The world’s largest retailer will end free shipping for online orders under $50 Canadian starting April 2.
With only 65 employees, the e-retailer relies heavily on technology and says it’s profitable.
After only three years of selling discounted products online, NoMoreRack.com Inc. is on track to bring in $300 million in e-commerce revenue in 2013, three times last year’s total of $100 million, says CEO Deepak Agarwal.
Investors are taking notice, as the e-retailer secured $40 million in new funding this week, on top of $12 million it raised in November 2012. Investors are fond of NoMoreRack because it’s growing fast, Agarwal says, but also because it’s a lean operation that relies more on technology than it does manpower. So it’s very profitable, he says, though he wouldn’t disclose specifics.
“A lot of retailers of our size have hundreds of employees,” he says. “We have 65. What sets us apart is that we’re able to deliver extreme value with low overhead. We cut out as many of the distributors and middle men as possible, and because we have such low overhead we’re able to operate on low margins. This has allowed us to ramp up quickly and grow.”
NoMoreRack.com works with 400 manufacturers around the world to sell items at 50%-80% off retail. All orders are drop shipped, which means those manufacturers ship each order directly to the consumer. Not having to invest in warehousing product and fulfilling orders allows the e-retailer to focus more time and money on customer acquisition, which is its biggest expense, Agarwal says.
The merchant invests heavily in ads on Google, AOL and Yahoo, in addition to social networks and in television commercials. A large portion of its ad spend, around 30%, goes to Facebook display ads and an array of other personalized and retargeted ads that appear in consumers’ Facebook newsfeeds. Facebook is a major sales driver for NoMoreRack, with around 35% of its site traffic coming directly from the social network, he says.
Mobile commerce is also a major priority—25% of orders come from shoppers on mobile devices, and the merchant expects that percentage to rise to 40% to 50% within the next year. It currently operates a mobile-optimized site, iPhone app and Android app. Its next step is a tablet-optimized web site, which it expects to roll out within the next few months.
As for the next few years, NoMoreRack has set its goals high. It aims to capture 20 million active customers. Currently it has three million active customers—shoppers who have placed an order in the last year—14 million consumers have registered on NoMoreRack.com and receive e-mail alerts.
“A lot of retailers can grow revenue, but it’s easy to grow top-line revenue,” he says. “We’re in an age when most retailers have thin or no profits, and a lot have losses. We’re able to drive profitability, and I think that will help us as we aim to become a household recognized brand. We’re just getting started.”
Oak Investment Partners and HTV Industries led the $40 million investment round. Last year, Giosis Gmarket International Pte. Ltd., which operates online marketplaces in Asia, led a $12 million investment round.
“Nomorerack’s impressive growth over the past year shows that it has the potential to become a leader in online shopping and is addressing an unmet market need,” says Ifty Ahmed, a general partner for Oak Investment Partners. “The company is well-positioned to take advantage of industry trends to directly connect manufacturers with consumers.”
NoMoreRack.com is No. 202 in the Internet Retailer Top 500 Guide. With a 1023.6% growth in 2012 online sales, it was the second fastest-growing retailer in the guide. Groupon Goods, the e-commerce arm of Groupon Inc. and No. 65, was the fastest, with 2086.1% growth.