We’re often asked why we have so many e-commerce models, so we would like to offer some insight into our business strategy.
Our customers are mostly small businesses and entrepreneurs in the event equipment rental, event planning, or event venue business. While events occur year-round, May through October is peak, with November-January next up, and February being the least busy. With that in mind, we raise and lower our prices based upon seasonal demands. We go further and allow customers to choose greater discounts in lieu of much longer delivery times. In fact, we sometimes price some products below our manufacturing cost. We will explain more about that below.
One of our largest expense is customer acquisition. In 2019 our cost to acquire a paying customer was $456.25. That’s the average across all of our websites. That’s abysmal for any industry, but our customer retention rate is quite high, around 35 percent, so the lifetime value of each customer is superb. With those numbers in mind we conceived a pre-order model and devised promotional sale prices that reduced our customer acquisition cost as low as $18.75.
Another massive expense is shipping. To ship our products via a traditional carrier like FedEx or UPS, we would have to use their LTL or freight service. Using one of those services would cost approximately $400 to ship a Model 1 chair. Plus, crating fees. Our answer to that is we use a team of independent delivery drivers, some paid per mile and some per day. When we first started, all of our orders were delivered within 7 to 14 business days. Utilizing out delivery team, our average cost of delivery for a Model 1 chair was $252. When we introduced pre-orders, we were able to make far more deliveries per mile and our average cost of delivering a Model 1 chair is about $90.
Lastly, when customers opt for greater discounts in lieu of much longer delivery times, or preorders, we benefit from lower warehousing costs, we minimize shrinkage, and realize sizable savings through economies of scale.
To our customers, we appreciate you, and as you can see by reading this, we really need you to stick with us, because we don’t make money on you the first time. We know our customers are small businesses and entrepreneurs struggling to make their dream work just like us and that’s why we are trying to find the most cost effective way to offer our products to you on a long term basis so you aren’t forced to purchase our competitors version of a Model 1 for $1000 and be charged $300 for shipping.