Gst, I have $4400 invested in Amzn junk bonds...that means I'll be a creditor... not a common share holder owning zippo!
>Mercury News
After nearly a year of dot-com carnage, it might seem downright crazy that anyone would start up an online store right now.
But in garages and dining rooms around the country, a handful of brave souls have thrown caution to the wind and set up shop on the Web in recent months.
They are entrepreneurs at heart, refusing to accept the current investor dogma that Internet retailing is, at best, a marginally profitable business. They have watched the stunning rise and the heart-wrenching fall of dot-coms over the past three years and have come away thinking that the Old Economy rules that so many Web companies abandoned still apply in the New Economy.
While they have no doubt that consumers do want to buy things over the Internet, they don't assume e-commerce will change the world. So they are starting small and growing their businesses slowly, keeping tight control over spending and getting by without splashy advertising or venture capital. Above all, they have made profitability a priority.
They are the poster children for a generation of post-shakeout Web entrepreneurs.
Because they have learned from their predecessors' mistakes, they are confident that the fate of their companies will be different than that of the many doomed e-commerce sites that came before them.
What follows are tales of three of these e-tailers launched over the past six months:
* * *
When Dina Tevas set out to line up venture capital for her high-end online boutique last fall, she ran smack into the big chill. The VCs had no interest in online retailers and many would not even look at Tevas' business plans.
So Tevas, 43, decided to ``build the model organically'' -- to grow the company slowly from the ground up -- with just under $70,000 in angel funding and about $15,000 in her own savings. She launched eWonderfulLife.com in September 2000 -- followed by a version of the store on Yahoo Shopping in October -- as the exclusive Internet retailer for Hollywood designers with celebrity clients.
The site sells everything from designer evening gowns, casual wear and baby wear, to beauty products, jewelry and even furniture. eWonderfulLife also offers personal shopping services and made-to-order apparel based on client measurements. So far, 11 designers have come on board, including big names like Eduardo Lucero, Chaz Dean and Adrienne Teeguarden, and Tevas expects to add six more soon.
Tevas, who has a background in advertising and marketing, runs eWonderfulLife out of the dining room of her Hollywood home with some help from volunteers and her 3-year-old son, Chandler. She is taking a conservative approach. Her goal: to be profitable as quickly as possible.
As a result, eWonderfulLife is not offering free shipping or 50-percent-off discounts or any of the other gimmicks that e-tailers once used freely to draw shoppers. ``You don't give the store away,'' Tevas said. ``What's the point of having sales if you're losing money on those sales?''
eWonderfulLife is also spending more carefully on marketing than many dot-coms did in the past. Rather than pour money into flashy TV commercials, the company targets likely customers with e-mail promotions. It is also marketing through Web sites like WeddingChannel.com.
``I've had the benefit of learning from other dot-coms' mistakes, so I don't have to worry about making those same mistakes,'' Tevas said.
eWonderfulLife is pulling in anywhere between $5,000 and $10,000 in sales each month and it is breaking even, although Tevas is quick to add that she cannot afford to hire a staff.
But she is expanding. Tevas is rolling out a line of wedding gowns on the site, and is starting a weekly online magazine featuring celebrity chats, interviews and advice columns. Tevas is also building an offline affiliate program, signing up offline boutiques that will carry eWonderfulLife samples so that customers can check out the goods in person.
Tevas has had some recent inquiries about selling the business. But she is in this for the long haul. And while she still hopes to raise funding, she doesn't want investors who are just looking to make a quick profit -- the kind of investors with ``a junk bond mentality,'' as she puts it. The kind of investors who jumped on the Internet bandwagon amid the dot-com frenzy.
``We're looking for investors who are willing to accept conservative income from a company that is built to last,'' she said.
* * *
When Melinda Konopko, 36, and Risa Meyer, 35, put together a party supplies catalog in the summer of 1999, everyone told them to raise funding immediately. The hype surrounding e-commerce was deafening and ``we were told that we could raise $25 million in a heartbeat,'' Konopko recalled.
But Konopko and Meyer were still figuring out what their business would be and who their customers were. So they decided to go slow and hold off on raising funding. Over the following year and a half, they refined their business concept. They threw out the idea of a party mega-store and decided to instead build a party boutique. And finally, in December 2000, months after the Internet bubble had burst, they launched PlumParty.com, an online party supplies store.
PlumParty, which will be expanded to include an offline catalog, has an unusual twist. While it does sell individual party supplies, the site specializes in theme party kits. The ``good fortune'' party kit, for $229, includes two boxes of fortune cookies, two dozen rabbit's feet and colored dice, among other items, for instance. The ``break-up'' party kit, for $239, contains everything needed for a girls' night in, including a male voodoo doll and a ``She Learned the Hard Way'' candle.
