Most ecommerce merchants own several domain names, and often will buy or sell the names as opportunities occur. One merchant based in Chesterfield, Mo. recently purchased the domain name RunningShoes.com for a whopping $700,000. He is Chad Weinman of Cat5 Commerce and he recently spoke with us about that acquisition.
Practical eCommerce: Why did your company pay $700,000 for a domain name?
Chad Weinman: “Well, aside from the fact that we feel like RunningShoes.com is a premium domain name and certainly worthy of a significant sum of money in and of itself, it ranks on the first page within the major search engines, being Google and Yahoo!.
“When we started negotiations, it was actually the number one result for the keyword ‘running shoes’. That adds value to the equation and allows us to pay a higher premium for a domain name than we normally would for one that perhaps doesn’t have a ranking. The keyword itself — ‘running shoes’ — is a pretty high traffic keyword. It’s one that’s tightly associated with a product category that we participate in. So that helps to justify the purchase price in this particular instance.”
PEC: When did the domain acquisition occur?
Weinman: “It closed in March 2011.”
PEC: Was there an existing site at RunningShoes.com?
Weinman: “There was. The previous owner had owned the domain name since the late 1990s and I think he launched a store in the early 2000s, which is the reason why the domain did rank so well. He had accumulated links, traffic and customers over that period of time, and simply because it was so old and had been around for so long in Internet years, it had grown and received a following. It had established itself as a leader for that product category.”
PEC: When you bought the domain, did the previous owner’s customer information and data transfer over as well?
Weinman: “No. We did not take possession of any related assets to RunningShoes.com aside from the domain name itself. In the sense that RunningShoes.com is the name of the store — not just the domain name — it is an established brand on some level, and you’d have to think that it’s going to receive traffic and return and repeat visitors from the store that existed previously.
“Since the acquisition, we’ve built the [new] site from scratch on our own custom platform. We did not take possession of any inventory or employees or technical assets, nor were we able to transfer the supplier accounts. The previous owner continues to operate a bricks-and-mortar store that is also called RunningShoes.com in Washington state. I think he’s in the process of renaming the store, but that business continues. So he maintained all his assets associated with the business.”
PEC: Was your company able to preserve the URLs of RunningShoes.com that were on page one of Google?
Weinman: “The only one that was on page one — well, I should say the only one that we really focused on was the keyword itself, ‘running shoes’. I think that he probably had secondary pages ranking here and there, although the majority of the traffic that was generated was originating from that ‘running shoes’ keyword and the fact that he had the number one position in the search engines for that keyword.
“So, when we acquired the store we analyzed all the traffic that it was receiving and utilized 301 commands to redirect those URLs — basically all to the home page of our version of the store, because our structure is different than his was. The task of going through and trying to recreate every page that he had previously would have been too cumbersome.”
PEC: Do you now have your own products and shopping cart that is driving RunningShoes.com?
Weinman: “That’s correct. Thirty days after we closed the deal, we launched our version of the store. Unfortunately, we didn’t have quite the supplier base that he did [at that point], but we came pretty close and presently — this is another month out — we have every supplier that he carried, save for one brand that we’re still working on.”
PEC: How is it going so far?
Weinman: “It’s going well. It’s a process to recreate all the supplier relationships and get all the inventory to our warehouse that he had already established. Also, when we started the deal he was ranking in that number one position, and the domain is now in the top five. It’s certainly dropped. So, we have a lot of work to do to re-secure that top spot and also to build out our product selection and add the brands that we think need to be represented on the site.”
PEC: How did you approach the previous owner of RunningShoes.com to inquire about buying the domain?
Weinman: “I had identified ‘running shoes’ as a major keyword target that was in our wheelhouse back in August 2010. I looked at his site and it seemed as if he was somewhat struggling to take full advantage or realize the full potential of such a powerful domain name and such a powerful keyword. And, if you looked at the competition in that space, you saw a lot of major brands like Zappos and New Balance and Nike. So, his site sort of stood out.
“I sent him an email to ask if he had any interest at all in entertaining an offer for the site. He responded back indicating that he had in fact committed himself to selling it in the near future. So, from that point on we got involved in negotiations.”
PEC: Tell us a little bit about your company, Cat5 Commerce.
Weinman: “Cat5 Commerce started in 2004 with our original store, which is called BDU.COM as in Battledressuniform.com. We sold military and tactical apparel. Since then, we’ve opened nine stores. We have a tenth in development, and we sort of migrated lately into footwear and started putting a lot of emphasis into footwear after we had tremendous success with one of our stores called MilitaryBoots.com.
“Getting into outdoor [gear] was a natural evolution for us from military and public safety. There’s a lot of crossover with the suppliers and there’s a lot of synergy between the markets. Primarily we operate in military public safety and outdoor markets. So, all the stores that we’ve launched since the original have fit somewhere in that collection.”
PEC: Do you own the company?
Weinman: “Yes. I also have a business partner, Andrew Hoefener, who joined the company in 2007. Together, he and I have realized a significant growth since then and we feel like we’re headed in the right direction.”
PEC: Can you give us an idea of the size of your company?
Weinman: “I would estimate [top line revenue] at about $15 million. We have about 25 or so staff. We’re still pretty small and we’re outgrowing our current space pretty quickly, but I guess that’s probably a good problem to have.”
PEC: Do you use a custom platform?
Weinman: “Yes. We operate on a custom platform that is based on a shopping cart called Znode, and we’ve extensively modified and customized that to meet our needs. The interesting aspect of our model is that all of our stores run off the same code and run off the same database of products. So, that really helps us to manage inventory and all the catalog data.”
PEC: Any other thoughts for our readers?
Weinman: “The lesson that I’ve learned that stands out most for me over the past seven years is to really take your time and focus on the brand name of your store that you’ve launched or, in our case, multiple stores. It takes time to build a following and to get traction with your target audience and target market. You might have all the pieces in place — the best brand, the best suppliers, great selection, beautifully designed store, great functionality, an intuitive shopping cart, and you might have a very intensive pay-per-click campaign that drives a lot of traffic to the site — but, at the end of the day, it just takes time to settle in and to become recognizable and to gain trust. Patience and persistence is a very important aspect of ecommerce and one that’s not discussed too frequently.”