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May 2001 |
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Bellacor’s CEO may have been late to the game, but he’s learned from the early flame-outs
By Mary Wagner
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.”
Seeking efficiencies
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.
Customers may browse the images of the SKU selection kept on the site, but if they don’t see what they want, they can e-mail Bellacor for help and a product specialist will respond within 24 hours. After determining the customer’s needs, the product specialist will comb though the other products to which Bellacor has access, digitalize the product images and push them through to the customer with a detailed description. All of the manufacturers Bellacor deals with have supplied graphics of their product lines. In some cases, Bellacor pulls the images from CD-ROMs the manufacturer has provided; in other cases Bellacor scans images from manufacturers’ catalogs. “Content is expensive—once you choose to merchandise content on your home page, you’re committed to keeping it fresh,” Andersen says. “You’re anticipating what someone might want to buy, and you’ve created significant overhead structure that’s highly inefficient.” Other than for the ready-to-browse items, Bellacor doesn’t create digital images or content or send pricing information until a customer tells a product specialist what he or she is looking for.
The same product specialist stays with the customer throughout the search and shop process. The specialists’ knowledge is a critical link between the enormous selection of goods available in the highly fragmented home furnishings industry and the shopper’s need to connect with another person throughout the buying process. The home accent shopper, Andersen says, is an “overwhelmingly female demographic. The customer for these kinds of products very much prefers to have someone help her with the buying decision. The successful traditional bricks-and-mortar furniture stores do an extremely good job of this. We recognized that, and we wanted to carry it over into a more efficient environment.” Bellacor’s experience proves that there’s value to replicating the real world on the web: the average order doubles when shoppers work with a product specialist rather than make their selection unassisted.
Bellacor.com doesn’t sell bulky pieces such as sofas and dining room sets, instead sticking with items such as lamps, mirrors and smaller accent furniture. In addition to being costly to ship, bigger furniture doesn’t fit the business model because it’s expensive, infrequently purchased, and typically requires family buy-in at purchase time. Lamps, mirrors, and less costly accent pieces are usually individually selected impulse purchases which occur more frequently (read: repeat customers). In fact, 20% of Bellacor’s customers buy from the site again within 90 days.
Back to the ‘50s
The site offers three services. The price quote service, a side-by-side price comparison, permits a customer with specific product information to see a direct price comparison and possible alternative prices. The personal shopper feature enables shoppers to search with the product specialists. Project portfolio, the newest service, launched in March, lets customers doing projects, such as buying or remodeling a home, manage lighting and fixture buying with Bellacor. “They need the same products, but they need a lot of them and they have to arrive at a specified time because the builder has to install them,” say Andersen.
Bellacor’s largest sale so far is a $9,000 crystal chandelier. The average ticket is about $400. The conversion rate is about 4% — pretty good, by industry standards. But conversion rates aren’t so much the issue at Bellarcor as are traffic rates, say analysts familiar with the company. The site is getting about 20,000 to 40,000 visitors per month, and the company spends little to nothing on online or offline advertising. It’s exploring additional partnerships such as the one it has with Improvenet.com, but to date has depended largely on a revenue share affiliate program through Commission Junction’s network to build momentum.
To date, 1,100 of Commission Junction’s affiliates have applied to post Bellacor’s banner on their sites. Plain old word of mouth and very selective magazine advertising help spread the word too. But will it be enough? “The challenge Bellacor faces is scaling up its operations to the point where it’ll increase its number of customers without decreasing the level of customer service it’s been able to provide thus far,” says Paul Ritter, managing director, Strategic Research Advisors, Ashland, Mass. “They’ve been spending very small amounts of money so far on increasing visitor traffic and they’re doing a good job of converting—the tricky part in the future will be increasing traffic without overspending on customer acquisition.”
Andersen knows that, but for now, he’s focused firmly on profitability before growth. And if growth is slower as a result, that’s fine with him. He might even argue that it would give the retail home furnishings industry time to catch up with the new opportunities presented by the Internet. “We still deal with a number of manufacturers that are set up so that to place an order, we have to type it up, put it into a fax, and send it to a local rep, who has to stamp it, then put it on his fax machine to send to the vendor,” he says. “This is why the opportunity in this sector is so exciting—it still has a lot of business practices that haven’t changed since the 1950s.”
mary@verticalwebmedia.com
Jan Andersen
l Background:
2000: President and CEO, Bellacor.com
1996: SVP Sales and Marketing, NetRadio.com
1992: Founder, International Resource Group Inc.
1989: VP Sales and Marketing, Numerex Corp.
1986: International Marketing Manager, The Toro Co.
1983: International Marketing Manager, FPI, division of Beatrice Corp.
1979: Regional manager, Plumrose Corp.
l Education:
1987: MBA, University of Saint Thomas, St.Paul, Minn.
1976: Business degree from Niels Brocks College, Copenhagen, Denmark 
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