A Return to Health

Searching for his next challenge in the retail industry after previous stops at the Home Shopping Network (HSN), Dell and Gilt Groupe, David Zucker joined health and wellness products retailer Vitacost in August 2011 as its new chief marketing officer. He quickly got to work. In the 13 months Zucker has been at Vitacost, he's helped to oversee a complete brand makeover, including a new logo and corporate slogan ("take the cost out of healthy living"); the redesign of its e-commerce website; the launch of two health and wellness content sites (Wellness Times and Momonomics); and the upgrade of Vitacost's mobile website and apps.

Zucker is just one of a handful of new faces within Vitacost's executive ranks. The company's CEO, COO, CIO and CFO are all new to their jobs within the last two years. This infusion of new blood is just one part of an overall strategy developed by Vitacost's board of directors to grow the business and increase profitability long term. Following a few lean years prior to Zucker's arrival, Vitacost has enjoyed sustained sales and profit gains in the year-plus he's been there. Consider the following:

• net sales increased 18.1 percent for the 2011 fiscal year, and have been up 31 percent and 21 percent in the first and second quarters of this fiscal year, respectively;
• gross profit for the full year 2011 was up 6.1 percent year-over-year, and 25 percent and 35 percent in the first and second quarters of this fiscal year, respectively; and
• total new customers in the first and second quarters of 2012 have increased over 100 percent year-over-year.

Zucker credits a lot of this growth to the significant increase in budget he's been given to implement his marketing plans as well as the more effective use of those dollars. In addition to giving Zucker and his marketing team more money to spend on acquiring and retaining customers, Vitacost has invested in expanding the product offering those customers have to choose from. The retailer has expanded its SKU count by close to 10,000 SKUs in the last year.

"What we've found over time is that we've become way more efficient," says Zucker of Vitacost's marketing. "I've been at Vitacost a year and we've been able to drive down the cost to acquire a customer significantly. Just in this Q1 vs. last year's Q1 we were able to drive the customer acquisition cost down by 37 percent in our paid channels. What this means is that while I can drive the customer acquisition cost down, I can actually spend a lot more to acquire more customers."

Customer acquisition has been a focal point for Zucker in his brief time at Vitacost. He's implemented a simple process to determine how much he can afford to spend on acquiring a customer: Identify the lifetime value of a customer, then figure out how much of that value Vitacost captures in the first year. That number is what Zucker is willing to pay for a customer. Vitacost is willing to spend more in certain channels (e.g., refer-a-friend, affiliate marketing) to acquire a customer because those channels have traditionally produced customers with a very high lifetime value to the brand.

Award-Winning Customer Service
One area in which Vitacost has excelled in recent years is customer service. The retailer ranked seventh in the ForeSee E-Retail Satisfaction Index for Spring 2012, the third straight year Vitacost has made the index's top 10. That said, don't expect Vitacost to rest on its laurels under Zucker's watch. The brand's executive team has made it a point to make the first email it looks at each morning be the customer surveys from the prior day. Their focus tends to gravitate to the negative reviews, whether it be a problem with shipping, pricing or the website itself.

Zucker also has a direct dial-in to Vitacost's customer service and sales lines, so he can check in to see what's going on in these areas at any time. He's also been known to mystery shop Vitacost.com to get the true feel of what shopping on the site is all about, from checkout to opening a product at home to returning a product. All of this customer feedback and insight is considered when the company makes any decision.
"For as good as these outside companies say that we are at customer service, we're nowhere near satisfied with where we are as an organization," Zucker says. "We tend to look — good or bad — at all the negative things that are happening and get frustrated every day. We are our own customers. We're not looking at a competitor or other people in this space; we're thinking how can we have the best shopping and mail experience."

Extreme Makeover: Retail Edition
Along with the new faces in the executive quarters, the Vitacost brand has undergone quite the transformation this year. The company has shifted its focus from viewing itself as an online vitamin retailer to an online health food company that targets health-conscious consumers who are seeking products and information that will help them lead healthier lives. It's done that through the launch of new products and the content sites Wellness Times and Momonomics.

The look and feel of Vitacost's website, including the navigation, was changed in order to make it easier to shop for all the other products that weren't vitamins. While most relaunched websites see a dip conversion in the weeks and months after going live as consumers need some time to get comfortable navigating them, that hasn't been the case for Vitacost. In fact, the retailer's conversion rate went up a little bit when the site was relaunched. That elevated conversion rate has been maintained and continues to trend upwards.

The second phase of Vitacost's brand makeover was a commitment to becoming a thought leader in the health and wellness space. That's where the launch of Wellness Times, a site that features expert-authored editorial content about natural health, and Momonomics, a fun online destination where busy moms can unwind and interact, come into play.

"With our content in general, Vitacost is able to be part of conversations," says Zucker, "which makes us a little bit more credible when someone comes to the site and thinks about buying something. We're not just going to be a fly-by-night company where consumers aren't sure whether they want to give us their credit card. It gives us a little bit of authority."

Increased Role for Mobile, Social Going Forward
Like many retailers, Vitacost realizes that it must have a mobile presence to remain relevant to today's smartphone-wielding consumers. In March, Vitacost launched an enhanced mobile site featuring a fresh design, easier navigation and new e-commerce features, including customer reviews and the ability to use Vitacost Set & Save for automatic redelivery of products, as well as special promotions and coupons exclusively available to mobile shoppers. The relaunched mobile site was designed to make the complete sales cycle easier and faster. And then in May, Vitacost added new features to its iPhone and Android mobile apps, including a barcode scanner that allows for easy price comparisons, shopping lists and the ability to set a "vitamin alarm" to ensure compliance with health regimens.

Vitacost recognizes that mobile is a huge growth opportunity for the company and is spending time and money to make that a reality. So far the progress has been promising — mobile engagement and revenues are both up year-over-year — if not slow paced.

"Shopping for the products we sell on a website is hard, and it's not easier on a smaller-screen device," Zucker notes. "We're continually thinking about what's the best experience for a consumer as the screen gets smaller."

Seemingly tied in with mobile in a lot of ways for Vitacost is social media. The retailer currently has a presence on Facebook, Twitter, Pinterest and Google+, and is making a concerted effort to incorporate video into its website and social pages. Yet like with its mobile efforts, Vitacost is finding it challenging to drive sales through social media.

"We've committed to making videos of our products," says Zucker. "Taking those videos and posting them on our social platforms is a way to create additional engagement with our customers."

In addition to getting better at driving sales via mobile and social media, Zucker believes that for Vitacost to not only maintain its success but grow its website must become faster and more efficient at delivering value to consumers. Lastly, the company is hard at work on upgrading the shipping experience.