Sramana Mitra: What was specifically the customer acquisition strategy? Were you calling these people? Were you visiting these people? Was it direct? Was it channel? How did you sell?
James Kane: The primary customer acquisition strategy was in-person sales at trade shows. The appliance retailing industry is cyclical. They have two buying seasons – in the late summer and in the very early spring. Appliance retailers have big buy fairs where they come together at those two times to buy new merchandise for their store and also to evaluate new business services. Almost all of our initial sales were through those kinds of trade events.
Sramana Mitra: How did the business ramp given that strategy?
James Kane: It was a very small team at this point. It was two or three people in a bootstrapped setting. We grew our revenues from zero to half a million a year over that time frame.
Sramana Mitra: That’s a very respectable growth for a bootstrapped company.
James Kane: Thanks. We also were not paying an overly large amount of attention to it, to be fair. The attitude during this period was very much lifestyle kind of a business. People made decent money. We had no real expenses. We divided that revenue up. There wasn’t a lot of ambition to grow the company until 2006 when we reimagined the business.
Sramana Mitra: What changed in 2006 that made you take this more seriously?
James Kane: Prior to 2006, the purpose of the company was the creation of software that let independent appliance retailers know about stock status levels at various warehouses and also merchandising information. It’s a SaaS subscription. We had maxed out our reach. The revenues from this were quite low. You’re talking $60 to $70 a month or so.
In 2006, a couple of things happened. There was a man by the name of Michael Gross. He started a company called AJ Madison. His goal was to become an online-only independent appliance retailer. He wanted to have a novel take on being an appliance retailer. He wanted to do most of his business online. This was novel in the post-dot com crash era. He may have started in 2005 but he became serious about it in late 2005.
He happened to belong to one of the buying groups that we serve with our retail product, which is a product that shows inventory and merchandising information. We spent a lot of time talking before he launched AJ Madison. He originally used a lot of the data from our software to power his website. He became enormously successful with that online retail operation. It galvanized the industry to recognize that an online presence could be a major component of success for a local independent retailer. That came into the zeitgeist of the independent appliance retailer in very early 2006. That represented a very logical opportunity.