E-business Briefing: October 2008

Lenstore.co.uk is a fast-growing etailer of contact lenses that was founded late last year.

The company aims to target consumers who buy their lenses online and go to their opticians for professional care - a trend that is apparently less prevalent in the UK than in other countries, such as the US and Sweden.

We asked director Mitesh Patel how he is looking to change that, as well as where he sees the brand going.

Can you give us a quick introduction to the business?

We founded Lenstore in the back-end of 2007. A Swedish pal of mine mentioned to me that a lot of contact lenses get sold online in Sweden, so I had a look at the UK market and realised there is very low online penetration of contact lens sales over here. That was quite surprising as it's a product that is quite well-suited to etailing. It's not like selling fridges on the web.

We launched the company in the first half of this year and trading has been very good. We've beaten our sales forecasts and have become a six figure revenue company. We've also started to attract a bit of attention from the investment community, as well as the media.

How are you driving your traffic?

We prioritised the affiliate space. We like the fact that it's a pure return on investment (RoI) play, being a CPA-based commission structure. I hear a lot about CPM advertising being in decline because of the credit crunch, but I think it is because it is a less track-able form of marketing online. My personal view on CPM is that it is almost a move back to the world of print media where you cannot get pure RoI traffic.

So we use affiliate marketing and have a relationship with Affiliate Future. We also use PPC advertising to gain penetration, and we've been picking up natural search traffic. We spent a lot of time thinking through the website design. We didn't scrimp and save.

How much of your traffic is coming through affiliates?

We launched with AffiliateFuture on 1 September, so it's a small percentage at the moment. But we expect it to become a big driver of traffic, and more importantly, sales. We managed to organically capture over 70 affiliates in the first couple of weeks, so we're very happy with progress. We're going to be putting a much larger pro-active effort into it in the next couple of weeks.

Are you placing any restrictions on affiliates?

We're not allowing brand bidding. We saw some data that showed there is not that much benefit from it. But apart from that, there are no restrictions and affiliates are very welcome to join our programme.

Do you have any tips for e-commerce start-ups?

Manage cash extremely closely and make sure it is always working hard for the company. Although it is a nice problem to have, be wary of over-trading because it places significant working capital pressures on your business.

E-commerce is an industry rife with what economists call "asymmetric information". In plain English, this means other people knowing more than you about products and services (how many times have you heard the phrase 'the dark art of SEO'?) and charging you because of your ignorance, like a car mechanic. So make sure you are well informed before engaging in any procurement processes.

And if you're trying to make it up the Google organic rankings and have not read Larry Page and Sergey Brin's PhD thesis on the Google Algorithm then you are quite mad.

What are you doing to build up the brand online?

Lenstore is very quickly becoming a brand online, which I suppose does go a little bit against what I said earlier. It's a long term view. If you take a company like M&S online, around 20% of their traffic comes through the affiliate channel, and a lot of that, I think, is because of their brand. We hope to develop our brand very quickly over the next twelve months, which we feel will benefit all our marketing channels.

How much focus are you placing on the conversion and retention side of things at this stage?

A lot of people ignore the retention side of things at the expense of their acquisition-related activities. But we feel retention is as important, so we've invested quite a lot of money in the technology behind the website. For example, we have an algorithm that calculates when you are likely to need to renew your contact lenses, and we send customers an email prompting them to buy new ones.

Our retention strategy seems to be paying dividends. We feel your customer database is one of the most important assets that you have as an e-commerce business. You have to "CRM the hell" out of your customers, as Brent Hoberman says.

How do you see the website evolving over the next year or so?

During the next year we will be adding a lot of new functionality to our website, such as a Direct Debit scheme and international shipping, as well as optimising the website in order to maximise conversion. We get a lot of feedback from our customers and we will be taking that on board and implementing it too.

What are you doing to measure and optimise your website?

We are using Google Analytics (but this can be wildly inaccurate, we have found) and tracking code for each advertising partner that we have. Website Optimiser from Google is an under-used tool and is very good. We also go through our server logs on a regular basis.

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Affiliate Marketing Survey Report 2008 
Affiliate Marketing Networks Buyers' Guide 

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