Ashford’s CEO brings the focus of a concert pianist to online luxury retailing
By Rick Markley
The strength of mom-and-pop businesses is their ability to know and serve customers in a timely and personal manner. But can a model that has been successful for small shop owners work for a retailer that sells $70 million in luxury goods per year through the impersonal Internet?
Ashford.com says the answer is yes. Like a stereotypical dot-com, the company is young, its CEO is young, and its clients are young. But parting from stereotypes, Ashford.com is built around old-fashioned retail values—namely customer service.
Just like in the olden days of small retailing, Ashford.com likes to know its customers and treat them special. Each year, for example, the company hosts a Christmas party in Houston at its lone retail store. The invitation-only event is for customers and investors; most are from the Houston area. Ashford’s 38-year-old CEO Kenny Kurtzman, an accomplished pianist, provides the musical entertainment. “One time we sold about $25,000 in one hour,” he says. And intangibles like making the customer feel good may determine Ashford’s longevity in a market that is increasingly unforgiving of dot-com retailers.
A difficult market or not, Kurtzman says there’s room to grow in the online luxury sector. Ashford’s research shows that about half the 100 million people online buy luxury items. About 20% of that half—10 million—prefer to buy luxury goods online without ever touching or seeing the product. “And that’s our target,” Kurtzman says. “That is a huge market; we only have 200,000 customers now and there are 10 million of those people out there.”
Shake, rattle or roll
When Wall Street’s dot-com love affair last year turned as stormy as a Liz Taylor marriage, pure-play survival, let alone success, could not be to taken for granted. Chicago-based Analyst Keven Wilder, of Wilder and Associates, says Kurtzman has his work cut out for him. She believes there is more supply than demand in online luxury retailing, and she expects a shakeout. “There will definitely be weeding out, especially if we head into a recession,” she says. “And the people who will be left standing are the ones with a stronger brand and other channels to sell their brand. Ashford has a daunting challenge. Pure-play companies really do have a problem, especially as marketing dollars get tighter and capital contracts.”
But Kurtzman does not share Wilder’s belief that a shakeout is coming. The worst of the weeding out has likely taken place; three of Ashford’s online competitors (Miadora; Eve, which sold fragrances; and Adornis, which sold jewelry) have already closed shop, he says. “Overall, the pendulum has swung too far against Internet retailing,” he says. “There are companies that have viable, fundamentally sound business models and are managing those models effectively that are going to survive and grow. Eventually, when we get through the storm, people will begin to understand that. Just as there was an over-reaction to the category on the upside, now there’s been an over-reaction on the downside.”
Even if Kurtzman’s wrong about the shakeout, he says Ashford will survive. If anything, the challenges only make Kurtzman more determined to succeed. “He’s a very competitive person,” says Ashford Co-founder Robert Shaw. “He doesn’t like to lose, and that affects the entire culture here.”
“When someone puts a challenge in front of me, I like to prove them wrong,” Kurtzman says. “With so many people doubting whether companies like ours can make it, it’s become personal with me, and really for the whole company. We know we’re going to make it and we’ll show everyone this kind of business can be successful.” And so far Ashford is on track. The company had sales of $52.8 million for three quarters ending Dec. 31, nearly double 1999 results. Ashford executives say the company will be profitable by the end of this year.
Some assembly required
Ashford executives know that to be successful they cannot simply wind up their business model and let it run. Kurtzman has a plan not only to survive the dot-com dark days, but to flourish. Kurtzman believes corporate sales, targeted marketing, partnerships and attention to detail will lead Ashford to profitability.
A year ago, Ashford, like several other specialty retailers such as Egghead.com, waded into the b2b pool. “This year our focus is on our corporate gift business,” Kurtzman says. “Compared with the retail business, this model has higher margins, faster returns, is less seasonal, and helps build the retail brand. Sending 4,000 packages to one corporate client, each item in Ashford packaging, is a very efficient way of getting people to know more about Ashford.” Wilder agrees that the b2b angle is a good plan. “The corporate gift section is one of the best parts of the site,” she says. “They offer things that work, and all the other services like engraving.” Ashford sells corporate gifts through a direct sales force.
Ashford is also targeting its marketing efforts to reach those most likely to buy. “Spending money just to build a brand is not an efficient use of our capital,” Kurtzman says “We invest our marketing dollars in online advertising, search engines and shopping sites because that’s the lowest cost of customer acquisition.” Ashford is in its second year of a major marketing deal with Amazon, which received 16.6% of Ashford’s common stock in exchange for marketing services—namely a link to Ashford from Amazon’s home page. The deal was renewed at the start of this year. Ashford also has deals with portals MSN and Yahoo!, and is using targeted e-mail marketing.
For the past 10 months, Ashford has sent targeted weekly e-mail messages highlighting specific products customers will likely be interested in, based partly on results of a customer survey on its site. And, the company uses inserts in shipping boxes to get its message to customers. “Our conversion rates have jumped dramatically,” Kurtzman says.
“The way we’re building the brand is through experience, not by spending inordinate sums of money on off-line advertising campaigns,” Kurtzman says. “A lot of other pure-plays made the mistake of burning a lot of cash to build a brand without generating any sales; we’re doing the opposite.” If the customer has a good experience he or she will return and spread the word to friends, he says. Ashford’s return customers made up 28% of its Q3 2000 sales.
In addition to the Amazon marketing partnership, Ashford has used acquisitions to expand its offering and reach. Early this year, Ashford said it will acquire Guild.com. Wilder compliments Ashford on its partnership with fine-art web site as a “great way to expand their offering without cluttering their web site.” Says Wilder: “That is appealing to the same type of customer. To the extent that they can do more to leverage the luxury lifestyle positioning of their site will help them succeed.”
