues now, and we run a full-profit analysis on each order that shows our true, fully burdened shipping costs. This way, we can see which items aren’t priced appropriately.
What do you foresee on the horizon for LD Products from an e-commerce perspective? Does newer technology — like, say, mobile devices — affect your strategy?
We’re focused on our office supply rollout right now while in conjunction trying to build a better mobile experience for our customers. We were late to the game with mobile but are investing heavily in it. It helps that our marketplaces side of the business benefits from the great mobile websites and apps that Amazon, eBay and others have.
How does social media affect you?
We sell unsexy products. So no, social isn’t a big vehicle for us in terms of driving direct sales. We use it primarily to reinforce that LD Products is a great company to buy from, gives back to our local community, and is a fun place to work. Our customers seem to enjoy seeing what’s going on at LD, and it garners a very loyal customer base.
Do you have any additional e-commerce best practices that you think might benefit a mid-market retailer trying to grow their online business?
We always try to look at things as a novice customer would look at them. When you do something day in and day out, the reasons for them seem obvious, but a customer who has never ordered ink cartridges online might find them confusing. So we look at our website designs, product packaging, instruction sheets, videos, product titles, descriptions and even product images and make sure a customer who’s never ordered from us before can understand all the industry jargon that we might use.
It’s great to go into depth about product specs for the person who wants to know them, but the average consumer just wants to know, “Is this the right cartridge for my printer?” And we try to make that as clear as possible in all things that touch our customers. Our e-commerce catalog team writes great product content for our own websites, as well as all the marketplaces we sell on. We try to have as much content as possible but make it simple and understandable to the average consumer who isn’t an ink and toner expert.
Aaron, thanks for sharing some of LD Products’ successes and struggles as you continue to scale your product line and e-commerce efforts. We wish you and LD Products all the best.
Be sure to check out the first installment in the Ask a Retailer series.