Sramana Mitra: This business started with you taking consignment inventory. Is that how you continued or did you switch to buying inventory?
Richard Birnbaum: The next step was going to the 47th Street in Manhattan and checking out all the different vendors. I was trying to learn the distribution model of dealers of these great brands of watches. They were selling at discounted rates, but they weren’t authorized dealers.
It didn’t take us long to realize that the office buildings above the retail stores housed importers, wholesalers, and quasi-distributors of branded Swiss watches that were being sold below the wholesale rate that US authorized dealers were paying.
We learned from these wholesalers that it took many years to figure out how the operations worked. That’s when we started buying from the New York importers, wholesalers, distributors who had all the world’s best brands.
If a watch was retailing for $10,000 and the US-authorized dealer’s cost price from the brand was $5,500, you can buy the same watch on 47th for $4,000. We learned that as much as we thought we knew, we really knew nothing about the way the world works.
Sramana Mitra: What did you do? What was your next move?
Richard Birnbaum: We started to buy the goods. We bought the most popular brands in those days. These were goods that were selling for under $1,500. We found that to be our sweet spot. There was no shortage of goods because the brands would sell to distributors in less developed areas of the world.
Distributors would promise that the goods would never end up in the United States. The first thing these distributors did was call up their customers in the United States and sell the goods. The goods ended up exactly where the brands didn’t want them, which was in the States and online.
During that time, we worked on several different platforms. We worked on platforms like eBay and Amazon. Back in the early 2000’s, we worked at a platform called Didz.com. I don’t think they’re around anymore.
Sramana Mitra: I actually want to go back and ask you the question of how you dealt with this issue of brands not liking inventory ending up in places that they didn’t want them to end up in? Were you working with the brands to help them liquidate their inventory?
Richard Birnbaum: We were not working with brands. If anything, we were a brand killer. We were exactly what the brands hated. We provided transparency of e-commerce and educated the consumer, which is the ultimate sin in an industry that’s built around the consumer falling in love with the product and being romanced by it. It was absolutely a business that the brands hated.
When we first got into this business, everyone told us how important it was to fly under the radar. Frankly in all the years, or even back to the beginning, we tried to fly under the radar as much as we could. In the end, you didn’t really hear many complaints because it was a vicious circle for the brands where they needed to sell their merchandise.