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Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy (Part 3)

Posted on Sunday, Nov 14th 2010

Sramana: When you decided to launch your online e-commerce solution, what was your pricing strategy?

Roger Hardy: We sold them for about $19. The rest of the market had very little competition. It is a very fragmented market with little consolidation. That meant optometrists were able to charge premium prices. We introduced a level of competition, and our business experienced success very quickly.

Sramana: How did you acquire customers?

Roger Hardy: One of the first things I did was buy the word “contact lens” from Snap.com and AltaVista. Any time a search was done on “contact lens” they would see our banner ads. I was fortunate because we got to that mark before others thought of it and we had locked in big agreements. At the time, if my business had not been successful it would have been difficult to pay them.

My first website cost about $2,500. All of the advertisements came the first day that I had my site live. We had 30 orders the first day and more than $68,000 in sales the first month. It went up from there. We were fortunate in our timing to get that early start, and we have been off and running since then.

Sramana: What year was that?

Roger Hardy: This was in 1999.

Sramana: Did you do anything else to get customers other than your keyword agreements with Snap.com and AltaVista?

Roger Hardy: At the time we did a decent job of search engine optimization. There was not a ton of competition at that point, so we were able to figure out how to get seen in all the various search engines. We had a number of engineers who were very good at figuring out the SEO components. That is how we generated our traffic. The value proposition was interesting for consumers.

Sramana: Where did your inventory come from?

Roger Hardy: We started out with the philosophy that we wanted to have product in stock. In the business that we are in, most optometrists cannot stock a large amount of inventory, and they cannot service every customer who comes through the door. Optometrists have to order the contacts, and customers would return a week later to pick them up.

Our philosophy was that we could serve customers better by having an inventory so that when a customer came, we would have it in stock and be able to ship quickly. We started purchasing inventory and we got better at predicting what inventory we would need so that we could get 80% of our orders out within 24 hours. Today we have more than $14 million of contact lenses in stock. That lets us get 95% of orders shipped within a day.

Sramana: When you started the business, how much money did you put into building inventory?

Roger Hardy: My strategy was governed by cash flow. I started the company with $10,000 in cash from my brother-in-law and a Visa card which had a $10,000 credit limit. That financing, along with our supplier inventory credit terms, governed our strategy. Our guiding principle was that whatever we sold each month we would put into inventory. When we were selling $70,000 a month, we had an inventory valued at $70,000.

This segment is part 3 in the series : Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy
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Before you can buy contact lenses you must first have a valid and verifiable contact lens prescription. According to http://www.coloredcontacts.com , federal law requires that you be examined by a doctor for contact lenses to get a prescription that can then be verified, and to get proper instructions and follow up care. Even if you have good vision and just want to change your eye color, you will still need to be examined by a doctor to get a prescription for a non-corrective colored contact lens that can be verified.

w. hunter Sunday, November 14, 2010 at 8:18 AM PT