Sramana: How do you do in terms of sell-through? How much of the inventory that you invest in is able to be liquidated?
Pavel Sokolovsky: I would love to say all of it but there have been some decisions that turned out to be less than ideal. Eventually we have been able to sell all of it.
Sramana: Is there any kind of expiration on your products?
Pavel Sokolovsky: There is not a hard expiration. The biggest challenge we face is when a manufacturer updates their product line and we have an old version hanging around our warehouse. Generally, the updates are very slight and there are often customers who are interested in getting a slightly older model in interest of saving some money up front.
Sramana: That makes things a bit easier. The genre of retail where you have to handle a lot of expiring inventory, such as food or clothing, are much more complicated.
Pavel Sokolovsky: I would agree.
Sramana: What percentage of your business is B2B as opposed to B2C?
Pavel Sokolovsky: The vast majority of our business is B2C. We have a small segment that I would estimate to be 10% or less that is B2B. Commercial customers are generally HVAC contractors or owners of commercial properties who are trying to save a little bit of money on their purchases. We have had larger corporate property managers who will buy things for use in their property. Contractors have recognized that our level of expertise and knowledge is better than some of the distributors they have worked with and so they prefer to work with us.
Sramana: Let’s talk about team building. You and your co-founder started the company. How did you flesh out the team and add functions?
Pavel Sokolovsky: We have always hired based on need. The downside of us being bootstrapped is that we have always been at the edge of our capabilities. Anytime we have hired anyone it has been a big deal for us. Some of my friends and acquaintances who have run funded companies have expressed very different experiences to me.
One of the first needs that we had was to field customer service calls as well as sales calls. We had one person at the desk doing both functions. We also had a need to have someone in the warehouse to pick, pack, and ship. Those two needs both happened around the same time in the first year of operations.
We recognized early on the need to know the product intimately. If things go well for an Internet retailer, then they will ultimately compete with Amazon. Unless we have an edge on other competitors, we would face a lot of challenges. Our edge is knowledge. Konrad had a mechanical engineering background which is tremendously helpful. He started out on the phone, doing sales and customer services. Eventually, when we had enough people he moved up into a pure engineering role doing technical support services and company training. He made sure our product catalog reflected our expertise.