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Student Entrepreneurs Bootstrapping a Zero-Logistics E-Commerce Company to $19 Million: CEO Azim Makanojiya (Part 4)

Posted on Monday, Sep 29th 2014

Sramana Mitra: For the keyword search traffic that you were getting from Google, to convert that into an order, were you taking orders and then ordering the products from the Chinese factory?

Azim Makanojiya: At that point, order volume wasn’t high. We didn’t have a platform for them to order online at that point in 2010. We were taking orders over the phone, jotting it down on an order sheet that we created, and submit that every night. That’s how the process initially worked.

Sramana Mitra: What were the economics of the business? What were the sizes of these orders? How much margin did you have?

Azim Makanojiya: When we started, the technology was totally different. At that point, you could only create wristbands at a minimum quantity of 100 pieces. The tooling of the wristband was really expensive because it was a new industry for the consumers. An average order was about $250 to $275 at that point for 100 pieces.

Sramana Mitra: Were the customers paying you on credit card and would you then turn around and place the orders to China? What were the payment terms? When were you paying the Chinese factory?

Azim Makanojiya: I was aware of the term P.O. because I had the IT company and I did certain P.O.s for other companies. Mostly, we did take credit cards. We didn’t have the option of PayPal, which they could have used if they weren’t able to order online. Customers preferred that a little bit more. People thought we were sketchy at that point because we didn’t have validation on our side to prove that we are a legitimate company. We would take any form of payment. Once we got the payment, we would forward that order to China and once we forward it to China, they would directly ship it to our customers.

Sramana Mitra: Did you have to pay the Chinese factory advance or did you pay them after they delivered the shipment?

Azim Makanojiya: Initially, we had to pay right there and then. We had to pay the transfer fee. Before they even start the order, they would give us an invoice. We would have to pay that. Once they receive the money, they would start production.

Sramana Mitra: What was the margin that you were working with at that point?

Azim Makanojiya: The margin of the products at that point was about 60% to 70%.

Sramana Mitra: You’re talking 60% to 70% gross margin, right?

Azim Makanojiya: Gross margin, yes.

Sramana Mitra: 2010 was when you were operating in this mode where customers pay you by credit card or PayPal. Then you had to pay the Chinese factory advance. How much were you able to do in terms of actual business volume by the end of 2010?

Azim Makanojiya: At the end of 2010, we were probably about a $6.9 million company.

Sramana Mitra: A $6.9 million company in one year?

Azim Makanojiya: I would say December 2009 was when we started. In 2010, we started in February effectively. Note that January to March are one of the weakest months especially for something that you’re sourcing in China because of holidays in the prior month. People don’t spend. The Chinese New Year is during February and March, and nothing goes in or out of China for a good 17 to 18 days. That was the biggest thing that we didn’t know. We took a huge hit in those months and were iffy about this business  We weren’t getting orders because we weren’t able to fulfill them. In March, however, we started hitting great numbers and started going aggressive in advertising. At the end of 2009, we pulled in about $110,000 in revenue. In 2010, we pulled in $6.9 million.

This segment is part 4 in the series : Student Entrepreneurs Bootstrapping a Zero-Logistics E-Commerce Company to $19 Million: CEO Azim Makanojiya
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