Sramana: You have crossed a lot of categories that are not traditional for your market area. What was the strategy behind that decision?
Tony Ellison: We are the first in our industry to cross the traditional lines of office supplies and offer many unconventional products that businesses need. This is important because we cater to small and medium sized businesses. Most of the time there is one buyer who is responsible for not only business supplies but pretty much all purchase. Shoplet is the trailblazer in our industry. We have defined the borders. We have defined the responsibility our industry has to take. We have defined the rules of engagement that companies like ours must have with customers and what the expectation should be from the SMB perspective.
Sramana: Are you still doing all outsourced distribution?
Tony Ellison: By and large we still follow the outsourced model. We have engaged with 3PL companies and we have a number of items we can ship that way. We also have a select amount of products that are now our own brand.
Sramana: I think that one of the secrets of your ability to bootstrap the company to the extent that you have is not having to carry inventory. You have not had to take out loans to cover inventory.
Tony Ellison: I completely agree that it was a low risk strategy.
Sramana: It has also enabled you to expand into other categories and have such a large product offering. Maintaining the correct distribution relationships is not necessarily easy to do. A key aspect of running an ecommerce business is having reliable fulfillment.
Tony Ellison: You have hit the nail on the head. It was not only having the distribution figured out, it was using the Internet. Otherwise I would have had to penetrate markets state by state. I was able to offer a solution on a national basis. As a result the addressable market became much bigger. We were able to gain a huge market with very low risk which gave us universal appeal to distributors. I am proud to say that we transformed the industry.
Sramana: You said you have some private label products. In retail private label is a very profitable strategy that all retailers deploy once they reach a certain critical mass. Which categories contain your private label products?
Tony Ellison: We followed a strategy for private labeling. We don’t have the physical stores that the big boys have. It is important for us to have a small catalogue as a leave behind. Branding was key to our strategy.
We also wanted to control some of the variables on those products. We have private label in and toner which is a low margin business and requires us to source it very well. When you go private label and make buying commitments you can get much better margins but you also have to source it properly.
We felt that private labels let us achieve a premier status in the industry. If you don’t have private label paper then you are not viewed the same way that the big boys are.