Real-World case study of a mid-tier retailer, born on eBay, spreading wings.

January 13, 2011

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

I got a ton of positive feedback from my quick profile of Beadaholique in the context of their awesome CyberMonday.  Naturally, sellers like to learn from examples of other sellers that have achieved the next level of success for both the natural best practices that come out as well as the inspiration.

Around CyberMonday, I was looking at customers that hit sales records and was reminded of a great case study – Shoe Metro – that I thought you guys would really enjoy.

Over the years at ChannelAdvisor (we are celebrating our 10yr anniversary this year!), we have seen so many companies follow the path from ‘birth on eBay’ to ‘We are now a top 500 internet retailer’ that we’ve developed a roadmap to document that path and some of the best practices we have seen over the years.  We call that the ChannelAdvisor Internet Retailer Lifecycle and I wanted to share that with you before we dig into the Shoe Metro story.

Introducing the ChannelAdvisor Internet Retailer Lifecycle

eBay is a great way to start an online retailer and we’ve seen literally over 100 companies follow this path to start on eBay and then grow to be a top retailer.  Here are the eight steps:

Lifecycle

I used to refer to eBay as ‘training wheels for e-commerce’ quite a bit because I thought it was not only true, but something they should be proud of.  Unfortunately, the management team at the time took offense at that, so I avoided the term.  I still feel it’s true and whenever someone asks us how they should start selling online, eBay is always the first answer.

Once a business starts ramping on eBay (Toddler seller) and then starts to hit scale (Adolescent/Adult seller), it’s a natural progression to expand to other channels.  We call that point the transition of a ‘seller mindset’ to a ‘internet retailer’ and that’s where the ‘Young Internet Retailer’ step in the lifecycle starts.   Once you start down that path, then adding additional marketplaces, search and CSE are natural progressions.

We’ve found that sellers also like to see the rules of thumb around SKUs (listings if eBay-focused) and orders/m – that helps the aspirational seller understand what they need to be thinking about from a sourcing, warehouse, fulfilment and customer service perspective.

With that framework in place,  step with me back in time  to 2004…..

A new online retailer is born! 2004

David and Will were high-school buddies in San Diego and in 2004 decided to start experimenting with online sales.  They opened the sellerID ebuys77 on eBay and started experimenting selling a variety of different items.  The looked at books, movies and electronics and ultimately settled on shoes.  They felt like the category was under represented online and being in the heart of SoCal that nobody was focused on some of the hotter brands they were seeing.

ebuys77 was reborn as shoemetro from their living room laser-focused on cracking the shoe category on eBay.

Seller Years: 2004-2007

In late 2004, they finally outgrew the house (every square inch was jammed full of shoe boxes), and made the big move into a 2500 sq-ft warehouse.  Little did they know, it would be the first of four warehouses they would rapidly fill and outgrow.

By selling on eBay they were able to quickly source products, see how they did, and get smarter and smarter while buying deeper and deeper.  The business grew from essentially zero in 2004 to a multimillon retailer.

By 2006, their 2,500 sq-ft warehouse was busting at the seams and they had to move to more than double the space in a 8,000 sq-ft warehouse.

By the end of 2006, they were happily selling over $3m/yr on eBay. They were also learning a lot more about e-commerce and decided putting together a play to diversify.

Internet Retailer Years:  2007-2010

In 2007, they started selling on Amazon and opened their first web-site.   Sales were still booming on eBay so these efforts didn’t get much traction.

In 2008, they outgrew the 8,000 sq-ft warehouse and moved into a 14,000 sq-ft warehouse until they could find still bigger space.

With the on-set of the recession, they realised that diversification was a top priority, so in 2008 they really started focusing on diversification.  They doubled down their efforts on Amazon and re-designed the website.  They also had several of their employees start to focus on these efforts.

In 2009, they learned their lesson about outgrowing warehouses and moved to a significantly larger 36,000 sq-ft warehouse that has two levels that give them effectively 50,000 sq-ft of room.

In 2010, they did another significant upgrade to their website:

  • Better merchandising
  • More product selection
  • Email marketing, search marketing and CSE programs started ramping
  • Affiliate program started and ramped
  • Social – they do a ton of social marketing that helps build the brand and increase repeat customers

They also realised in this timeframe that they needed help with buying, so they hired professional buyers from offline retailers to come in and help with that.  This program has been very successful.

Adult years – Shoe Metro Today – By the Numbers

There are a lot of impressive numbers that Shoe Metro has put together that I think speak for themselves.

Shoe Metro…

  • is growing at >35% y/y
  • is a $10-20m online retailer (I suspect we’ll see them on the IR500 soon!)
  • employs 45 people with an additional 10 around the holidays
  • By the end of 2010, eBay was still growing, but down from 100%  to 65% of their business.

On CyberMonday 2010, they sold 2,800 pairs of shoes, enough to fill a 53-foot Fedex truck (which they did, much to Fedex’s delight).

Here’s a picture of David and Will:

Shoe_metro

David is on the left and Will is on the right.  I’m the handsome one in the middle – a couple of years ago we went to a Chargers game when I was doing some customer rounds and we’re surrounded by lots and lots of shoes….

Shoe Metro’s lessons learned

David was kind enough to share a couple of lesson’s they’ve learned over the years they thought everyone would benefit from:

  • Diversify your supplier base – less risk of a supplier drying up and more selection for consumers.
  • For website, you need a much larger selection than eBay or Amazon
  • Plan your purchasing and supply-side in anticipation of the holiday, keep the shelves stocked so you don’t miss that huge opportunity.
  • They take a channel-specific approach (e.g. they run eBay, Amazon and their site as three different channels with with their own product selection and even sourcing).
  • Their philosophy is to control the consumer experience 100%, so they have been focused on doing their own fulfilment.

Conclusion

There you have the Shoe Metro story, I hope readers enjoyed the story.  If you guys like this kind of thing, I can make it a monthly feature of eBay Strategies.  As an entrepreneur myself, I really enjoy talking with other entrepreneurs and learning about their keys to success.  

David is a reader so I’m sure he’ll answer any questions you have in comments.

SeekingAlpha Disclosure – I am long Google and Amazon. eBay is an investor in ChannelAdvisor Corp. where I am CEO. ShoeMetro is a customer. I’m a Charger fan by way of Philip Rivers – NCSU Alumni – GO PACK!!!