ECOMMERCE TIMES INTERVIEW WITH BID.COM
ecommercetimes.com
E-Commerce Success Story:
Bid.Com
Exclusive Interview
with
Jeff Lymburner,
President
Q What kinds of products or services do you offer on your site?
A Bid.Com is an auction site, where we sell a diverse selection of consumer products, from computers, notebooks, monitors, and office products, to digital cameras, games, sports collectibles, beanie babies, all the way down to ball point pens.
Q How does Bid.Com conduct an auction?
A We use two different auction formats, one being the more typical, "bottom-up" type of auction structure, where people place bids on products. If a counter bid is made, they have the opportunity to go in and re-bid.
The other option is the Dutch auction format, where a set starting price for a product is given and the price counts down in pre-determined increments as the time remaining in the auction counts down. In a way, this format combines the elements of a game show with discount shopping. The idea is, the longer you wait, the better your price -- but if you wait too long, the item may get sold out. If you click on something while there's inventory left, you definitely get the item. Our Dutch auction is unique in its technology in that it's conducted in real time.
Q Can you tell us a little about yourself and how you got started selling over the Internet?
A Paul Godin and I are the co-founders of this company. I had been in the cellular telephone and wireless data business before getting involved with Internet commerce. Paul was both a friend and business associate of mine for a number of years. In fact, Bid.Com was really Paul's idea. Paul had had an experience shopping online back in 1995, when the Internet was in its early stages. Paul found shopping over the Internet rather cumbersome and awkward, so he started thinking about ways of creating a more dynamic structure for selling consumer products over the Internet. The light bulb went on, and the idea he came up with was online auctions.
Paul sketched out his idea on the back of a table napkin at a breakfast meeting, and I was immediately captivated by the idea. In a matter of a few months, we made some decisions to move forward and go into business together. That was in 1995, so we've moved a long way since then.
Q Where do you acquire your products?
A In the early stages, we had to approach a number of suppliers and explain our merchandizing concept, and basically sell them on the notion of providing for us. Now that we're better known and have more history behind us, we get approached every day from people who'd like to be vendors to our auctions.
Q Aside from your Web site, how else do you sell your products?
A We are an exclusively e-commerce business. We have no brick-and-mortar component as a retailer at all. Other than facilities to house our staff and our servers, we are truly an Internet company.
Q Can you give us an idea of your company's sales volume?
A In 1997, our sales were about $2.6 million, and by Q3 in 1998, our year-to-date sales were between $13 and 14 million. Our Q4 1998 results are not yet published, but growth was substantial.
Q Can you give us a feel for the size of your business -- in terms of number of employees?
A We have approximately 40 employees.
Q Which areas do you see your business coming from?
A It's really broadly based. The U.S. is still the majority of our business, but we are starting to grow rather nicely in Canada, and soon we'll start transacting internationally. We recently designed and launched a Canadian site with Rogers New Media, the largest cable and cellular telephone company in Canada, so it's expected that some of the bids will come from Canada, but the U.S. is still the majority of our consumer business. We do anticipate a very substantial growth area being business-to-business, as well as licensing, in 1999.
Q What do you feel has helped make your site successful?
A Our technology has demonstrated itself to be very scalable by being able to handle significant traffic volume without slowing down or under-performing.
In terms of site design, we've given our site a softer look and feel with the use of cartoon avatars or icons, in a deliberate attempt to seem a little less boring, and to also increase the comfort level of first-time users. We don't want our site to just be a domain for computer resellers or techno-gurus. Bid.Com is a site for "newbies" right through to the sophisticated user.
A testimonial to the way our Web site combines highly functional technology with a user-friendly look and feel, is the award, among others, of the highest honor in the Canadian high-tech industry, which we received at the Canadian Information Productivity Awards in November of 1998.
Q What sets your company apart from your competitors?
A We stand out from our competitors because we don't sell on a classified ad, user-to-user basis. We sell only on behalf of manufacturers, distributors or recognized resellers who can offer warranty support, because we want to make sure we don't run afoul of any after-the-fact issues with product quality. We're very different from eBay, for example, who often acts as an intermediary between totally private individuals who just want to sell an item out of their home.