Of the Guild acquisition Shaw say it has “neat synergies and is a beautiful company financially.” He says Ashford should be able to convert Guild customers into Ashford customers and vice versa. Ashford hopes the addition of the fine art offering will increase the reasons for shopping at Ashford and speed the company’s path to profitability. The Guild acquisition also gives Ashford a springboard into the catalog medium. Guild.com has a good catalog system and Ashford is looking to piggyback on that expertise to go multi-channel, Kurtzman says.
The Guild acquisition was not the first for Ashford, nor will it likely be the last. In January 2000 Ashford bought fragrance retailer Jasmin.com, and in October 1999 it added TimeZone.com, a community and content site for watch collectors. TimeZone was receiving 80,000 visitors per month from collectors who buy between two and ten watches per year. Ashford sells a line of luxury watches. In fact, Ashford began as a watch retailer, called New Watch. But at Kurtzman’s insistence, the company expanded its line and changed its name. He felt the customer acquisition costs were too high if the company offered only one product. Shaw says Ashford is looking at other brand-expanding deals, but won’t say with whom.
By any other name
But even as it expands, Ashford intends to continue to pay attention to the details. Ashford learned a valuable lesson in customer responsiveness this past summer. A buyer contacted Ashford regarding a $175,000 diamond. “They sent out a number of e-mails to several sites,” Kurtzman says. “We were the first to respond—within an hour. We ended up winning the business. That kind of responsiveness drives sales and makes customers happy; we saw that in action.” That diamond was the highest-priced item sold on the site to date.
“We pay very close attention to how we respond to customers on the phone and through e-mail,” Kurtzman says. The average call wait time during this past holiday season was 31 seconds, which dropped from 69 seconds in 1999. “We try to treat e-mail as if it were a phone call,” he says. “We were responding to over 80% of the e-mail within two hours with the answers not just ‘hey, we got your e-mail.’”
Kurtzman’s attention to customer service was put to the test this past holiday season when Ashford guaranteed on-time delivery. To back that guarantee, Kurtzman personally sent 25 roses to each customer whose order arrived late. The program was promoted through ads in The Wall Street Journal and USA Today, on Ashford’s home page and through e-mails. Ashford was successful on 99.5% of its orders, meaning it sent out fewer than 500 sets of roses. “Anything you can do to make the customer feel special helps,” Wilder says. “Customers hate being ignored. Sending roses is a very nice touch.”
Paying close attention to the backend operation was key to keeping the rose count low. Ashford’s infrastructure is such that it can ship a product within 15 minutes of when the sale is made. Ashford operates a single, 45,000-square-foot warehouse and fulfillment center in Houston. “It’s a combination of our business model and the systems we’ve put in place,” he says. “Everything we sell is small and light. So the logistics of picking and packing are different than if you were shipping large, heavy items. We’ve worked very hard at tying all the systems together and building a process that is efficient. I think we do that element of customer service better than anyone else.”
All the right notes
And doing things better than anyone else is important to Kurtzman. His competitive juices flow so deep, in fact, that he passed on a career as concert pianist to play sports. Both Kurtzman’s parents teach music at Washington University and his sister is a professional violinist in Switzerland. Kurtzman, who has played since he was 5, strongly considered becoming a concert pianist in high school. But, he was very involved in sports, and realized he would have to give up sports to focus on the piano. The thrill of competition was too much.
Much of Kurtzman’s competitive attitude was honed on the playing field. Aside from high school sports, he played soccer at Rice University, basketball at Cambridge and went to the French Open as a member of the U.S. Paddle team—a sport similar to tennis and racquetball developed in Mexico.
But Kurtzman also incorporates what he learned from music into running a company. “I’ve drawn from the discipline of learning and practicing a piece of music to get it to perfection. As an Internet CEO, you have to have a lot of discipline to manage the business; all of it has to be well timed and perfect in its execution.”
Part of his management philosophy involves staying in touch with what customers want. The typical Ashford customer is not the Thurston Howell III type. “It’s someone between 35 and 45, well off, busy all the time, and who knows how to use technology and shop online,” he says
Kurtzman also draws on his background as a way to relate to the company’s clientele. While attending Rice, Kurtzman spent two summers on an archeological dig in Rome. “I wasn’t an archeology major, but I spoke Italian and was willing to dig dirt, so they sent me over,” he says. At age 12, he lived in Florence for a year while his father did research. Knowing Italian, having lived in Europe and knowing piano has acclimated Kurtzman to the luxury-goods industry. “The other things I do besides run Ashford help when talking with industry people because they like to talk about those kinds of things,” he says.
Kurtzman believes that whether it’s sports, music or business, it takes both clear analysis and passion to be a winner. “My background is very analytical, very numbers driven,” he says. “The luxury goods industry is much more about design and passion and heart. Combining those two is what we have to do. We’re bringing analytical technology to an industry that’s run on guts and passion. That’s been very interesting.”
rick@verticalwebmedia.com
Kenny Kurtzman
— Background
– 1989 to 1995McKinsey & Co., principal in
computing, telecommunications, systems
integration, banking and energy industries
– 1995 to 1999 Compaq Computer Corp.,
vice president and general manager of
several divisions
– May 1999 Ashford.com, CEO
— Education
– Undergraduate degree in economics, Cambridge University 1984
– Bachelors’ degree in economics magna cum lauda, Rice University 1985
– Masters in Business Administration, Graduate School of Business at Stanford University 1989 
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