Red Envelope Discusses Offline Marketing and Fulfillment (REDE 3Q05 Conf Call Quotes)

| About: RedEnvelope, Inc. (REDEQ)
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Online gift retailer Red Envelope (ticker: REDE) CEO Alison May discussed fulfillment and marketing on her November 1st conference call. Net revenues were up 24% year-over-year, orders up 21%; but as you'll see from the comments below, Internet companies don't find it so easy to succeed in offline channels:

Our fulfillment expense, as a percentage of net revenues, improved to 17% for the second quarter of fiscal year 2006, compared to 21.7% for the second quarter last year. We were able to ship 21% more orders, yet we spent less in absolute dollars. And we were able to accomplish this at a 99.9% accuracy rate.

Our marketing expenses were 20.8% of net revenues, the same as the second quarter of the prior fiscal year and a sharp decline from the 27.5% in the first quarter, when we saw the last of our print advertising campaign. Our online marketing channels continue to grow more quickly than our catalog and exceeded our expectations. Our catalog performed below our expectations for the quarter. And with feedback that we have received from focus groups, we’ve made some changes to our catalog design and product layout for the holiday season, which we believe will help conversion in this channel.

(Quotes are from the CCBN StreetEvents transcript.)