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WORCESTER - Scott Savitz practices what he preaches, at least when it comes to shoes. Asked to speak at a recent WPI Venture Forum event, the chief executive officer of Shoebuy.com Inc. showed up wearing a pair of Johnson & Murphy shoes purchased online at Shoebuy.com, naturally.
But buying shoes online was not always so readily accepted. When Mr. Savitz and Craig Starble launched the online shoe store in 2000, the dot-com bust left observers skeptical of the duo's plans.
"Everybody said we were going to fail because we were involved with the Internet," Mr. Savitz said.
Not so. Today, Boston-based Shoebuy.com employs about 60 people and is profitable. Almost a year ago, it raised $9 million in venture capital from Apex Venture Partners and Tudor Ventures.
The privately held business has prospered as a virtual shoe seller with dozens of deals and partners, and a few promises to shoppers: Free shipping. Free returns. No sales taxes.
Shoebuy.com has no warehouses or fulfillment centers to operate. Instead, it sells the shoes and relies on manufacturers to carry the inventory.
The result is an online store with more than $1 billion in inventory.
For the vendors, Mr. Savitz said in an interview, "we are essentially their Internet distribution arm."
Online retailing has seen its share of ups and downs in recent years. Some flamboyant retailers, such as Pets.com, flamed out, despite the buzz around its sock-puppet commercials. Furniture.com launched with fanfare in 1998, then struggled to fill customers' orders and closed in 2000 before reopening under new management.
Yet customers have clicked their support for online shopping. Forrester Research calculated that U.S. e-commerce last year totaled $136.6 billion.
Shoebuy.com managed to survive the bursting of the technology bubble by doggedly building a unique business model, said Lon Chow, a general partner at Apex Venture Partners.
"They've actually used technology to allow them to integrate with their shoe manufacturers. That was very unique and very different," he said. "This business model they developed, it's less capital intensive. You don't have to spend a whole lot of money buying shoes wholesale and selling them retail."
Shoebuy.com got its start accidentally enough. Messrs. Savitz and Starble were working in banking, not actually looking to start a business. Then Mr. Starble went to buy shoes online for his family and struggled to find one site that could accommodate them all. He was baffled.
It wasn't as if people were wedded to buying their shoes in stores. In 1998, Mr. Savitz said, $2 billion in footwear sold through catalogs.
"We tried to find many different reasons why this idea wasn't a good idea," Mr. Savitz said. They didn't.
Instead, Shoebuy.com forged agreements with vendors, built a Web site and affiliated with others on the Internet to drive customers to Shoebuy.com. It offers thousands of shoes as a seller on Amazon.com.
The company crafted a business model that allowed it to make money on its very first sale. It still makes money on every sale, Mr. Savitz said.
Shoebuy.com does not disclose revenues, but Mr. Savitz told the WPI Venture Forum crowd that it totals about $1 million per employee.
The site attracts about 2.5 million visitors each month, and the retailer's target market is 25- to 40-year-old middle-class professionals, a category of shoppers that buys shoes and shops online.
About 250 vendors are tied to Shoebuy.com, but the site has agreements to add about 40 more brands, Mr. Savitz said. In six months, there should be more than 300 vendors offering shoes on Shoebuy.com.
Driving customers to the site is not free. Marketing costs average out to about $15 per "acquisition," or paying customer. But each transaction produces a profit of about $21, Mr. Savitz said.
"Because we sell something everybody buys, we're able to acquire customers and make money on the first sale," Mr. Savitz said.
Yet Shoebuy.com is not just about shoes. In 2002, the Web site added handbags for sale. Luggage joined the mix in 2003. The next category to go up for sale will be active wear.
About one in six shoes sold through Shoebuy.com is returned, Mr. Savitz said. But satisfied customers are returning repeatedly. In 2004, repeat buyers accounted for 42 percent of total revenues, he said.
Those repeat customers are the key to successful online retailing, Mr. Savitz told the WPI Venture Forum. "If you can't have that repeat buyer drive the bottom line, I don't think you'll ever cross that threshold," he said.
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