Sramana: How did you fund the startup?
Jana: I put it on my personal American Express card at first. I covered the first month of product myself. We have never taken any funding, and we have never taken on any investors. We also never had any startup capital. I was able to quickly pay myself back for the product. I would say I put around $5,500 of my own money in before we started the business. I had to get the website built, the logo created, and I had to pay for the baby expo fees. I wanted a self-sustaining business that was cool enough that people would tell other people about it because it was exciting and they were treated well.
Sramana: You started the business with an email list which had 160 email [addresses]. How did that list evolve and grow?
Jana: Today we have 375,000 emails which are sent every day. We have shipped 1.7 million orders. That gives you an idea of the growth of the business. Our list grew very quickly at first.
Sramana: If you are sending out 375,000 emails every day, how many of them are transacting on the site every day?
Jana: Many. The reason is that we have never bought any of our names, and we do not require you to give us your email address in order to see our deals. We have a huge return rate on our database because those people chose to give us their email addresses as a reminder tool.
Sramana: How much revenue do you do on average in a day?
Jana: The first year we did about $650,000 in revenue. The next year we did $2.4 million. Our third year we did $10 million and the following year we did $14.8 million. Last year we did $16.4 million.
Sramana: What kind of margins do you work on? You obviously are getting an attractive deal from the manufacturer.
Jana: I have never shared that with anyone; however, our average discount to the consumer is 56% if you equal out all the deals. It has to be at least 40% off to make our site. We have usually only done less than that if it is brand new from the manufacturer. Many other deal sites buy wholesale at 40% off and are fine with a 10% margin. We are very different in that regard.
Sramana: The question mark around the entire deals category was if there was enough margins to build a business. You can definitely get revenues. Groupon and LivingSocial are both struggling.
Jana: You are exactly right. We are profitable and have not lost money. We don’t have loans or investors. We have done business with 1,500 manufacturers, and we don’t owe any of them a dime. We have over 70 full-time employees here in Salt Lake City. In general, deal sites are not profitable. They have focused on top-line revenue for so many years that they have lost sight of profitability. The sites you listed have left everything up to the supplier for the customer experience.
Sramana: Groupon and LivingSocial squeeze their merchants so much that they do not return. Do yours come back?
Jana: I can’t think of one manufacturer that we have worked with that would not want to work with us again. The reality is that we only have two steals a day on each website, so that limits the number that we can repeat with. There is a huge entertainment factor to our business, so I do not want to repeat. We try not to repeat brands. We do repeat some of the larger brands, and in some cases we have the product made specifically for us.