Sramana Mitra: How long did you do the marketing services before you were able to switch full-time to the online retail car purchasing?
Sean Dawes: About two years. We spent some time investigating markets because we weren’t sure if we were going to go in the automotive market. We were exploring a lot of different verticals. We looked at everything from baby stores and sporting goods.
We started with things that were of interest to us. I’ve played hockey for the longest time. I had interest there. We said to ourselves, “If our background is automotive, we would be foolish not to enter the automotive market, especially if we needed to go down the route of investment capital.”
Any investor would be more attracted to someone who’s had experience in a very similar vertical. That’s what we ended up doing. We did spend some time doing our due diligence in terms of figuring out which market we want to enter. It was about two years.
Sramana Mitra: You were obviously, simultaneously, launching the auto parts e-commerce business. Talk a little bit about how you got it off the ground. What was the customer acquisition? What did you do for inventory?
Sean Dawes: There could be a debate on either side. Years ago, it was much easier to attract customers when there was less competition. When we started, we were going into a market that had competitors that were north of $80 million in revenue.
Penetration into that can be difficult, especially if you don’t have much capital. At least, a large amount of capital can compete with someone of that size. For us, it was about leveraging our skill set which was search marketing and paid advertising.
We started with social and we built up brand awareness and building a following on social media using highly-targeted Facebook PPC ads that we then leveraged on site. When new customers or new visitors, at least, were on site, the perception that we’ve been around for a while definitely helped improve our conversion rate.
Within months of our launch, customers thought we have been around for years because of the perception that we were able to convey, given our size. The quickest way for us to get that MVP was to leverage paid advertising. Once the catalog was up, we were able to target customers using Google search ads, pay-per-click advertising to a highly-targeted set of customers to see what our conversion rate was, what our customer acquisition costs were.
It’s basically simple math from there once you have that data. We were able to scale up from there. In terms of inventory, the most common way to start is dropshipping. We didn’t hold any inventory. Since we didn’t actually need to operate out of a physical retail store, we actually were using free commercial office space from one of my partners.
His father owned a veterinary practice, which is kind of hilarious given the fact that I had a Zoology background. We used some free office space in one of his commercial buildings. We were just dropshipping orders. Orders would come in, and we then place them with our suppliers. The suppliers would ship them directly to the customer.
That lasted probably for a few months. In the quest of getting more margins and also signing on additional brands that were not set up to do dropshipping or were not using distributors, we then had to figure out inventory.
We just used a one-car garage. We started putting our inventory. It had to be 10×10 foot room. We would keep all parts that we had in our inventory. That’s how it started. From there, it was just scaling up. We just continued to sign on new brands.