Savvy surfers discover Web giveaways

Recovering from a broken nose in October, Michele Shumaker hid behind her computer screen at home, filling a virtual shopping cart with some unforgettable deals for free merchandise.

The flurry of bargains prompted Ms. Shumaker, 35, to create her own Web site devoted to finding free stuff - and even free money - online. If she chose, she could close her Naples, Fla., real-estate brokerage today and earn up to $100,000 annually from her online venture alone, she said.

"The more I searched, the more I found," said Ms. Shumaker, whose Web site charges no fee to consumers. In addition to those who visit her site, she has about 2,000 subscribers to whom she sends out periodic free notices about new Web giveaways.

"If you're a first-time customer out there, you could go to my page today and get $200 worth of merchandise for a maximum of $55 in shipping," she said.

As e-tailers try to distinguish themselves and reduce consumer apprehension about the safety of online shopping, they are increasingly turning to bargains and giveaways for shoppers. Like food suppliers fighting for shelf space at the grocery store, these companies are competing for viewers' attention as 1,000 new Web sites debut each day.

Some sites offer discounts of $10 or $20 off a purchase of at least that amount. Others give away gifts or free shipping with any purchase. A small number of companies offer both.

"The name of the game in the e-tailing space is basically customer attention," said Doug Aldrich, managing director and vice president of global e-services for A.T. Kearney in Dallas.

"You see more and more desperation - as the field becomes more and more crowded - to become one of the preferred bookmarks," Mr. Aldrich said.

Of course, the competition isn't limited to Internet companies. Traditional bricks-and-mortar retailers spend billions of dollars trying to attract new customers. They blitz the television and radio airwaves with catchy slogans; they plaster coupons in newspaper ads and mailers; they even pitch their wares on the Internet.

But the new breed of online companies has distinguished itself with a wave of giveaways. Through traditional advertising channels and online deals, it's not uncommon for Internet retailers to spend hundreds of dollars acquiring each customer, analysts have said.

Backed by windfalls

Online companies can spend so much money because they are financed by venture capitalists or stock offerings that have benefited from Internet euphoria.

Stamps.com, for instance, is doling out $20 in free postage to businesses and consumers who want to print stamps from their computers - instead of using old-fashioned postage meters or lick-and-stick stamps.

"People have been putting stamps on their letters the same way for almost 80 years," said Chris Hylen, senior vice president of marketing for Stamps.com, which is based in Santa Monica, Calif. "There's enormous inertia there. We have to give them incentives so that they'll change their behavior and establish new habits.

"We believe once you try it, you'll stay with us."

Adding intrigue to the online marketplace is the slew of new Web sites and online forums that have sprung up to direct consumers to freebies. They channel people to sites offering discounts, and they provide confidential coupon codes that are intended for a smaller subset of users.

DVDTalk.com started in January 1999 as an online forum for people to discuss digital video disks. In short order, consumers persuaded founder Geoffrey Kleinman of Beaverton, Ore., to create a separate forum on the site devoted to other online bargains. Close to 10,000 messages have been posted in the past 45 days.

"If you had 150 or 200 people walk into a bricks-and-mortar store at the same time, you'd probably call the police because you're afraid of a riot," he said. "Online, we have thousands of people who are shopping together."

Consider what happened at more.com, an online pharmacy: This year, the company offered clocks on its Web site for 9 cents, instead of the standard price of $8.79. When word spread through online discussion boards, more.com received about 1,000 orders per hour.

In the end, the pharmacy gave each customer one clock for 9 cents - and a $10 coupon for future purchases from the Web site.

"Thank you for your participation in more.com's unintended experiment to prove whether time can really fly," the company said in a letter to shoppers. "In the space of only 36 hours, time not only flew, it approached the speed of light."

The fine print

In a similar vein, hundreds of online shoppers tried to redeem $30 coupons at FamilyWonder.com after hearing about the promotion on message boards. What they didn't realize was that the certificates were intended for only a few customers whose orders had been delayed during the Christmas season.

"People probably thought that they were able to get $30 off because there are so many crazy deals on the Net," said Jonathan Kaplan, the company's co-founder, chairman and chief strategist.

Some companies that initially embraced "free stuff" promotions are now using other approaches to gain customers. NextPlanetOver (npo.com) gave a discount of $15 off every first order until early this month. Now, the company offers a T-shirt and free shipping with every order totaling $50 or more.

"Any type of promotion done to excess loses its novelty and its interest to the consumer," said Milton Griepp, CEO of the entertainment and comic book site.

Similarly, Mothernature.com had replaced its $20 freebie offer with a 50 percent discount for new customers, up to a $50 savings.

"You can essentially find anybody, give them $20, and they'll find something to buy in your shop," said chief marketing officer Jeffrey Steinberg.

The half-off promotion didn't last long, though. The company is now offering $10 in free stuff for first-time purchasers.

Unlike their bricks-and-mortar competitors, online companies gauge their success by the lifetime value of each new customer. If the cost of acquiring shoppers is greater than their lifetime value, the company fails.

Some analysts say e-tailers have done a poor job planning online promotions and monitoring them. In a July 1999 report, a leading online research company concluded: "Commerce sites are using promotions indiscriminately to drive transactions and are conditioning their customers to expect discounts."

About 93 percent of commerce sites offer promotions, Jupiter Communications said, but only 26 percent know how many consumers are new users. Interestingly, the report said, 73 percent of customers wait for promotions that offer discounts before making a repeat purchase.

"Instead of encouraging an impulse purchase, commerce sites end up rewarding customers who wait a week or so for the next e-mail announcing a sale, or who surf outside the commerce site looking for coupons or free gift offers," the report said.

The Athlete's Foot, which offers a $10 gift certificate to online visitors, said it's not trying to drive people to shop online. Rather, it wants to gather a database of consumers who are interested in the company so they can be sent information or promotions.

"The truth of the matter is, footwear, by definition, is a sizing proposition," said Robert J. Corliss, president and CEO of The Athlete's Foot. "I don't expect it [the Internet] to be a large part of our business. I do expect it to further elevate awareness of our brand."

Meanwhile, Ms. Shumaker, who runs the coupon site, continues searching for bargains, spending six or seven hours a day managing her Web site. Her Web site, www.hometown.aol.com/mshum /coupons.html, is named "Funtasia's Internet Coupons" after the Disney hit Fantasia.

She makes her money a few cents at a time: Every time a visitor to her Web site clicks to visit a retailer's site, she is paid for the referral.

One day, when Ms. Shumaker was busy and could not update her Web site, she received 85 e-mails within six hours asking what happened, she said.

"Either decide to do it or get out of it," she told herself. "The site keeps me busy."