New Jersey-born Mike Kawula once bought a franchise that helped him know how to buy a franchise, which led him to create Discount Cleaning Products.
Kawula graduated from Ramapo College in New Jersey with a marketing degree in 1996, working as a wholesaler for AllianceBernstein, an investment firm, until 2005, helping financial advisors select suitable investment funds for their clients.
But he wanted to be his own boss and in early 2005 he bought a consulting franchise for $60,000 that helps others on purchasing franchises.
He apparently paid attention because at the end of 2005 he bought The Cleaning Authority franchise for $120,000, which had 190 franchise locations around the U.S.
“I grew it to 30 employees with sales of over $1 million by direct mail marketing and introducing a referral reward program. We secured cleaning contracts for over 600 homes during the summer in the New Jersey beach communities and 450 homes in the non-beach areas,“ Kawula said.
As the economy weakened in 2008, cleaning franchisees began looking for ways to save money on supplies. Kawula attended a trade show and visited manufacturers’ booths to encourage them to sign agreements with his company to sell their products for greater brand exposure and sales. He left the expo with agreements from some top wholesalers of vacuums, chemicals, rags, dusters, and more.
Kawula bought the domain name DiscountCleaningProducts.com. Through this website, his new suppliers agreed to drop-ship products directly to his commercial customers.
“My business partner Jeff Cannon, who handles the operations and finances, had owned a cleaning franchise in Georgia. We both sold our franchises in 2012 to focus on the growth of Discount Cleaning Products,” Kawula said.
Discount Cleaning Products recorded $100,000 in sales in 2008 and grew to $2.8 million at the end of 2012. The company anticipates sales of greater than $3 million for 2013.
Ecommerce Shopping Carts
“We initially started with a very low-cost, low-features shopping cart from VStore that had free hosting and charged less than $100 for added features,” Kawula said.
Launched with less than 500 products in 2008, Discount Cleaning Products expanded to about 1,000 products when the company began using shopping cart Volusion at the end of 2009.
Kawula said Volusion lets him upload products faster. Discount Cleaning Products’ growth has exploded as wholesalers send him content-rich files with weights, descriptions, and feature, which improve sales.
“Volusion offers us an all-in-one site, offering merchandising, marketing, social media, and more. But it is much more expensive with monthly fees of $1,350. Our expenses continue to increase as our traffic increases,” Kawula said.
“The advantage with Volusion is many programs integrate with it, though support is costly. Most of our IT and design support we’ve obtained from people overseas in India and Philippines at a fraction of the U.S. cost.”
Kawula’s partner, Cannon, who taught himself HTML, designed the first Discount Cleaning Products website. Then Volusion redesigned it on its entry-level package, which costs around $1,250 for a header, logo, left navigation, and home page redesign.
“Since then, we changed the design many times, using off-shore designers, who are 90 percent cheaper,” Kawula said.
In 2012, they began using Spring Metrics to create website “sliders” that offer first-time visitors an offer or coupon.
“We control it based on unique visits, IP addresses, purchases and much more. It’s really good for us and for first-time customers because they save so much money and all office supplies arrive next day — so they come back,” Kawula said.
The company is currently getting its header redone by a designer from El Salvador, who Kawula found via a networking event and who was then mentioned again on a podcast.
“You can get a full-time designer for $500 per month working 40 hours per week.”
Credit Card Payments
“We use Volusion, and a PayPal account. Volusion’s costs are high at around 2.9 percent — on a weighted average with American Express and other cards — and we are currently exploring other options.”
To make processing faster, Discount Cleaning Products contracted with a programmer in India to facilitate the routing of orders to customers’ closest wholesalers.
“It is okay, but at our current volume of about 50 office-supplies orders a day, it is more manual than it should be. As it grows, we’ll create a program for it. Our two largest partners, which account for 70 per cent of our business, are completely automated,” Kawula said.
Discount Cleaning Products has two full-time employees, both of whom work from home. The one who handles finances and updates products via file transfers joined in 2009. The other, who handles customer service, joined in 2010.
“Ninety percent of our orders are placed online and go direct to the shipper and tracking is uploaded every morning, which reduces the need for extra staff, “ Kawula said.
The company tried warehousing from 2010 to 2011, but it wasn’t sufficiently staffed for someone to check for damaged stock.
“We were selling more than 50 carpet machines a day. The trucks were delivering them to us weekly. We ended up losing a few machines a week, costing us from $100 to $1,200 in damage. If we’d had a full-time warehouse manager he could have checked that the products were okay. But that wasn’t the business we wanted to run.”
Search Engine Optimization
Kawula has been burnt by SEO companies that he caught not working, while billing for it.
“I had changed the Volusion passwords to all accounts and watched the company bill me the following month for $1,800 for work that they couldn’t have done,” he said.
“Now we do SEO internally — after stopping briefly during 2012 — and we’re focusing in 2013 on video content and how-tos using our wholesalers’ content, which will help drive traffic.”
