In its second-largest acquisition, Amazon buys the company for $970 million.
Living Direct uses proper planning and realistic expectations to guide business development.
Expanding an online business needn't be a leap into the unknown, providing a company has realistic expectations and takes the time and trouble to truly understand and test new business development initiatives, said Living Direct president Jason Roussos.
Roussos spoke today at the Internet Retailer Conference & Exhibition at a session entitled "When opportunity knocks, what's the right answer? When to expand your business." Living Direct launched three microsites in 2009 and grew sales year over year almost 15% to about $40 million.
To keep a firm handle on business expansion, Living Direct, which operates niche web sites such as CompactAppliance.com, PortableAirshop.com, HotWaterSource.com, Kegerator.com, SimplyDehumidifier.com, WineCoolerDirect.com and LivingDirect.com, first determines realistic expectations during the transition to new business development, addresses what management changes will be needed to make the new initiative work and tests any concept thoroughly prior to any big roll out.
"If you want to grow, preserve your core but also provide a base of continuity," he said. "Also ask yourself: 'What can we be the best at?' 'What drives our economic engine?' and 'What are we deeply passionate about?'"
Expanding an online retail business should also be done with reasonable expectations. "If you fail, it helps to do it early, often and inexpensively, but you also learn from your mistakes," he said. "Vendors might not want to hear this, but if the new expansion requires a new technology partner don't be afraid to ask for a trial period or an early out clause."
At Living Direct, which has been selling online since 1999, new business opportunities are classified into three categories: existing markets currently served, existing markets not served and new markets. "The first level helps to determine limited risks, the second presents risks that are hefty enough that they could prompt the cancellation of the project and the third represents opportunities that you can't articulate a variety of outcomes," Roussos said.
To create new business expansion opportunities, web retailing organizations also need to create a culture of innovation. During a recent holiday brainstorming session, a customer service employee suggested offering free return shipping, which could be an expensive proposition given the retailer's average order value of about $350. But the idea turned into a major business expansion opportunity that helped Living Direct increase holiday sales year over year by 25%.
"You must engage more than top management," Roussos said. "Small innovations lead to bigger ones and it should be happening at all levels."