A VAR Without Feet

On average, LLT BarCode and Label (Uniontown, OH) receives 300 calls and ships 250 packages per day. Furthermore, the company's customers tend to make a purchase 4.5 times a year. With $12 million in expected sales revenue, it would be hard to argue the merits of LLT's business philosophy. However, many VARs and integrators would argue whether LLT is really a VAR. After all, since 1989 the company has been primarily a catalog house, first offering bar code media (e.g. ribbons and labels) and later adding data collection hardware and software. Opponents of LLT's model would also stress the fact that the company does not employ staff to install or integrate a customer's equipment or software. Therefore, where's the "value" in value-added reseller?

Technical Knowledge For The Shoestring Budget
According to Jodi Westphal, general manager of LLT, the value her company provides is through its phone support. Her seven inside service reps (ISRs) offer presale technical support such as help in choosing a thermal bar code labeling system (e.g. printer, software, labels, and ribbons). After the sale, the technical support manager offers comprehensive technical support such as installation instructions and maintenance recommendations. And although Westphal agrees this type of support may not be the same as sending an employee directly to a customer's site, she states that for LLT's customers, it's usually more than enough. "Our typical customer is a small- to medium-sized manufacturer or distribution center," Westphal explained. "These kinds of companies usually want to install the equipment themselves and just need some hand holding over the phone. It's technical knowledge for the shoestring budget."

According to Westphal, this lack of outside salespeople has allowed LLT to keep its cost per sales call lower than a VAR "with feet". Having no travel costs is the largest contributor to these savings. The company's ISRs are also able to contact more clients in a day than a salesperson who has to travel from customer to customer. While an outside salesperson may be able to see 15 customers in a day, LLTs salespeople can make 10 calls in an hour. Furthermore, outside salespeople are often 100% commission based. "A typical catalog house doesn't provide the support we do and doesn't have the technical expertise we do," she said. "I know this because we call the competition on a regular basis."

Is The Product's Life Cycle A Fit For The Customer?
Westphal is no newcomer to the AIDC (automatic identification and data collection) market. She's been with LLT since it began, starting out as a product manager. It was during those early days when she realized the key to the company's success was to cater to the small- to medium-sized business (SMB)(companies with less than 500 employees) sector. As a product manager, one of her responsibilities was choosing new hardware and software for LLT to offer in its catalogs. These new products had to be at a point in their life cycle in which they were simple enough for a mom-and-pop style of business to implement. Gradually, LLT added products such as thermal bar code printers, bar code scanners, and point of sale (POS) equipment (see sidebar on page 22) all through this life cycle analysis.

"Let's face it - many AIDC devices (e.g. printers) are in the mature stage of their life cycles," she said. "In other words, they're simple to use; they've become commodities, and therefore, they're an ideal fit for my catalog. The value an integrator offers, for some companies, is very valid. But, to a large segment of the SMB market, when a product becomes a commodity, an integrator's service is no longer needed."

The Right Time To Add E-Commerce
With the rise in e-commerce in the past few years, it is surprising LLT waited until 2000 to launch its Web site. Westphal attributes this delay to the success her company was realizing through its catalog and phone sales. LLT mails 1.5 million catalogs per year, and in the eyes of parent company, MACtac, was doing fine without an e-channel. Nevertheless, she insisted LLT could benefit from an e-commerce site. Using her standby product maturity theory, Westphal proved the time was right to add Web sales since the price of operating an e-commerce site had come down. In addition, software packages designed to create these sites were also simpler to use. "I lump catalogs and e-commerce into one business model," she explained. "We already had a graphic designer on staff who could work on the Web site in addition to the catalog."

Push Customers To The Web
To date, LLT's Web site has produced only $300,000 in sales revenue. However, Westphal predicts Web sales will reach 3% of sales revenue this year and rise to 6% in 2002. She cites a recent upgrade to the site as the reason for these increases. "In terms of a Web site upgrade, the biggest need I saw was for viewing order history. Our customers often want to order the same items as they did the last time. The original site didn't even have a search engine - it was really just a shopping cart."

In addition to the order history function, LLT added product specification sheets to the new Web site. This online access to technical information is expected to decrease the number of calls made to LLT. Thus, the company's ISRs can focus more on outbound calling for leads. In fact, currently the ISRs are promoting the new Web site to customers that call for routine information such as product numbers. LLT's catalogs also promote the new features of the Web site. "Because of our existing catalog and telephone sales channels, we haven't needed to invest any extra money toward promoting the Web site," Westphal said. "We've also submitted our information (for free) to most of the major search engines. Now, 12% of our Web business comes directly from search engine inquiries."

During the Web site revision process, LLT also decided to eliminate its agreement with the ISP (Internet service provider) hosting the site. Using the MACtac Webmaster, the site is now hosted internally. Although the company only realized a $1,200 annual savings (from ISP fees) with this move, the real value came in the form of increased functionality and security control. LLT's visitor-to-buyer conversion ratio for its Web site is approximately 1%. According to Randy Covill, senior retail analyst for AMR Research (Boston), the average visitor-to-buyer conversion ratio for a single channel (e.g. Web or catalog) retailer is .5% to 3%. However, the average conversion rate for multichannel retailers (e.g. those offering Web and catalog sales) is 11%. "Web site features such as an order history function allow customers to convert to buyers even quicker," Covill said. "Furthermore, many multichannel retailers' replenishment conversion rates are approaching 100% because of features such as e-mail reminders."

It should be noted that Covill's comments are typical of traditional retailers such as Lands End. Although LLT does have more than one sales channel now, it's Web site is still relatively new. Most of the company's customers still shop via the catalog. Currently, LLT uses its customized call center system to prompt ISRs to follow up with customers who have purchased products (e.g. consumables) that have a definable life span. As the company continues to promote its Web site via its catalog and phone sales, it is likely the 1% conversion rate will rapidly increase.

You Have Two Seconds To Get The Customer's Attention
LLT is meticulous when analyzing the effectiveness of all of its sales channels. The company rents specific mailing lists for the catalogs and tracks all sales by industry, company size, and geographic location. According to Westphal, this research not only suggests a continued Web focus, but possibly a change in the company's flagship catalog. "Our customers probably receive our catalog more than they want," Westphal chuckled. "But with a mailing, you have only about two seconds to get the person's attention. In the future, we may switch to mini-catalogs targeting specific audiences or markets. This move may also lead us to create specific sub-Web sites."

Obviously, LLT's "VAR without feet" model is not typical of the channel. However, the company's real uniqueness (and success) lies in its multichannel approach and focus on the SMB market. LLT may not have "feet", but with an expected $12 million in sales this year, it is standing tall.