Sramana: You decided to go to market with 1,000 of the most popular products in your market segment. Did you buy that inventory?
Tony Ellison: No, everything we did was drop shipped. We bootstrapped the business, so our only way of making things work was to partner with a distributor out of Chicago. For example, the Encarta software was really just CD-ROMs. The good thing about CD-ROMs is that you don’t need to touch them to buy them. A lot of people had PCs at that time and CD-ROMs were in high demand. There was no need for a warehousing operation, the entire business was managed from my apartment. When orders started flowing in, I realized that I needed a whole lot more than a one-bedroom apartment.
Sramana: Did you finance the startup costs out of your pocket or were there investors involved?
Tony Ellison: I used my own funds. I did not take any outside funds. We have remained privately owned and have not taken any outside funds. We have had a lot of offers, but it just makes no sense for us to take outside funding. We hit profitability early on in the process and our company was growing at a nice pace while being entirely self-sufficient. There was no reason to lose control of the company or start dividing it up between ourselves and investors who may have had completely different agendas.
Sramana: Let’s trace that journey in a systematic way. The Macworld article gave your site enough visibility to validate your hypothesis that there are enough people willing to buy office products online in 1995.
Tony Ellison: Yes. By 1995 we were already averaging over 100 orders a day.
Sramana: Other than the Macworld article how else did people find out about you? There was no Google PPC at that point.
Tony Ellison: If you remember the early days, the popular site was Yahoo. I was one of the fortunate people to have an email from Jerry Yang telling me that I was approved to be listed in their directory. They were building some pretty impressive directories and they covered just about every topic you can imagine. That was a great source of getting discovered. Lycos was also a site that was on the scene. We knew how to leverage SEO at that point and we were coming up on a lot of their search results.
To give you a sense of how scalable our business was, in 1996, we went from 1,000 items to over 120,000 items overnight. That never would have happened if we were a traditional brick and mortar retailer.
Sramana: Were you still relying on drop shipping and avoiding the requirements of taking on inventory?
Tony Ellison: Yes. Our model is very much a bare essentials model. We did not invest in any warehousing until recently. We have been working with distributor and trading partners who would ship the products. We were able to connect to the back end of their databases, provide inventory to our users and handle all the marketing, SEO, and SCM.