Friday, December 12, 2014
How Onestop Internet Is Powering Ecommerce For Brands
Story by Benjamin F. Kuo
If you're a brand or retailer, needing to get online, there are a lot of things to deal with to run your e-commerce business smoothly--everything from your e-commerce site itself, to taking photos of your products, packing and shipping, to digital marketing. If e-commerce isn't your main line of business, how do you get a handle on all of that? One Los Angeles company--Onestop Internet (www.onestop.com) has created a growing business handling exactly that. We spoke with CEO and founder John Tomich to learn why the company has been seeing so much success handling all of the nitty gritty of e-commerce for many well known brands, including Juicy Couture, The Coffee Bean and Tea Leaf, Lululemon, RVCA, Paul Frank, True Religion, and many others.
For those who haven't heard of Onestop Internet, tell us about the business?
John Tomich: Onestop Internet is an e-commerce services company. We provide a turnkey, back end, managed service offering for brands and retailers on an outsourced basis. We do everything from picking, packing, and shipping to customer service, fulfillment, and providing the technology that powers the e-commerce site, online marketing, creative design, and digital imaging and photography. We provide all of the categories that need to be done if you want to sell products online, at least those that are non ticket and non travel, physical products. We are an option for brands who don't want to build it themselves in-house, from soup to nuts, or don't want to outsource to a single vendor. One of the things that are unique is we use a revenue share business model, typically. Our usual business arrangement is we don't charge or charge very minimally for setup and launch costs. The way we get compensated, is we receive a percent of net sales that flow through the website.
Who are your ideal customers and market?
John Tomich: We have about forty clients today, and I would say about thirty of them are in the apparel, accessories, and footwear space. We have quite a bit of expertise in the apparel sector and in the fashion business. We know a lot about acquiring those kinds of customers and building those brands online. If you look at the Internet Retailer Top 1000, which is a list that tracks e-commerce sites by sales volume, you'll see that Amazon is number #1, and number 1000 does a few million in sales online. We're in that 250 to 750 range, if you want, with brands that are getting significant, multi-million dollar amounts of online business, are growing fast, but typically also have a core business which is outside the Internet, such as wholesale or as a brick and mortar retailer. They want to partner with someone to control their cost, and lock in a revenue share arrangement at an operating cost percentage that makes sense. They also want someone co-piloting, someone where all they do is ecommerce and provides best practices. We're locking in a cost structure for them, and also ensuring that they have an effective solution.
It looks like you have many top tier brands and customers signed up, what has been the reason for their adoption?
John Tomich: I think it's the business model. It's really complicated to run an e-commerce channel successfully. Technology is always changing, and it's very challenging to recruit and retain talented, e-commerce personnel to run everything. That's particularly true when it's not their core business. We're very unique, in that we have a revenue share business model. Our clients like that a lot.
Are those brick and mortar and wholesale business still afraid of cannibalizing their own business through online sales?
John Tomich: We started our company in 2004, and we're now about ten years old. When we started, we did see a lot of concern around the channel conflict you are mentioning, particularly in the apparel business. Wholesale brands and manufacturers were concerned about alienating their department store customers, or the customer base of their specialty stores. That's gone away, for the most part, at least in the apparel industry. It's very rare that you see concerns with that in our core vertical segment. Everyone is now pretty much selling direct on apparel sites now. If you poll all of the brands who sell at Nordstrom's or Macy's, the vast majority also sell direct. That's not universally true, however, there are some niche segments of the market where channel conflicts do arise, particularly in consumer electronics. There's a lot of issues there around pricing and controlling MAP for their resellers. In that area, clients are still concerned about that, but you have to explain to them, even though it sounds counter-intuitive, that if you control your own website, you can be supportive of pricing for your resellers. If you don't sell your own product on your website, you're leaving the internet to sell your product, so they're going to find the product on eBay, and through third party sellers on Amazon. Your own website can clean a lot of that up, and control that, if that makes sense.
You've got a very interesting background. How did you end up going from Senior Associate at a venture capital company to CEO at a fashion related business?
John Tomich: Actually, prior to working for the VC firm, I spent a couple of years out of college working on eCommerce and Digital strategy at a consulting agency. I learned a lot about the professional services model, when it comes to doing strategic analysis and buildling e-commerce projects. I had a little of that in my DNA prior to working for that VC firm. At that firm, I really admired how Amazon had done as a business, which is not a surprise, as lots do. One of the areas that they pioneered, was the concept of monetizing their infrastructure in other ways. They started with e-commerce, but they built that into Amazon Web Services, taking their back end and building another business around it. They started in the e-commerce services business, the same business that we have, having pioneered that model with Toys R Us in 1999, running the logistics and technology for that company. I observed that when I was working at that VC firm, and saw that it was a very smart idea. We applied that model to a friend who had an apparel company, and it found that it was a success. We built the initial use case, very successfully took it to another client, then another client, and grew. That's when we all quit our day jobs, and joined the company, and we've been growing every since.
What's the biggest lesson you've learned so far at OneStop dealing with all the complications of shipping products and deaing with e-commerce?
John Tomich: It is a lot more complicated and operationally complex than most people give it credit for. But, that's why you don't see a lot of companies doing this. You can spent a lot on your e-commerce operation, and it's not a guaranteed road to profitability like people think. One of the things you learn, is that there are probably hundreds of technologies you could implement on your website to optimize conversion rates, or increase your average order value, or other things you can do to drive traffic to your website. If you go to the Internet industry events, you'll see hundreds of booths of people who have stuff you can plug into your website to optimize it. That's one of the biggest challenges of running an e-commerce company, which is figuring out where to focus your time, effort, and resources, and figure out which technology to use, and to figure out which operational processes to implement. Frankly, that's the biggest challenge, when you have a wealth of data, and analytics on how to operate your business, information on merchandising, product selling, marketing, customer acquisition activities. Those are all technology decisions, and there are an overwhelming number of directions you can go. Staying operationally efficient is really challenging. That's the essence of our business model. You've got to be very focused, and disciplined about what you're doing, otherwise your cost structure can get out of control.
Is it tough to scale this with having to operate warehouses and customer service?
John Tomich: When we first started Onestop, companies would come to us for a true, turnkey value proposition, handling fulfillment, customer care, technology, imaging, and marketing. However, as we've grown, the average size of the customer engagement has grown, and the industry has evolved. We see lots more clients who want unbundled services, who want maybe several of our service offerings a-la-cart. There's much more emphasis for us now, spending time and money on the technology and marketing piece. Our SLAs, our service level agreements at our warehouses are great, and meet industry standards and match everybody else. But, the real investment focus for us in the technology and service capabilities.