NEW YORK -- Fultonstreet.com, a rapidly growing on-line purveyor of seafood, gourmet foods and housewares, expanded its warehouse facility here earlier this month in anticipation of a spike in holiday food orders.
The pure-play retailer has gradually been moving its operations into an increasingly larger space and now occupies 144,000 square feet, up from 600 square feet only six months ago. The size of its staff is growing too, up from three employees in June to today's 60 full- and part-time workers.
With its blend of specialty items and housewares, Fultonstreet.com represents the new type of business model competing for traditional supermarket sales.
The warehouse facility, located in the Long Island City section of Queens, was previously used to process merchandise returns for sporting goods retailer Modell's, which owns one-third of the privately held company.
The ramping up of resources will enable Fultonstreet.com to better respond to surges in on-line orders. During off-peak periods, the retailer typically processes anywhere from 150 to 250 orders; however, promotions and seasonal buying spikes could drive that number far higher, according to founder and chief executive officer Stratis Morfogen.
For example, a recent e-mail promotion involving some 40,000 customers resulted in a threefold increase in orders -- up to 700 on-line purchases in one day. With order sizes averaging about $70 each, that surge represented about $49,000 in revenue compared with $14,000 on a typical day.
Morfogen noted that average order sizes have since increased from $70 because the latest merchandise addition, housewares, is now driving transactions higher. Fultonstreet.com offers 1,450 stock-keeping units of food and cooking products.
The great majority of targeted customers responded to the promotion, developed with Vanguard Interactive, New York, because it was aggressive while also allowing customers an easy way to "opt out," Morfogen noted.
Those choosing not to participate in the promotion, which took the form of a contest, received an instant e-mail message indicating that if they had chosen to participate, they'd be eligible for a generous discount. Initially, 13% of targeted consumers "opted out," but after the real-time message appeared, 11% of those acquiesced and chose to participate, leaving only 2% of consumers out of the contest.
Morfogen noted that those who "opted in" also were rewarded, even if they didn't win the contest. Consumers were asked to "vote" for their favorite seafood by choosing from among four choices: lobster, shrimp, mussels and king crab legs.
"For the 25% or so who voted for lobster, we e-mailed them a message that said, 'Mrs. Jones, we're sorry you didn't win but here's a lobster [meal] package,"' regularly priced at $99, but discounted for that shopper at $60.
"We did not make money on this," Morfogen said. "We broke even. But we created loyalty."
At the same time, by encouraging its customer base to share their seafood preferences -- lobster vs. shrimp and crab vs. mussels, Fultonstreet.com gained valuable insight and will know how to target promotions effectively going forward.
A promotion for king crab legs going to noncrab-eating customers, for example, will require more aggressive incentives.
"This is intelligent database marketing," Morfogen said. "I'm shocked people are not putting money into intelligent database marketing." On-line retailers are spending significant sums on "eyeballs, eyeballs, eyeballs," trying to increase traffic to their sites while at the same time neglecting relationship-building opportunities, he said.