Scaling that up would mean having three tiers of management, scores of interns, nobody knowing the names of anyone in the warehouse, the product team not talking to the customer care team, whole departments dealing with accounts things, it just goes on. You could have 100-250 extra people without noticing, banks to pay off, vast premises to rent, a huge marketing bill, considerable IT infrastructure and so on.
This would be fine if you really were that smart and that good. Why, you could be the next Amazon.com, even put them out of business. What is alarming is that people think that way, they let greed and arrogance cloud their judgement. It is like a disease.
I couldn't agree more. Dare I say it, we've got an "open" floor plan for our customer care and product teams. It helps immensely when you can place a customer on hold and ask a product guy a question without emailing, chatting for calling.
Incorporate flash sales as a daily deal feature, creating re-engagement and perhaps pushing lesser known or tough to sell products. I'd even argue that scarcity is good for a quick grab, but might be a turnoff for regular customers of a site that isn't focused solely on flash sales.
Subscriptions are a slippery slope for physical goods as well. You have to be careful to provide the customer with enough perceived value, while enforcing the notion that the value will be the same every month. At the same time, you can't strain your inventory or infrastructure to maintain the regular flow of these products.
Loyalty programs are probably the oldest, and safest trick in the book. Often times, can be done for free. Perhaps purchases earn points which are only redeemable on products you specify. Could help move problem inventory while saving a few points in payment processing fees.
One should tread carefully with all these options. Like the author mentions, there's plenty of room for innovation in this space.
It's possible that the $40m company is king of it's niche hill. If that's the case, they might look at leveraging their experience and infrastructure in other markets. All the while, working to keep the core business sustainable.
> Perhaps better for everyone (but the VCs)
In an abstract way this makes some sense - more competition, more niche & targeted companies to suit more needs, and an income distribution that's much flatter (naturally) across the board. In the real world, it only takes one person (e.g. Bezos) aiming for something bigger to keep this model from ever thriving.
With competitors such as Amazon, 40 million in a lot of cases might be 10% or less of the marketshare. Or it is 100% of the market but it is tapped out.
Ecommerce is kind of a vast term. I think it is also important to look at if the company drop ships, has inventory, or manufacturers goods in-house. Huge difference there.
http://www.overstock.com/Patrick-Byrne/7371/static.html
Thus overstock has been under attack by Wall Street and has an incredible high short interest. 20% of the stock is reported to be sold short, although Patrick thinks, with the unreported naked short selling, that the number is much higher:
However, what you do not see are precisely the daily operational and margin-related activities that don't make it onto the radar screens of Wall St. but do matter to the comptroller or even CFO. Vendors who you purchase goods and services from set payment terms factoring in an evaluation of the share price. Going from Net 90 to Net 30 will impact cash flow. If your share price action alarms someone enough, they may even refuse to do business except for paid-in-advance terms.
The share price also impacts your PR and marketing efforts. More alarming share price activity makes it more expensive to reach your customers; just as there are many fathers to a success story, no one wants to associate with a perceived loser, so your advertising spend per customer will go up to counter negative perceptions while only achieving the same revenue.
Similar dynamics obtain at the sales interface with customers. Your cash and time spend per customer for the same amount of revenue (thus dropping your margins) goes up with greatly negative perceptions incited by adverse share price activity. In the case of Overstock, it is not the b2c customers that watch the share price, but the b2b customers; the partners Overstock sources its inventory from.
"Nice $40M ecommerce company - call me when it scales and I can profit obscenely while strapping you with loads of debt and/or other unwanted obligations/management advice so that you end up firing half of your staff after doing the thing I made you do because I now control the board."
From the "other" Fab:
http://betashop.com/post/72547337624/betashop-quarterly-volu...
On a personal level I took some justifiable hits in 2013. That goes with the territory when you raise money at $1B and then cut headcount and operating expenses as dramatically and swiftly as I did. I freely admit, when you grow revenue 500% year over year and become a media darling overnight, it’s hard to keep perspective. No doubt, we had lost perspective at Fab. We had started to dream in billions when we should have been focused on making one day simply better than the one before it.