10 Dos and Don'ts for Online Retail Startups
Growing his e-commerce business from $5,000 in sales in year one (2008) to $27 million in sales five years later, Josh Neblett, co-founder and CEO of Etailz.com, which operates three e-commerce websites — GreenCupboards.com, ecomom.com and everyCasa.com; a soon-to-launch site, coybeauty.com; a brick-and-mortar store in the company's hometown of Spokane, Wash.; and etoolz, a division focused on developing proprietary software solutions and tools, is well schooled on what it takes to grow a business from startup to thriving operation.
Neblett shared those insights yesterday at a session at the Internet Retailer Conference & Exhibition in Chicago. Here's a list of his five things bootstrapped e-commerce businesses should do, followed by five things they shouldn't do:
1. Focus on team and culture. Create an environment where your employees enjoy coming to work every day, Neblett said. This gets harder as your company grows from just a few employees to a larger group, but it's possible. For example, eTailz.com has no dress code for its workers, hosts weekly barbecues for employees in the summer, and often provides food and drinks in the office. And the best part about this strategy, according to Neblett — it's free to do (for the most part).
2. Follow the money. With no financial backing, bootstrapped online startups must identify opportunities of growth wisely, Neblett said. I have zero interest in short-term profit; everything Etailz.com makes is invested back into the business, he added.
3. Under-promise, over-deliver. This is a philosophy that all companies should live by, not just startups, Neblett said. He cited an example from eTailz.com to illustrate his point. Neblett creates two budgets every year — one for his bankers and board of directors, and the other for his internal staff. The budget for the bankers and board of directors is more conservative and created with the idea that it will be more attainable to beat; the internal budget is more aggressive in terms of sales and profit growth. The internal staff only sees the more aggressive budget, so they're motivated to perform at their best.
4. Seek deals. This means more than working out the best deals with your suppliers — although you should be doing that too, Neblett said. For example, Neblett said that he and his wife, also a co-founder of Etailz.com, would shop for computer equipment for the upstart company on Black Friday amongst the masses to get the best deals possible, saving up to 30 percent to 40 percent.
5. Be agile and wear heavy armor. You don't know what you don't know, Neblett said, noting that startup companies must not be tied to a single idea. Go where the opportunity is, he said. You're going to face competition along the way, but you need to defend yourself.
What Not to Do
6. Don't lose the bootstrapper mentality. Even if your company is successful and growing, don't forget the strategies that got you to that point, Neblett said. For example, continue to test and experiment ways to improve your business (e.g., new products, sales channels, technologies, etc.). However, if you fail, fail quickly and move on.
7. Don't fear the big boys. You have to be aware and somewhat paranoid of what the Amazon and Costco's of the world are doing, but you can't be fearful of them, Neblett said.
8. Don't overspend on customer acquisition. The lifetime value of your customers needs to measure up against what you're paying to get them, Neblett said. He cited companies that have worked with coupon sites such as Groupon failing because they've given up too much margin for customer acquisition — and in most cases, a one-time-only customer.
9. Don't focus on where you're going to be in five years. You need to be aware and have a plan, but it shouldn't be your immediate focus, Neblett said. The vast majority of startups don't have the capital to fall back on, so for them no time is more important than the present.
10. Don't forget to hedge your bets. Constantly be innovating and seeking out new streams of revenue, Neblett advised. Bootstrappers don't have the resources to fall back on if their sole source of revenue dries up.