Sramana: What were the circumstances of the post-$50 million era? How did you find those two companies?
Roger Hardy: We looked at staying within the core competency of taking good care of customers. We found a company in Japan that we thought was growing and doing a good job serving their customers. We had run into them on a few transactions. We found that we were trying to find the same customers, so we had some conversations with them. They were a growing business which was doing $8 million to $10 million in revenue but were constrained by lack of capital.
We proposed that there was a way to make it a win-win scenario instead of fighting over the same customers. That was a collaborative process. We had approached them because we were looking to expand into the Japanese market.
Sramana: How did you know they were the right company to approach?
Roger Hardy: When we went to Google, we saw our own listings and four or five other listings. We approached all the companies in that market and had conversations with many of those companies. A lot of them had already seen the acquisitions we had done and knew about our business a bit. In Japan, a lot of the market is driven by affiliates, so you need solid referral business strategies.
The same goes for the company in Holland. We were participating in that market a bit and had started receiving some orders there. We knew the market was interesting and felt it was well penetrated from an Internet standpoint. We looked at the major players there and found a similar entrepreneur in Holland. He had come out of the optics industry and had taken the business as far as he wanted to. We met with him, and after some discussions we realized collaboration would be more productive.
Those were two interesting acquisition at the end of 2006 that gave us a sales lift as well as more complexity to our business.
Sramana: The integration of new businesses is complicated, as are international operations. How did you resolve that?
Roger Hardy: We have taken the model that we understand what the Web platform, logistics platform, and customer service platform look like. When we do these acquisitions we bring in all the best practices. We go back to making sure we have the right inventory, make sure we are generating referrals, and make sure we are delivering in a timely way. It creates a remarkable experience for customers.
Sramana: Other than that, did you let the international units operate on their own?
Roger Hardy: No, we didn’t. In both cases, after a period we realized it made more sense to consolidate those businesses into our existing distribution centers. It gave us a bigger inventory and enabled us to reach customers with more products faster. We closed the small distribution centers in Holland and Japan and consolidated both fulfillment centers in Stockholm, Sweden, and Vancouver, Canada.