Customer reviews

Gareth    Planning    

Over the last few weeks, we’ve been talking about how we’re going to handle customers leaving product reviews on webtogs.co.uk.

Originally we’d decided to build our own reviews engine and encourage customers to leave reviews via the usual method of enticements. There’s no doubt that on page product reviews increase conversions, as customers get one step closer to being reassured enough to buy.

This DIY approach, however, has some disadvantages. For a start, there’s the whole trust issue. With high profile stories surrounding sites like trip advisor, more net savvy consumers are beginning to distrust reviews. It’s also a hard area to get right. Enticing users to leave reviews, without offering them the earth, is a science in itself and best practice on this is hard to come by. The other big issue, for a start up like us, is the content (or lack of it). Until your site builds enough momentum to get reviews you tend to have loads of product pages, with “Be the first person to review this item” on the page. What’s interesting here, is that, statistically, people are far more likely to write the 3rd or 4th review, than they are the first.

Bearing this in mind, we’ve looked at out-sourcing this piece of the site to another company. After a bit of thought, we narrowed it down to Reevoo and Bazzar Voice. We met the relevant people from both companies a few days ago and chewed the fat on the whole reviews issue.

Reevoo’s offering is straight forward in its aims. They feel the ‘trusted mark’ side of things is critically important to get right, and offer a co-branded approach, where ‘Reevoo reviews’ sit on the product page. They only contact customers who have made a purchase from our site, and have good conversion rates at getting review content. Once they have the raw review data, they manually (i.e. a human being) edit it, removing all reference to the retailer, price and any unwanted content (bad language, racial comments, etc). The ‘clean’ review is the posted on our site. It’s also posted on other retailer’s sites that occupy a similar space. This sharing of review data is actually quite a benefit to a start-up, as we gain more than we lose, in terms of populating our product pages with reviews. The downside to this shared approach, is ownership. Should we end our relationship with Reevoo, we lose the review content they have collected on our behalf.

The data that is stripped from the raw reviews is still kept, and provided to us in a private manner, allowing us to deal with any customer service issues, that affect our performance as a retailer, rather than the quality of the product itself.

Bazzar Voice, on the other hand, have a different approach. They operate on a total ‘white label’ basis. Their review engine is integrated into our site, with no mention of their brand. From the customers perspective, it’s all Webtogs. They provide some very well researched best practice on gathering review content, mainly via email, and offer a similar manual data cleaning service.

Bazzar Voice also provide private access to comments relating to our service, but don’t provide the shared reviews side of things, so all content that we display will have been collected solely from our customers. Most importantly, they hand over all review content to us, should we part company in the future.

In terms of technology, the Bazzar Voice offering is further ahead than Reevoo, mainly in terms of site integration (site search on top rated, most popular products, etc), but, to be honest, there’s not much to differentiate the core offerings of each company, beyond what I’ve discussed here.

As for cost, both companies are very similar in price. They both charge a fixed monthly fee for their service, based on the amount of review content they have to process (which is largely based on site traffic). We haven’t yet got to the ‘fine print’ level with either company, but guide quotes at this stage are around the £40,000.00 per year mark, for a company such as ours, with conservative traffic projections. I dare say a larger company, with higher levels of traffic, would pay a bit more. On first glance, this seems like a lot of money. But when we sat down and looked at what it would cost us to do this in-house, it starts to make more sense. The nice thing about both companies is they are pro-active in providing tools that identify the ROI their respective services produce. Comparing the conversion of customers who have clicked on a review, against those that haven’t, after all, is a fairly easy thing to do.

We’re still undecided on the way to go. One of the big questions for us, is the ‘trusted mark’ concept. How important is this? I’d love to hear what you think about this.

Accepting cards online

Gareth    Planning    

Well, things were going so well! Then we got this letter from Barclays merchant services, in response to our application for a merchant account (this is a separate account, run by the bank, to receive payments from credit and debit cards).

Now, as you can see, they have accepted our application, with one provision, deferred settlement for 30 days, post each payment. They go on to say that they will (kindly) review this in 12 months for us. This, apparently, is a ‘security measure’.

So, each time a customer buys something from our website, their money will be credited to our merchant account with Barclays. They will then sit on this money (paying us no interest, I suspect), for 30 days. We then get the money credited to our bank account, 3 days after that (nice touch, i thought, the extra 3 days).

Now, for any young company (actually any company), cash-flow is king. Retail is all about getting the money in from your customers on a percentage of the stock you have bought, before you pay your suppliers. Most trade accounts with suppliers work on 30 day terms.

As a brand new retailer, Webtogs has no trade references to give to suppliers, so many are asking us to pay ‘pro-forma’ for our first few orders. This essentially means we pay up front for our stock. Now we expected this, and had factored it into our cash-flow forecasts. What we had not expected, was to be squeezed at the other end, by the bank.

I did some quick excel work on how this would affect our cash-flow in the first 12 months. The results are staggering. It creates a net shortfall of roughly £40,000.00 in our first year, as compared with the 3 day settlement model.

Why? you may ask. Well, we’re an aggressive company with big plans. We are aiming to turnover (on a forward basis) £400k by the end of year 1. This requires a fairly steep acceleration of month on month sales from the website to achieve. The additional cost (in cash-flow terms) of this ‘minor item’, means we will have to fund stock purchase from our cash reserves, rather than use direct revenue. As the growth is steep, we never get a catch-up period, as each new month requires a larger stock purchase, than the last. So, the more revenue the site generates from sales, each month, the worse this gets as we have to buy ever increasing amounts of stock to service the continuing growth.

The other item to note, is the requirement for ‘audited’ accounts at the 12 month point. Companies house classify companies as either ‘Small’, ‘Medium’ or ‘Normal’. Small companies get several forms of reporting relief when filing accounts, in terms of the information they have to supply and the need to supply audited accounts. A small company is one that meets several criteria, but the main one being a turnover of £5.6M or less. Now we have big plans, but £5.6M is pushing it a bit for the first year! So, as a small company, Webtogs doesn’t need to get it’s accounts audited. This is a good thing, as a formal audit is roughly 4 times the price of getting standard accounts prepared. The bank requiring and audit, therefore, just cost us another bunch of unnecessary cash.

So, happy days! We’re trying everything we can to change the terms of the deal with Barclays, and I had an encouraging chat with a local business manager recently, who hopes we can come to an alternative arrangement.