Shipping remains a concern for Kawula.
Discount Cleaning Products drop-ships from the manufacturers. Customers who purchase products that are not from the same wholesaler’s warehouse require multiple shipments, which increase shipping costs and decrease profits.
“Normally we break-even, but Volusion checkout doesn’t have the logic to charge more for products coming from different warehouses, and even if it did, customers don’t want to pay that much to ship,” Kawula said.
“We’d rather do what’s right for the customer as they’ll come back to shop again and again so we only charge based on total weight. This saves the customer money but does hurt our business.”
The company has agreements with other wholesalers to ship orders complete, though that eats into margins — and cleaning products are a very thin margin business.
Kawula wants a shopping cart that allows for more contingencies.
“For example, delivering a machine to a home can cost $100 more than to an office because you need a lift gate for heavier machines. We sell a lot of carpet cleaners that weigh over 200 pounds; they need to be on a truck.”
The company uses UPS and FedEx, but lets the vendors use their own shipping provider if it’s cheaper, although Kawula acknowledges that can create tracking issues.
Kawula said he entered the industry at the right time because manufacturers were looking to increase sales in a poor economy.
“Now the economy has improved and our volumes are even higher, many of our wholesalers want to continue doing business with us.”
Discount Cleaning Products offers product education through its website, manuals, customer service, and even helps customers get in touch with the wholesalers if necessary.
“For instance, we had a large hotel that wanted someone to supply carpet cleaning units to several different locations. Since buying online was easier for them, we recommended the right unit and got the manufacturer to do the demonstration and we handled the sales process.”
Discount Cleaning Products has over 100,000 products. It manually uploads inventory photos, descriptions, and prices from its larger partners weekly, but this will be automated in 2014.
“For now, we can use simple file transfers. We don’t charge our customers’ credit cards until we have confirmation that the order is in stock to ship. Since we currently can fulfill close to 100 percent, the daily program hasn’t been needed so far.”
Discount Cleaning Products has about 500 Fans on Facebook and 1,300 Twitter followers. Kawula said social media is an area yet to be fully utilized.
“Our average order value is currently $180 and we review any order higher than that to see if we can source elsewhere or reduce shipping costs, especially for machines and larger office supply orders,” Kawula said.
“We also manually review orders over $180, comparing the billing and shipping addresses to combat online fraud. Even though we have a fraud score program, many get through.”
Apart from shipping, the company’s biggest expense is advertising, spending over $100,000 annually on pay-per-click advertising and shopping site partnerships.
While neither Kawula nor Cannon had experience in PPC advertising, after doing it in-house, they found firms in Florida and Illinois couldn’t convert better than the pair were already doing with limited knowledge.
“We have reduced our PPC spending levels, but now Google Shopping, which used to be free, charges on a percentage or a PPC model, of which we do both, “ Kawula said.
“When Google started charging for its shopping platform, it reduced the number of listings. We benefitted from that, but it hurt our bottom line.”
Discount Cleaning Products offers customer support via the phone, email, and chat.
“We call our commercial customers on a weekly basis and we also have an automated email to check satisfaction with each order. We’ve tried hiring overseas workers to make outbound calls. But I’ve not been satisfied. So we will have interns do this more often from the second quarter of 2013.”
Kawula cites three memorable mistakes.
The first involved double charging for inventory. Discount Cleaning Products’ wholesalers had been given authority to charge the company’s credit card for each order they drop-shipped. But Kawula and Cannon hadn’t yet set up an effective system to cross-check charges. They suffered over-charging from wholesalers that had swiped their credit card twice for the same order.
“When we received monthly credit card statements over $200,000 from double-swipes. We suffered some major losses,” Kawula said.
Another mistake was using shopping comparison websites, according to Kawula.
“In December 2010 we were so busy that we didn’t notice the comparison sites had older product files. We tried canceling because the products obviously couldn’t convert to sales. But the click-through charges — comparison sites charge by the click — grew to $40,000. Canceling our credit card was the only thing we could do to stop more charges.”
Kawula and Cannon have since discontinued all shopping comparison sites as the company’s core customers are commercially-based, They have received better responses through pay-per-click advertising and direct mail postcards to cleaning companies and hotels.
Warehousing was the third mistake, even though it secured them better pricing from wholesalers.
“We received many damaged items thanks to poor handling by the shipping company. Many drivers didn’t use the forklift truck correctly and some actually drove through pallets,” Kawula said.
Additionally, they had no way of checking inventory, costing them over $50,000.
“New companies make mistakes, but we were making money. So we didn’t notice everything in the beginning.”
Kawula is proud that Discount Cleaning Products made the Inc. 500 list in 2012, when it was ranked the 144th fastest growing and number 8 in its industry.
The company is also growing strongly in the janitorial cleaning market.
“Thanks to the poor economy, many budgets have been cut and when facilities, schools, and hospitals have only $10,000 left in their budget but have to buy $15,000 worth, they look around and find us.”