Great Information on RDIM. A lot of questions that have been posed within the last few months are answered in this Q & A interview with the CEO of RDIM soon to be HOME. A great long term investment. Read for yourself and check out the new site at householddirect.com
Q & A : Management Interview of
WOW with John Folger, CEO of
HouseHold Direct, Inc.
Management Interview:
HouseHold Direct, Inc.
(OTCBB: RDIM)
John D. Folger, President, CEO
WOWS: For openers, it would be a good idea to comment on your name
change.
Folger: Yes, on March 17, we announced that we filed for
trademark/tradename registration to change our name to HouseHold Direct,
Inc. from RDI Marketing, Inc. to better reflect the nature of our business and
the innovative interactive technology we will be making available to our
members in the near future. Additionally, we are applying for a change in our
stock's symbol to HOME from RDIM.
WOWS: Briefly describe your business.
Folger: We are a private consumer buying club whose members have
access to purchase an enormous selection of products at huge savings
directly from more than one thousand factories nationwide. We will apply
demographic and psychographic customer profiling, sophisticated database
marketing, and interactive marketing to become the dominant factor in this
$8 billion sector of the private buying club industry. Merchandise available to
our members will be comparable to anything you would find in a large,
highly successful shopping mall. The huge savings we offer our members is
achieved by cutting out the mall as a middleman. So, instead of going to
Sears and buying a Maytag washer or dryer, you can come to us and buy
another popular brand name of comparable quality at a sizable savings..
WOWS: How do you differ from the Costco's (NASDAQ: COST), BJ's
(NYSE: BJ) and Sam's(NYSE:WMT) of the world ?
Folger: Our business is an $8 billion subset of the $100 billion Costco Co.
model. Wholesale buying clubs are well known, but there is a difference
between the public buying clubs like Costco and the private clubs, such as
HouseHold Direct, Inc. Members of private clubs like HouseHold Direct, are
able to buy merchandise at factory and distributor cost prices, whereas
public club members mostly pay prices that are discounted from retail. The
wide variety of products available to our customers are current models,
whereas many of the products available to public club members are
non-current, overstocked, or factory close-outs. Products purchased by our
members are drop-shipped and paid for in advance by our members, thus
we do not have the space and inventory demands associated with the public
membership companies. Finally, our services are designed for consumers
who have a much better sense of what they are going to buy over a period of
time, so there is a much greater degree of customer profiling that is done to
assure that the products will meet the customers' specific needs.
WOWS: What does it take to become a member?
Folger: There is a one-time application fee that will range between $199 and
$899, which establishes a form of exclusivity for the members of our club,
then there will be modest monthly or annual dues, and a per-transaction fee
which is typically no higher than 10%.
WOWS: Isn't that application fee a bit stiff ? How can that be justified ?
Folger: No, it's pretty much the standard for the150 private clubs with 2.5
million members, in fact, it is a little on the low side for private buying clubs,
which stands to position us well competitively in the industry, not to
mention our other unique features. The one-time fee represents a big
savings if the member is going to buy several thousand dollars worth of
merchandise each year. It also eliminates the inactive consumers who will
be making few, if any, purchases. We don't just want a lot of unprofitable,
inactive people in our database. What we look for in a member is a buying
unit of a wife, a husband, two children, ownership of a home, solid, or two
sources of income, and a consuming budget of $5,000 to $10,000 a year.
Over a 30-year life cycle, many of these family buying units will spend
between $1 million and $2.5 million, taking into account the fact it will
multiply significantly as the children get married and start their own families.
If we service that growing member unit properly, we will get a large share of
those purchasing dollars.
WOWS: How do your members transact business ?
Folger: We service our members at whatever level they feel comfortable.
Presently, we have two levels of interconnectivity. Members can visit one of
our 6,000 – 10,000 square foot showrooms where they can see and touch
sample products on display, deal with a person face to face, shop either
from our catalog or shop electronically, and ask questions. Currently, the
company has nine showrooms with plans to open or acquire up to 100
showrooms within the coming three years. The second level of connectivity
available to our members is to call a toll free telephone number connected
to our service center where they can obtain product and pricing information.
Our third level of interconnectivity, our Web-based service, will become
available within several months. The Web site with an address HouseHold
Direct.com will be tied to a very large service bureau. The site will be
available to non-members and will offer merchandise at suggested retail or a
sales price, but will not offer it at the member price. In time, our members
will be able to comparison shop among manufacturers. On the drawing
boards is a computer friendly innovative technologies, on the order of QVC's
(NASDAQ: CMCSK) home-style shopping, except members will be able to
shop in real time for anything the want, not for just what is offered when it is
offered night and day. Some companies have failed to recognize who their
real customers are. They tend to believe that their customers are the
retailers, or displaying dealers. E-commerce is changing that forever, which
gives us a tremendous advantage.
WOWS: Where are you getting your Web site expertise ?
Folger: Alfred Werner, president of Thunderstick Software LLC, is providing
the heart of our software programs, coordinating the huge data management
system that will serve our growing base of members as they transact
business with a host of manufacturers. Werner's credentials are
impeccable. He was the principal engineer behind the highly successful PC
Flowers.com; he designed the intranet for CompuCard (Cendant Corp.) and
the worldwide extranet for Saatchi & Saatchi. HouseHold Direct is currently
well along the way to acquiring Thunderstick. Thunderstick Software is a
custom Web site engineering firm with specialties in e-commerce and
imaging systems; as well as relational database systems, data
warehousing, demographic and psychographic profiling, transaction
processing fulfillment and shipping integration, all software vital to
HouseHold Direct's business.
