Sramana: What specific steps did you take to get the business launched? How did you acquire your customer base?
Pavel Sokolovsky: We put up a website using open source software. I had a bit of a technical and development background. Victor took on the challenge of accurately describing the products on our site. He did the groundwork to make sure the information that our future customers were going to need was available on the site.
Sramana: Were you carrying inventory?
Pavel Sokolovsky: We did not carry any inventory at all. We leveraged our relationships with distributors that we knew from our previous work at my father’s company. We sold inventory that they made available to us. We had to convince the distributors that we were a safe bet. We had to convince them that we could pay our bills, which was indeed a challenge in the beginning but over time, it has become less of a challenge.
Our initial customers came organically. That led to us getting a little bit of cash, which we reinvested into advertising. Eventually, we hired more people and built an organization around us.
Sramana: This sounds like a classic niche e-commerce case study. You start with organic traffic and build initial revenue with that traffic. You typically maintain relationships with suppliers that let you avoid taking on inventory until you have grown enough to get reasonable terms from your distribution partners. When you can afford it, you gradually start to use Google PPC. Is that how it played out for you?
Pavel Sokolovsky: We used a lot of other SEM channels such as price comparison engines.
Sramana: Everybody knows Google PPC. Can you talk about your other strategies in a bit more detail?
Pavel Sokolovsky: We also looked at a lot of price comparison engines. There are companies in that category such as Shopzilla and PriceGrabber. We learned that if you just open the fire hose with those companies, you will get mixed results. You have to be careful what you promote and when you want to promote it. At some point, we started using an algorithmic method to tune our advertising buys there using a large dataset. When our catalogue list hit tens of thousands of items, we were not able to list all of our products there and we needed to have a strategic method of handling that process.
Sramana: Let’s drill down on that some more. You are alluding to a methodology of marketing through price comparison engines. How did you put one foot before another in that category?
Pavel Sokolovsky: Price comparison engines are pretty straightforward. When you set up your account, you tell them who you are and how you are going to pay them. Price comparison engines try to compete to get traffic to their site. Once consumers are on their site, they will use the proprietary search features to compare vendor products. So, if a consumer is looking for a box of air filters, they will use a comparison shopping site to find out who is going to give them the best deal for those filters.
From the business end, you have to submit a structured data feed of your products. You have to include the name, model number, a link image, and the price you are selling it at. They will take that information and add it to their database. When a consumer searches for a product and they click on a link, it will take them to the offering merchant’s website. The key is that the merchant must pay every time that link is clicked. It is similar to the Google model in which you only pay for traffic when you get it. However, it is different than the Google model in which it is product advertising, not keyword advertising.