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Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy (Part 8)

Posted on Friday, Nov 19th 2010

Sramana: Essentially you are supporting your Japanese operations with your Vancouver fulfillment center and your Holland operations with your Stockholm fulfillment center. Is that correct?

Roger Hardy: Yes. The nice thing about contacts is that they are lightweight and high value. There is a flight that leaves every day and arrives in Japan that night. It allows us to serve Japan on a next-day basis and also allows us to serve Australia and New Zealand very quickly. Similarly, in Europe the distances are not great. We can serve our markets overnight. Airlines like having small, high-value freight that does not have any weight. It is perfect for them because it does not burn any fuel. We have been able to structure some strong partnerships with companies like FedEx. We are one of their top 10 accounts in Canada. That has been quite good for us as it helps us get our shipments out in a timely manner.

Sramana: What was the financial impact of those two acquisitions?

Roger Hardy: In dollars, our revenue in 2005 was 65 million, in 2006 it was 80 million, and in 2007 we did 100 million. The past two years have seen continued growth. In 2008 we did about 120 million, and in 2009 we did 140 million. The acquisitions were done in 2006 and since then we have consistently added 20 million dollars of revenue a year.

Sramana: What size businesses were they?

Roger Hardy The Japanese company was doing $8 to $10 million in revenue and the Holland company was smaller. They are both growing today.

Sramana: You mentioned that you were using a predictive technology to manage your inventory requirements. Can you talk more about that?

Roger Hardy: We have two components to it. One component is that generically speaking, contact lenses are something you use and throw away after a period. A customer can buy contact lenses in six-month supplies, which gives us an idea that in six months they will be back looking to buy more contact lenses. If they buy weekly contact lenses and they purchase a year’s supply of them, then we know when they will be back. There is always some variance in that. Some people do not wear contacts 7 days a week.

From our experience, we are able to hypothesize when customers will return, and that allows us to manage our inventory. There are hundreds of thousands of possible SKUs and combinations that people could want. We think our job is to know the statistical outliers. We need to know when they will be coming back and make sure that we will have their item in stock waiting. Speed is a key pillar of our strategic differentiation.

Sramana: Is this technology that you have built internally?

Roger Hardy: Yes.

Sramana: What is your plan at this point? Where do you go from here?

Roger Hardy: We are at an exciting point, probably the most exciting point in the 10 years we have been growing out business. The contact lens market in North America is 1 in 10 people. The eyeglasses market is 10 times bigger and is growing faster. As the population ages, almost 100% of it will need some type of vision correction.

As a company, we feel we deliver significant value in contact lenses. We have certainly affected the landscape. We think that is good. The eyeglasses market is one that we think we can serve better than the existing customers. Our value proposition is now even better. The price umbrella in eye glasses is quite large. Glasses customers get the sense that their plastic lenses are costing more than they should. They cost more than an iPhone and can’t really explain why.

Our customers have been asking us to help them with glasses for a long time. They have learned to trust us and want us to help them save money there. As a company, we looked at this for a long time but we did not think we could sell them online. After hearing so much feedback, we took a good look at it and realized the the technology in eyeglasses has changed rapidly. It is now feasible to serve someone’s eyeglasses needs over the Internet, and we can now make glasses much more cost effectively than how they are made in individual stores.

When we look at the quality of eyeglasses that we can produce and put into the market, we realize that we can do it at a fraction of the price of what customers pay today. I emphasize quality because our business has been built on the annuity of serving customers and their coming back.

This segment is part 8 in the series : Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy
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