When BabyAge.com co-founder Jack Kiefer worked for one of the first video conferencing companies in the early ’90s, he thought commerce online had possibilities. By 1999, Kiefer had co-founded BabyAge.com. He is now its CEO.
Fast forward to 2008 and BabyAge’s gross revenue reached $30 million, with 2009 revenue expected to exceed $41 million. Practical eCommerce recently visited with Kiefer at the 50,000 square foot BabyAge warehouse facility in Wilkes-Barre, Pennsylvania.
PeC: What was your inspiration to create BabyAge.com?
Kiefer: “In 1996, when Babies’R’Us arrived, you had a major retailer trying to centralize baby products under one roof. I was working at iBaby at the time, and saw a real opportunity to consolidate wholesale and retail distribution of baby products in the United States. I wrote the business plan and we launched in 1999.”
PeC: What were the early days like?
Kiefer: “We were a mostly a distributor. This really allowed us to buy more goods and sell more goods at a quick turnaround, which helped us to establish credit, negotiate discounts, etc. We didn’t have $250,000 a month to buy an anchor tenancy on AOL [America Online], so we took a lot of stock in ‘make it up in volume.’ Amazingly, every month we made money, and it was clear after four years we needed to build a facility with growth potential. We relocated to Pennsylvania, and this infrastructure has helped us keep growing even through the down economy.”
PeC: Is there an overall approach you’ve taken to the ecommerce marketplace?
Kiefer: “If you took all the SKUs that we stock and put them out on a retail store floor, you would need more than 250,000 square feet. The notion of getting the best of the best, whether it’s feature, function or style, and making it for sale on location and online is still our focus. It was a game changer for the baby business. Parents continue to love the fact that they can get a stroller that isn’t just navy blue with four tires.”
PeC: Any advice you could give on using marketing channels strategically?
Kiefer: “One of the challenges with online marketing is it’s not a static plan or process. We’ve gone through five paradigm changes with marketing since we launched. In the beginning it was the Prodigy, CompuServe, and AOL. Then we went to the alphanumeric directories. Then shopping comparison engines came on the scene and that was the next step on better tools.
“Then when Google came out, there was more power to search broadly. From our business side we have seen the quality and results from Google decline recently. Over the past 18 months we have reduced our spend from $100,000 to $30,000 a month, and kept the same revenues.
“We’re now looking at affinity-based shopping sites, like Amazon.com, Buy.com, eBay and TorreyCommerce.”
PeC: Talk a bit about social media and how that’s worked for you.
Kiefer: “A few years ago, we launched our blog, and it quickly became the best repository out there for anything celebrity and baby. Whenever we get hammered with people asking for ‘the stroller that was in People magazine with the Angelina Jolie baby,’ we’ll do the research and try to get the customer into something similar.
“Our theory is that we need to play in different venues, be it a Facebook page or Twitter. Businesses need to be effective getting people the information they want when they want it over the channel that they want it. One example is that we’re looking to build a baby registry application for Facebook. That way when mom is connecting with her family and friends in that environment there’s an instant opportunity to publicize the baby shower and send them to our registry system.”
PeC: What about traditional Internet marketing, like pay-per-click advertising and affiliate marketing?
Kiefer: “We’ve moved 85 percent to cost-per-action [CPA] advertising over cost-per-click. We’re able to grow profitably by paying very close attention to our ROI [return on investment]. Affiliate marketing is great, but we’re also doing some really neat work with comparison engines that give us CPA-style rates. This allows us to set a predictable cost of sale.”
PeC: Tell us about your in-house customer service.
Kiefer: “Right now we’re not 24-7. We have a lot of potential to become 24-7 and engage in proactive outbound calling campaigns to re-engage past customers. We have seven full-time customer service representatives, and we keep them pretty busy right now. One of our most important skills that we look for, train on and monitor is the ability to manage customer expectations. This is crucial. If you screw up once the likelihood of that customer returning is poor. Our agents keep our customers informed and leverage our in-house systems to keep satisfaction high.”
PeC: Effectively managing growth seems to have been one of the strong points.
Kiefer: “Definitely. From a growth perspective we try to empower our employees, and we have to be ready to make mistakes, but the secret to success lies in having the right product in stock at the right time, shipping it, and making sure that you can do that effectively.”
PeC: Tell us about the back-end order management process.
Kiefer: “Everything is written in house. We have refined our processes and then taken the process and implemented it with technology. Also, freight is our biggest expense by far. We’re able to control that by negotiating the costs with the shipping companies. We know when to pack a smaller item in a larger box to save costs.”
PeC: Any advice to merchants of things not to do?
Kiefer: “You shouldn’t do something that hasn’t been well planned and thought out. Sure, you’re going to have to make quick decisions and make some mistakes along the way, but to go into a new venture without a good plan is the quickest way to frustration and some really big mistakes that could destroy your company.”
PeC: What are some things merchants should be doing?
Kiefer: “If you can afford it, hire [professional] software developers in-house. There’s nothing better in this business than being able to have an idea and go into a developer and have it programmed right there.”
PeC: BabyAge.com has grown from three employees in 1999 to 45 in 2009. Any advice about employee relations?
Kiefer: “Be sure that you intimately understand your staff and their talents and breaking points. You have to do reality checks to make sure someone actually can do what they say. By doing critical assessments across the board, you often will find people who have skills that are untapped but just need to be given a chance to excel. About 15 percent of our employees actually started here as interns and we’ve since hired them.”
PeC: What do you use for financial tracking and payments?
Kiefer: “We’ve built all of our reporting from an operational standpoint into our in-house system, which is all done in .Net. We use an out-of-box accounting software just to do general financial tracking. For payment processing we use Chase Paymentech for some, but we really use PayPal a lot. I’d suggest PayPal to anyone, especially smaller merchants.”
PeC: What would you say to a merchant who has an idea and is just starting out?
Kiefer: “First, cash is king. All of our office furniture is “early American garage sale” and our warehouse shelving was purchased used at a third of the cost of new.
“Second, everything across the board is negotiable – from suppliers to shipping companies to vendors.
“Third, do a critical assessment of yourself and your strengths. You need to clearly understand what skills you have, and hire the best people you can afford.
“Fourth, you are the expert in your business. You need to understand the dynamics online, what it’s going to cost you to market and how to negotiate. Don’t hire a firm to tell you how you need to position your business. You’re the one who needs to tell them how your business is positioned so they can market what you’re doing. You’re in charge.”
PeC: Tell us about the BabyAge.com Guiding Principles posters around your office.
Kiefer: “We look to these [ten] principles in everything we do to make sure that it is constructive and with our company vision. The principles are:
- Commitment to high performance.
- Total accountability.
- Direct, responsible, confidential communication:
a. Immediately go to the source of problem;
b. No malicious gossip;
c. Constructive intent.
- Have fun.
- High tolerance for personal style and eccentricities.
- Willingness to develop someone up to and beyond his or her potential.
- Ability to apply tough love to nonperformance and, if needed, remove someone from a job they cannot do.
- Complete willingness to say, ‘I screwed up. I made a mistake. Here’s what I learned, and here’s how I will change…’
- Belief that mistakes will not hurt us, but complacency will.
- Agreement that anyone who cannot buy the vision and management of the company: first, tries to change it; second, leaves voluntarily.”