One of every five beauty purchases online is made via the Amazon marketplace, according to a new report.
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UncommonGoods launched a test web site for the Christmas 1999 shopping season, funded by Bolotsky and other individual investors. But by the time the company officially launched a site in July 2000, web companies of all sorts were falling out of favor with venture capitalists.
After a board meeting, the company decided to tighten its purse strings and run the company within its means, a decision that meant ditching a big, expensive marketing campaign. The company reduced its staff, some through attrition and some through layoffs. The company today operates with only 23 employees, which includes consultants and part-time employees.
Make it work
The bottom line was the bottom line, according to Bolotsky. “Our marching orders were to make it work with the resources we had,” he says. “We were going to do a multimillion-dollar marketing plan if we raised the VC money, like our competitors, but I was not willing to make that commitment without the VC money.” UncommonGoods says it spends less than $20 to acquire each new customer.
The company has used affiliate agreements, some online advertising, traditional direct response and portals, but mainly has relied on coverage from consumer products media, such as InStyle magazine, Yahoo! Shopping, The Chicago Tribune, Modern Bride magazine and a spot on NBC’s Today Show. “We spent a reasonable amount on marketing by normal business standards but that was conservative for online retailers,” Bolotsky says. This proved to be the smart path as Bolotsky observed the market around him. “The first-to-market mindset was to drive off the cliff at 100 mph with the idea that there was something on the other side,” he says. “My attitude was that you might not make it to the other side, that the chasm may be bigger. We went slower than other online retailers and that’s what has saved us to date.”
To find unique merchandise for its site, UncommonGoods has a team of merchandisers who attend gift and craft shows around the U.S. and abroad. And the company is developing a scout program in which users can suggest artists and unique items. In addition, the company encourages artisans and vendors to send sample products to be considered for inclusion in the site’s product mix.
Although UncommonGoods goes outside the company to discover new products, it handles the inventorying, packing and shipping itself. The company has taken inventory of most of its merchandise and handles fulfillment in-house in order to control the customer experience. BizRate says UncommonGoods has done well in that regard. BizRate gives UncommonGoods.com a Gold Store rating, and customers rank the store 8.6 out of 10 overall. On-time delivery received the highest ranking: 9.2. Customer support got an 8.9 rating while order tracking got a 9.1. Fulfilling in-house also keeps costs down and gives the company a chance to build expertise in doing so. The company also does its own returns and, while returns are complex due to the different suppliers it uses, its return rate is less than 5%.
UncommonGoods.com’s conservative strategy is getting attention from the retail industry. At the National Retail Federation’s annual conference in January in New York City, Bolotsky sat on an Ernst & Young panel of retailers and analysts including BlueLight.com, ToysRUs and Goldman Sachs, representing the only pure-play e-retailer. Carolyn Topp, associate director of retail business strategies at Ernst & Young, notes that UncommonGoods’ business is well-placed. “David has developed a specialty niche on the Net,” she says. “And he describes building his business one SKU at a time, the old-fashioned way. His description of success is to not lose sight of the fundamentals: good customer service, a distinctive merchandise assortment and good prices. And having been a retail analyst at Goldman, he was in a position to assess the fundamentals of companies. That has to be beneficial to opening up a business.”
Bolotsky combined what he learned about retail at Goldman Sachs with an entrepreneurial drive. And he knew how to translate that drive into building a company, say his UncommonGoods coworkers. Marc Gibley, who heads up marketing and business development and has been with UncommonGoods.com since December 1999, says Bolotsky was passionate about getting the right team of people together to build the company. “He interviewed every single person we hired and spent hours with them,” he says. “David wanted people to fit culturally and have a work ethic and drive to build an enduring company.”
Bolotsky’s tenacity in building a successful web business was what kept the staff motivated even while staffers saw their VC opportunities dry up along with their plans for a big marketing launch. “Dave stayed true to his vision of having an online retail site that by consumers’ standards would be the best place to shop on the web and sticking to the fundamentals to do that,” Gibley says. “He thought about the long term and never ever talked about going public.” Gibley contrasts that attitude with the prevailing notion at the time that had companies opening up just to go public and make money, not thinking about building an enduring business. “Knowing that you have a CEO who is not going anywhere is motivating,” he says. “No matter what happens he’s not giving up the ship.” l
1999: Started UncommonGoods.com
1995-1999: Managing Director of Retail Research, Goldman Sachs
1992-1999: Institutional Investor All-America Research Team, Goldman Sachs
1987: Analyst at Goldman Sachs
Bachelor of Arts, State University of New York at Binghamton