What also sets us apart is that we don't have an inventory position. Our business model calls for us to act as an intermediary, or a consignment type of dealer, where we sell goods that suppliers will put aside for us for a period of time, so we bear no liability for unsold goods.
This is a particularly effective approach, because it allow us to respond to supply and demand in the marketplace, without being a slave to our inventory. If I had $3 million-worth of a certain model of hard drives sitting in my warehouse, I would be extremely obligated to keep pushing that particular item, even if it was no longer a hot item. By not keeping an inventory, however, we can move very quickly to respond to what's in greatest demand. It allows us to be particularly responsive to what consumers are looking for.
In addition, as our business plans mature, we're beginning to see a number of licensing opportunities emerge, such as our recent agreement with American Interactive Media (AIM), which have potential to broaden our reach into broadband distribution, i.e. cable, as well as other unique opportunities in the Internet domain.
Q What have you done on a regular basis to promote your site?
A We have been among the highest profile e-commerce advertisers in the world. We've created well in excess of a half billion advertising impressions over the last year, through portals like AOL, Yahoo!, and Metacrawler. We're now paying particular attention to employ banner ads and key anchor positions in shopping-oriented areas that we feel will yield us a high propensity-to-buy type of customer.
Q What are some of the downsides or pitfalls you've experienced?
A From a technical standpoint, there have been surprisingly few pitfalls, largely because our team has done a superior job in getting the Bid.Com Web site set up in the first place. It's never easy, and it's an enormous undertaking, but our head of technology, who's a Smithsonian award recipient, and some of his team have made it relatively smooth.
From a business standpoint, an Internet business is like any other. In the early stages of a very volatile sector, there are all kinds of ups and downs. We've been fortunate enough, as a public company, to have been able to raise financing at opportune times, sometimes in the 11th hour. It's been a stressful situation at times, but we've managed to stay on top of the business and financing side of the equation. We're generally pleased with the results.
Q What has been your biggest surprise in doing business online?
A One of the realities of conducting business online is that change is an ongoing condition, whether making small changes to the cosmetics of the site, updating or changing inventory as we do on a daily basis, or making decisions to change larger elements of the business.
We feel we've responded well to the need for change, and that's one of our strengths as a business. It hasn't been a surprise, it's just different from other businesses in that respect.
Q Was there a specific time when you first realized that your e-commerce site was a success?
A I don't think that there was any one cathartic moment that made it all seem real. I think that there are a lot of small victories that add up to a very good feeling about what we've done. When we launched a new category, people started to bid and activity buzzed. When we recently introduced our "Search Buddy" feature, we saw that over half of our shoppers were using that feature the next day. All of these things were very gratifying. It tells us that our ideas have been embraced by our shoppers.
Q What type of store software, and payment processing systems do you use to operate Bid.Com?
A We used customized coding, using Microsoft SQL Server, and we use Net Perceptions Personalization software as a custom feature. For our payment processing, we use specialized software to effect a secure link to a major credit card processing house. All of the systems we're using are very effective, and we're very satisfied with them.
Q What goals have you set for Bid.Com, for 1999?
A We are augmenting our core auction activity, by adding items such as Micra SoundCards, which are trading cards with a digital, high-quality recording of the actual sports event. Retailing products on our site gives us another revenue stream, and will help us diversify our customer base. We also plan to deepen the offerings within our categories with more mainstream consumer products, like an increased array of jewelry, and travel products.
Even as we will continue to grow in the consumer sector over the next year, we also expect to see very high increases in Bid.Com's business-to-business transactions, and in areas such as licensing, direct sales, and advertising.
Q What advice do you have for beginners who are interested in selling over the Web?
A An online business has to be very adaptable. The Internet is an environment that imposes greater responsibility on the decision makers, because of the speed with which things happen. So, it's probably one of the purest entrepreneurial environments one could ever want to find, and that's both good news and bad news, depending on how one reacts to those decision making opportunities.
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