WOWS: Why the showroom ? Don't they add unnecessary overhead ?
Folger: No. They are economical. Gateway Computer (NYSE: GTW)
discovered their value even though the company has been very successful
with their toll free order system and Web-based system. They opened 40
offices to expand their range because customers wanted to look at and
touch the computers as well as be able to ask questions.
WOWS: How can you expect to compete with the giant public buying clubs
like Costco, BJ's , Sam's ?
Folger: The answer is twofold. First, we start off with a membership base to
serve. Secondly, we plan to acquire established facilities ( physical sites,
showrooms) from other private clubs all of which will comprise a base of
consumers who are accustomed to using this kind of purchasing system.
Thirdly, due to the uniqueness of our industry, there is a lot of information
we will be collecting about our membership that will enhance our ability to
provide first class service to them. For example, we know how many
children they have, when their birthdays are, their ages, and when they are
likely to buy furniture as the children grow older. These are people in their
mid-earning years whose incomes will continue to grow. If they bought a
refrigerator from us and its life cycle is ten years, at the end of nine years
we can ask them about a new one and perhaps, in order to prevent them
from changing brands, the manufacturer would give them a special deal
above and beyond the highly attractive price they are getting by buying
through HouseHold Direct. The giant public buying clubs can't break down
their customer base like we can. It gives us a significant edge.
WOWS: Who are your most direct competitors on your terms ?
Folger: We haven't found any.
WOWS: In what other ways are you unique ?
Folger: Price and product selection are our major attractions. Some
companies offer products at wholesale price, but that is much higher than
manufacturers direct price where our club members can buy . Bear in mind,
there are three price levels that products are sold at. The manufacturers'
price is the price that the distributor (the wholesaler) pays the manufacturer
for products. The wholesale price is the price the retailer pays for products
and the retail price is the price paid by the consumer. By enabling our
members to purchase direct from the factory and from distributors at
wholesale price, we are able to beat just about everybody on price. Most
manufacturers will not sell direct to the public, since individuals represent
too small a buying unit. However, as a membership club, we represent a
huge buying unit, and therefore are attractive to do business with.
WOWS: The membership benefits are attractive, but aren't there any
disadvantages to membership in HouseHold Direct ?
Folger: Yes, depending on where the manufacturer's factory your member
is buying direct from is located, there may be a longer wait for delivery. We
give them a complete breakdown of shipping and handling costs and
analyze the situation to get the fastest delivery.
WOWS: How adequately are you financed ? What about your burn rate ?
Folger: We are a development stage company that is moving into the
operating stage, so we are planning a series of additional offerings to raise
capital. So far, we have done it on our own, but we have interviewed several
investment bankers, but haven't decided on one. We have not exceeded our
burn rate and are careful to maintain an adequate cash reserve.
WOWS: When will you have meaningful revenues ?
Folger: We have just closed our first acquisition, Personal Consumer
Services (PCS), a two- showroom unit buying company with facilities in
Atlanta, Georgia and Birmingham, Alabama. In 1998, PCS had more than
$3 million in revenues and $444,487 in net income. This is the first step in a
series of acquisitions we have planned. We anticipate buying a network of
localized operations by the acquisition, conversion or merger of existing
facilities meeting our criteria, implementing the "hub and spoke" system on
a regional basis to provide the necessary controls.
WOWS: Can you comment on any pending acquisitions ?
Folger: On March 10, we announced a letter of intent to explore a number
of cross marketing and funding opportunities with Universal Express, Inc.
(OTCBB:USXP). The deal would benefit both companies. Of primary
importance to Household Direct is Universal's trade association of 7,000
local packagers and shippers called APAC, which includes a number of
Mail Boxes Etc. locations. HouseHold Direct will assist in the development
of APAC's network. As part of a localized ground-based HouseHold Direct
network, APAC will provide thousands of shipping and receiving points,
ultimately one in every key ZIP code in the United States. Also attractive is
Universal's Manhattan Concierge subsidiary which is a provider of tickets to
concerts, Broadway theater, sporting events, restaurants, etc. On March
22, we announced the signing of a letter of intent to acquire Unimart Group,
a private membership buying club with seven clubs in Oklahoma, Colorado,
Nebraska, Oregon and Kansas and close to 250,000 members. Upon
finalization, the deal would bring HouseHold Direct's total units to nine and
its membership base to 350,000. On a preliminary basis, we project
Unimart's revenues to approximate $11 million with gross profits of about
$2.5 million.
WOWS: The SEC is requiring all listed OTC Bulletin Board companies to
be reporting companies. You are not. When do you plan to become a
reporting company ?
Folger: We are going through the audit process now. As soon as we
complete that, we should technically be able to be a reporting company,
probably by April which is enough time to retain our status with the OTC
Bulletin Board.
WOWS: What is the price of your stock and how many shares are
outstanding ?
Folger: It closed at $0.67 on Monday, March 22 . There are 15.5 million
shares outstanding, roughly 10 million of which represent the capital
contribution by insiders pursuant to the completion of a Regulation D Rule
504 Private Placement.
WOWS: What are your short-term targets ?
Folger: By the second quarter of 1999, we expect to represent over $30
million in revenues, based on our acquisition schedule, not including letters
of intent
WOWS: What are your long-term targets ?
Folger: Some investment bankers have indicated to us we could be a
multi-billion company in five years.
George H. Brooks - March 23, 1999
householddirect.com
Take care, Scott |
