The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
A seasoned web executive finds a way to succeed at selling home furnishings online.
Jan Andersen didn’t have experience in interior design when he launched online home accent site Bellacor.com last fall, signing on as CEO. He debuted late in a field already littered with the tombstones of home furnishing dot-com duds, in a highly fragmented industry where some business practices haven’t changed in decades. He had no outside funding. In the view of some industry analysts who looked his company over, it was a prescription for doom.
In Andersen’s view, those doomsayers simply didn’t get it. “With one or two, we ran into an amazing amount of-well, I’ll just call it an adherence to the old dogma,” he recalls. “They were wedded to the old business model and how to execute it. Why were we different? This was not how Furniture.com and Living.com did it.”
Precisely. Andersen believes a different business model is exactly why his 15-employee, self-funded company won’t end up like competitors who lost millions and then rolled over. So far, the numbers are bearing him out. Bellacor.com says it will rack up sales of $3 million to $5 million in its first year and achieve profitability in Q2 2001, which is the final quarter of Bellacor’s first fiscal year. It’s projecting 100% growth in year two-more if it gets outside funding.
While the business model has been the driver, it doesn’t hurt that Andersen has plenty of Internet experience, the enthusiasm of a varsity football coach, and a reluctance to part with cash that would do Scrooge McDuck proud. One example: Asked to supply a bio for the interview with this magazine, the CEO volunteered to take care of it himself rather than assign the task to his PR agency at $100 an hour. Another: He thought hard before replacing the office fax machine. “As a start-up, you operate like a start-up. Every dollar counts,” he says. He adds that not having outside funding at launch proved to be a blessing: it helped the company avoid the pitfalls of fallen dot-coms that rushed to invest in technologies and job descriptions beyond their real needs. “When you have $60 million in the bank, it feels like the party will go on forever,” he says. “But if you burn $5 million a month, it doesn’t last long.”
Unlike many Internet entrepreneurs, it wasn’t a passion for the product that led Andersen to start an online company. Though he’s now developed an appreciation for the design attributes of lighting and home accent pieces that are Bellacor’s stock in trade, initially, the merchandise might just as well have been widgets. “What attracted me was the business challenge of looking at an inefficient marketplace that’s huge-maybe $50 billion a year-and how the Internet, which excels in information exchange, could be used to change the system,” he says.
Andersen didn’t come by his Internet savvy via traditional routes like Silicon Valley or VC firms, either. Prior to launching Bellacor, the transplanted Danish native hopscotched the world as an international business development consultant. One of his clients was NetRadio.com, which in the mid-90s became one of the first companies to stream originally programmed music online. Intrigued by his first exposure to the web, Andersen quit the consulting business to join his client as director of sales, marketing and development, helping to build one of the largest early online audiences for streaming music.
Looking for new opportunities after leaving NetRadio before it went public in 1999, Andersen was encouraged by a friend to look at a small, local catalog company in the Twin Cities that sold lighting. Golden Valley Lighting didn’t have a big customer base, but it had something else: relationships with hundreds of vendors. Andersen believed the business could be easily translated online. With only private investments and no outside capital, he and the owners of Golden Valley together transformed the catalog company into Bellacor.com, using its established track record to greatly expand supplier relationships.
They weren’t the only ones who saw opportunity in home furnishings online. In fact, Living.com, Furniture.com, Kozyhome.com, Goodhome.com. and others had tried and failed. But as a relative latecomer to the game, Andersen had the benefit of learning from others’ mistakes and saw an opening where others found a brick wall. “I came to believe the reason they went under had little to do with the basic opportunity and everything to do with poor business models and worse execution,” he says. “The home furnishing sector still represents a very interesting opportunity because it’s very large and inefficient. It seemed obvious to me that there was room to create a whole new dynamic between customer and vendor by opening up direct access.”
Not an online store
In fact, don’t call Bellacor.com an online store. Andersen says that while its business is b2c sales, Bellacor.com is a hybrid between a manufacturer’s representative service and a direct merchant. “An online store suffers from the same fundamental shortcomings that a bricks-and-mortar store does-a few items from a few manufactures. The ability to see merchandise online rather than having to get in a car and drive to a store turned out not to be much of a compelling difference,” he says.
By bypassing the online store model, which in effect weds the merchant to a selected set of merchandise, Bellacor can leverage its relationships with vendors to give shoppers access to nearly half a million products. But how does one site keep that many images loaded up and ready for shoppers to browse? The answer is simple: it doesn’t. The site keeps 6,000 to 7,000 product images up at any given time, and offers access to the rest of its universe through its online product specialists. These are veteran home decor salespeople. Recruited from retail, they are familiar with the offerings of the major manufacturers and they’ve mastered the art of helping customers zero in on needs and desires in a way that leads to specific product recommendations.