Sramana: This is very similar to how you probably manage CPC [cost-per-click] campaigns with Google AdWords.
Pavel Sokolovsky: The high level logic is the same. You have to know how much a data object is worth and when to stop spending.
Sramana: What about the data structure piece? Based on the keywords you are promoting on the price comparison engine, you are required to feed certain data structures to the engine?
Pavel Sokolovsky: It’s not keyword driven. They do some things with keywords on their search engine functions, but on the feed side we just submit our products. We send in an XML feed with descriptors such as product short description, product long description, model number, brand, price, weight, color, etc.
Sramana: So instead of keywords, you are providing product data structure?
Pavel Sokolovsky: Exactly.
Sramana: If you look back at how you have built your business, can you quantify your distribution of customer acquisition from the various sources?
Pavel Sokolovsky: I don’t have raw data, but I can give you some directional info. Our first year was weighted towards organic traffic. As time went on, we started to expand our efforts into paid traffic. Today, we are driven by paid traffic and we receive very little of our customer base from organic traffic. Paid traffic probably accounts for 60% of our traffic.
Sramana: What is the split between PPC and price comparison engines?
Pavel Sokolovsky: Over time Google has taken more and more of that advertising share. They have gotten better at that. When they launched their product listing ads and started promoting it on their front page, it really generated a lot of traffic. They got us in front of a lot more searchers.
Sramana: Have you used any other customer acquisition channels?
Pavel Sokolovsky: We used some advertising platforms from places like Amazon.
Sramana: How have you managed the inventory side of your business? Are you still leveraging your relationships with distributors?
Pavel Sokolovsky: We started seeing trends where certain products became very popular. They were ordered several times a day. We decided it would be better for our customers if we could get those products shipped faster. We started stocking those products in our warehouse. A year into our business, we had to move into a much larger facility and we have packed every square inch of it.
As we have gotten more experience, we have started doing some predictive purchasing. We have managed to maintain a good balance of reliable supply chain partners and inventory on hand.
Sramana: If you look at your trajectory from year one to year four, what is the size of your inventory?
Pavel Sokolovsky: Inventory has definitely grown over time. We have always been conscious of keeping inventory low enough that it makes sense financially. We can’t have a lot of excess money tied up in inventory. We also know that more inventory is better for our customers.