May 31, 2006, 12:00 AM

InsideStore.com: Small, with big plans

The second fastest growing site among the Top 500 says it`s growth isn`t over.

As CEO of InsideStore.com and a veteran e-commerce entrepreneur, Eli Katz knows a thing or two about seeing an opening and taking it.

Three years ago frustration with finding and ordering higher-end plumbing products for a home remodeling job led Katz to launch InsideStore.com (No. 476), a hardware and home fixtures web store with 2005 web sales of $5.2 million, an increase of 478% from sales of $900,000 in 2004, its first year, making the company the second fastest growing web retailer behind Blockbuster Inc. (No. 70) in the Top 500 Guide.

“When I was remodeling my home and looking for certain products, I either couldn’t find them or enough information about them,” Katz says. “This got me thinking about an e-commerce opportunity in a very fragmented market.”

The high end

Katz was an early web retailing entrepreneur. He was founder and chief operating officer of Ibeauty.com in 1995, served as CEO of Lanac.com, a cataloger and online retailer of fine china, crystal, flatware and gift products, and from 2000 to 2003 was CEO of Home Décor Products Inc. (No. 107).

But it is Katz’ latest launch that has him the most excited. InsideStore.com is on track to generate web sales of about $10 million in 2006 and the e-commerce site is well positioned to take advantage of the online hardware, housewares and home furnishings market, which in 2005 generated online sales of $2.4 billion, according to the Top 500 Guide.

The company’s retailing strategy is concentrated on selling higher-end interior fixtures and some outdoor products to Baby Boomers doing the ultimate remodel or fixing up a second home. The site carries about 100,000 products in categories such as bath, kitchen, hardware, décor and outdoors. The company’s average ticket is between $500 and $600. “Aging boomers want upper-end home fixtures,” says Katz. “The average value of the home our customers live in is about $700,000.”

InsideStore.com faces some stiff competition from other retailers that also want more market share in the online home fixtures and fix-up space. For instance, The Home Depot Inc. (No. 41) in April acquired Home Decorators Collection (No. 213). As a result of the acquisition, Home Depot Direct has doubled in size and significantly increased its presence in the home décor category with approximately 65,000 new home décor products, according to the company. Home Depot CEO Harvey Seegers also says Home Depot’s direct-to-consumer division has the potential to become a billion-dollar business by 2010.

Marketing partners

But Katz says InsideStore.com will stay within its higher-end niche and is adding up to 10,000 SKUs and more shopping categories, such as lighting. “We don’t sell $30 faucets,” he says. To stay competitive, InsideStore.com also is making several technical changes. InsideStore.com is adding faster search, including guided navigation, with a new application from Mercado Software Inc. and is implementing a new web analytics package from Omniture Inc.

The web retailer also is looking for new marketing partners, particularly companies and organizations that work closely on high-end home remodeling projects. InsideStore.com already has one relationship with the American Society of Interior Designers. “We do e-mail and search marketing, but we also work closely with professional organizations and those relationships generate great word-of-mouth referrals,” Katz says.

Though overall higher interest rates and other factors are slowing the booming U.S. housing market, Katz still sees good growth for his segment and InsideStore.com. “We sell to existing homeowners where there is less churn than in new home development,” he says. “There’s plenty of growth in our niche. We’re on track to double our sales.”

mark@verticalwebmedia.com

 

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