Woot!: Happy to sell you just one thing
Amazon.com
Woot.com sells one discounted product.
One product, often refurbished, sold at below-market value, every 24 hours, or until its limited supply is sold out. Wal-Mart is expanding into super stores to try and sell even more items to people, and Woot.com is attempting to do the opposite. “Attempt” probably isn’t a fair word, since the company posted revenue of $117.4 million in 2007. For all intensive purposes, Woot isn’t trying, it’s doing.
The company has gone through a number of changes since it’s inception in 2004, most notably in its business model. Originally a simple merchant, Woot has gone on to address the advertising, affiliate, and community models in its drive toward every company’s ultimate goal: making lots and lots of money.
Woot usually purchases about 1,000 items of each “woot” (the term the company uses to refer to its daily product), but never actually discloses the precise number. According to a New York Times article, about a quarter of the products are refurbished; some are approaching the end of their shelf life and others have been overproduced. All products have a shipping cost of five dollars, regardless of the size or weight of the product. The deals can be very substantial too. A recent woot for an HP laptop sold for $549.99 compared to Amazon’s price
The humorous and honest product listings have given the company a character all its own. One which has sparked a lively community of avid wooters (the first woot of the day is purchased within minutes, often seconds of its posting). The atmosphere is less like a store trying to sell a product, and more like a friend trying to give away old junk. “Take it or leave it, but while you’re here, let’s have a beer and talk about it.” Below is an excerpt from Woot’s FAQ section:
Will I receive customer support like I’m used to?
No. Well, not really. If you buy something you don’t end up liking or you have what marketing people call “buyer’s remorse,” sell it on eBay. It’s likely you’ll make money doing this and save everyone a hassle. If the item doesn’t work, find out what you’re doing wrong. Yes, we know you think the item is bad, but it’s probably your fault. Google your problem, or come back to that product discussion in our community and ask other people if they know. Try to call the manufacturer and ask if they know. If you give up and must return it to us, then follow on to the next FAQ entry.
Regular Photoshop contests (usually humorous in nature) are sponsored to keep the community engaged. While this community may not directly produce “sellable” content, its staunch loyalty to the company creates word-of-mouth advertising that’s probably worth millions. The near addiction to the site can’t hurt sales either.
Relatively recently Woot has included advertisements on its site. It’s a simple model to implement, but one that probably helps pad the profitability of a company with (likely) a low ROI. Even more significant is the company’s cooperation with Yahoo. It is a testament to the site’s popularity, and a bright note for its future. Yahoo now features it’s own “deal of the day”, sponsored by Woot. The deal offers the company a sly way of trying to maximize growth potential by offering more than one product a day, while still remaining true to its core business plan. And of course, in the vein of the company’s care-free nature, the new Yahoo site is sellout.woot.com.
The company has also added wine.woot.com and shirt.woot.com, specializing in one deal every day for wine and clothes, respectively (woot.com primarily deals in electronics).
It’s tough for a company like this to measure its growth (or grow period), when it only sells one product a day, and that product consistently sells out. As with all pure-play businesses, you need to get customers through the digital door. Woot received over 1.4 
million visitors in December of 2008. Converting those visitors into users is important. 40% of the buyers for the most recent woot (as of the writing of this post) have been users for over one year, and a total of 67% of the buyers are over a month old. Given that high number, user sign ups may be the most important metric Woot has. The community is in place to allow for interaction among members, and the playful competitions keep things lively, but reeling them in is probably the area Woot should focus on the most.
The time it takes products to sell out is also an interesting statistic. The most recent woot sold out with nearly 6 hours left in the day. That’s 25% of the company’s selling opportunity gone, because another product won’t become available until midnight. If Woot finds products are selling out at extreme rates, it’s missing out on profit potential. Although the “one deal a day, no matter what” approach is probably responsible for the site’s popularity, in this case, it’s a double-edged sword. We’ll probably see Woot continue to segment markets in an attempt to keep true to its initial ideals of one deal a day, while still selling more products: electronics, wine, and shirts now, but what about jewelry, or cooking utensils? Or even partnering with more companies like Yahoo could provide opportunities to expand the “product catalog”.
Who knows… maybe it’ll find a way to sell nothing once a day and turn a profit. It’s only one product away.
w00t
[References: NY Times, Woot, Inc, Compete]
Tags: business model, pure play system, sellout.woot, shirt.woot, wine.woot, Woot
March 20th, 2009 at 1:58 pm
Other sites have taken Woot’s model and used it to their advantage as well. A couple like http://www.yuster.com and
http://www.TigZoo.com vary the model to sell only one product until it’s sold out. The process then starts over. They probably got the idea for this model from Woot’s “Woot-off” sales. Regardless, the model allows the opportunity to monetize all the time instead of being limited to the time the item sells out.
April 2nd, 2009 at 7:41 am
Good writing, thanks