The Shoplet case study is interesting because it illustrates how an entrepreneur has bootstrapped a category leading e-commerce venture by trading off margins in favor of minimizing logistical challenges.
Sramana: Tony, let’s start with the beginning of your story. Where were you born and raised? What is the backstory of the Shoplet story?
Tony Ellison: I was born and raised in Israel. I came over to the US to study and I stayed here. The Shoplet story began as an accident out of my research. I have 7 years of experience on Wall Street and I realized from my time there that more and more companies were migrating to online e-commerce. I also realized that the Internet offered a level playing field for small and medium sized businesses, allowing them to compete with big businesses. That is where my journey began.
In 1994, I looked at different industries and wound up in the office product industry because of the sheer size of the market and the fact that it was a commodity-driven industry. There has not been a substantial change in it over the past 100 years and it was ready for a transition to an online platform.
Sramana: How did you get an e-commerce story off the ground in 1994?
Tony Ellison: In the early days, I experienced a lot of trial and error. The industry itself is not very well-defined. There is overlap between traditional office supplies, imaging and printing, and break room supplies.
In the very beginning, I was focused on building a proof of concept. I wanted to know if I could take the top 1,000 items used in the industry and sell them online. In 1994, there was not much available in terms of infrastructure. The Internet was very much in its infancy. I had to invest my own money and build a very basic site that included shopping cart capabilities. We only offered 1,000 items.
Macworld reviewed us in one of their magazines in 1995. The next day our site crashed and our answering machine had over 200 messages because we were advertising a CD-ROM product called Encarta Encyclopedia for $24 which included almost 100% margin. Retail stores were selling it for $69 dollars. I realized at that point that our business model could offer customers enormous savings.
That first experiment was very successful. I knew that we were on to something big. That was the moment that I really focused on scaling this business idea into the company that it has become today.