Hearts on Fire Blogging: HoF Embraces “E-Commerce”

This is my first Hearts on Fire University, and I have to
say I’m impressed with the sheer scale of the thing (there are about 900 people
here) and the enthusiasm of the attendees. The sales training is on the whole
excellent, and a lot of conference-goers were touched by the motivational speakers. One person even
told me the event “changed his life.”

Though meetings like this don’t come cheap, I’m sure this one
is good business for HoF. The conference takes place right before the holiday season, and
many sales associates attend, which you don’t usually see at jewelry events.
After being wined and dined for three days at one of Las Vegas’ nicest hotels,
it’s not surprising that the frontlines of the industry return to the store
pumped to sell a lot of Hearts on Fire.

Still, a bit of controversy developed after the company laid
out its e-commerce strategy at its annual “Town Hall.” The company is offering
three e-commerce “scenarios”:

–  The first has a third party provider, ESDN, build
e-commerce websites for HoF retailers.

–   The second lets retailers who already have e-commerce
sites sell HoF products, if the site meets certain requirements

–   And the third involves HoF selling to consumers over its web site, heartsonfire.com.

Not surprisingly, the most chatter was about “scenario
three.”

Obviously HoF is not the first brand to sell online, and it’s safe to say it won’t be the last. But “channel conflict” is
always a sensitive subject in this industry, and things grew so contentious when
this was announced at the HOFU “Town Hall,” that a follow-up meeting was held.
(I didn’t attend that, but am told it was less heated. And I do commend HoF for
having these discussions out in the open.)

Hearts on Fire has been careful to design their e-commerce
strategy as retailer-friendly.  So while
the company will be selling on its web site, every time a consumer buys a piece
online, they will be asked to choose a local HoF-carrying retailer (and if they
don’t, one will be assigned based on zip code.) 

The customer will then have the option to pick the item up
at the retailer.  But if they
don’t, then HoF will fulfill the sale itself. Even so, the chosen retailer will still receive 15% of the retail price of that sale, and
have the responsibility for servicing it down the line. (Which seems to me pretty fair, considering the retailer wasn’t involved in getting that sale.) In addition, providing the
customer agrees, the retailer will be given that customer’s information for
future outreach and marketing. The company will not discount the product
online, and will also collect local sales tax, even though it technically
doesn’t have to.  All the money the
company receives from its e-commerce business, it stresses, will be funneled
into brand development and marketing.  It will also only sell jewelry online, not loose diamonds or
rings.

Company president Mark Israel told me in an interview: “We
are not really selling around the retailer, we are sharing our revenue with
them.” He said that, while he doesn’t expect to do a huge business on the site,
the company doesn’t want to lose those shoppers that favor that channel. “There
is a whole set of customers who will be alienated from the brand if we don’t do
something like this,” he says. He pledged to “revisit” the idea if it wasn’t
working.

Still, while most retailers I spoke to were okay with the
plan as it is currently conceived, some were unnerved because they thought it
set a bad precedent. Israel says the company “has always thought about what is
in the retailer’s interest. That won’t change going forward.” But as one
retailer told me: “It all depends on how much we trust the company.”

JCK News Director