Konopko and Meyer met in late 1998 through a mutual friend. Konopko had worked in credit analysis and investment banking. Meyer had worked for her family's mail-order jewelry business, Merlite Jewelry. Both loved to entertain, and both had been considering starting a party supplies business.
Their goal for PlumParty is to make entertaining easy and less intimidating.
They won't give sales numbers, but they make one thing clear. Konopko and Meyer are not assuming that their business will experience explosive growth from the start -- a mistake many other e-tailers made -- and so they are keeping spending down. They have no full-time employees, they rent office and warehouse space in Merlite's Long Island City, N.Y., headquarters and they let Merlite handle the orders. This has enabled them to get the business off the ground with just $200,000 raised from friends and family.
``Rather than build the infrastructure to meet what you project to be your demand, you should build the infrastructure for who you are today,'' Konopko said.
She noted that many other dot-coms bulked up for huge demand that didn't materialize and later had to cut back through layoffs and other belt-tightening measures. Many have shut down altogether, including one of PlumParty's biggest competitors, GreatEntertaining.com, which closed last month.
As Konopko sees it, many dot-coms never had realistic expectations in the first place. ``People don't set up a retail store with 50 outlets without testing the concept,'' she said. ``You start with one or two stores. But that's not what people were doing on the Internet.''
``Just because it's online retailing, that doesn't mean there are more shoppers out there,'' Meyer agreed. ``The Internet won't expand the universe of consumers.''
But, she added quickly, there are still real opportunities online. ``The Internet isn't disappearing. It's here to stay and if you're reasonable you can have a business on it,'' Meyer said. ``It's just not the emperor's new clothes anymore.''
* * *
When Nathaniel Gurien, 48, began selling deep-discount consumer electronics online through eBay and a handful of online news groups two years ago, he never got a chance to finish a polished business plan to attract investors. He was still experimenting with the business model and things were changing quickly. He was also too busy keeping the venture afloat.
Just figuring out how to pay the bills on time and get products to customers resulted in many 12- and 15-hour days. ``I was consumed with keeping all the balls up in the air -- borrowing from Peter to pay Paul,'' Gurien said. ``There was no time to pursue lining up money.''
But even without funding, Gurien launched his online electronics store, World-Exchange.com, in the days just before Christmas 2000. Today, the business that Gurien started in his garage is run out of an office in Point Pleasant Beach, N.J., and has about a half-dozen employees.
It has been a boot-strapped venture all along. Gurien has used a lot of credit cards and ``trade credit'' -- generating working capital by taking payments from customers but holding off on paying suppliers until the bills come due. He recalls one time when AT&T shut off his 800 number because the bill was so overdue. Gurien estimates that by the time he launched World-Exchange.com in December, he had spent about $500,000 and pulled in gross profits of about $250,000 -- leaving him $250,000 in debt.
Gurien has some regrets that he didn't raise funding during the height of the Web mania. Still, he believes he couldn't have done things any other way. ``The only way to know we had a solid business model was to be so hands-on,'' he said. ``Had I gotten the money, I probably would have stopped learning and testing. I could have gone down the wrong path.''
Gurien had originally planned for World-Exchange to be an ``outlaw'' site that would sell stereo systems, DVD players and other electronics for well below manufacturers' suggested retail prices. He had already run renegade mail-order and retail businesses that circumvented manufacturers' pricing restrictions for 30 years. But just over a year ago, he came up with ``Certified Mint,'' which is now the basic concept behind World-Exchange.
Through the ``Certified Mint'' program, World-Exchange sells dealer display models and customer returns that are not defective. Certified Mint gives dealers a way to get rid of products they cannot sell as new, and it gives customers access to goods that are practically new for prices that are 20 percent to 25 percent below what competing merchants charge. And the program is designed to avoid upsetting manufacturers.
World-Exchange faces intense competition online as it goes head-to-head with retailers like Crutchfield.com, buy.com, 800.com, Hifi.com and even Amazon.com.
But Gurien is optimistic. He expects World-Exchange to pull in about $350,000 in sales in February, and projects monthly sales will reach $1.5 million by December. The company recently turned profitable on a monthly basis.
In addition, Gurien expects to raise a first round of funding -- anywhere from $500,000 and $1 million -- over the next six months.
Even as so many other e-tailers have gone belly up, Gurien believes World-Exchange will be one of the survivors. Because money is so precious to it, the company is spending much more carefully than many of the e-tailers that were funded amid the dot-com euphoria, he explained.
``There's got to be a difference when you have to work for your money than when you just have $20 million thrown at you,'' Gurien said. ``You've got to sweat every detail and when you've got a lot of money, you don't do that. The ones who went through that are the ones who will survive.'' |
