Lessons Learned: U.K. Online Ink Store Celebrates 10 Years

“Lessons Learned” is a series where we ask ecommerce business owners to share their experiences, good and bad. For this installment, we corresponded with John Sollars, founder of Stinkyink, a U.K.-based printer ink business.

Stinkyink.com celebrates 10 years of trading this month. A serial entrepreneur with three start-ups in 30 years, Sollars launched Stinkyink in 2002 knowing little about ecommerce. He was almost bankrupted within six weeks by criminals who defrauded him of £32k of products. But he fought back to make his first profit within two years and now turns over £3 million in gross revenue and has 14 full-time employees.

Sollars’s background is selling electronic components. He previously held sales and management positions for various electronic suppliers, including ITT Multicomponents, STC and Farnell Electronic Components.

John Sollars

“I launched my first business, a CB radio shop in Kidderminster [West Midlands, England] in 1982 for about two years during the early 80s recession. Then in 1991 in the next recession, I and two others took over an electronic sub-assembly business that had gone into administration which again lasted about two years.”

He set up Stinkyink.com in Shropshire, England in April 2002 as an online superstore, providing ink and toner cartridges for all makes and models of printers. He picked “Stinkyink.com” because it was an unusual name. At the height of the Internet boom in 2001, Sollars noticed that every ad on taxis and on the London subway was for dotcom companies. “How do you remember all of these, I wondered? It took me about six weeks to come up with Stinkyink.com.”

Sollars had no experience in ecommerce and searched for the right web experts who would create his printer ink website. He chose U.K. Internet retail specialists Teclan.

“The guys at Teclan were a big help when I was starting up; they even sent a chap from Slough up to Shropshire to train me so I could maintain the site myself. And now they still do the hosting and always respond magnificently if we have a query.”

Shortly after the fraud disaster, John was on the verge of bankruptcy.

“Early in September 2002 I was sitting with my dog in the office at home when the full enormity of what had happened sunk in. I had to decide whether to bother going on, or to go back to a ‘proper’ job. But I picked myself up, resolved not to trust anything or anyone in future and got on with it.”

Then he had another knock: In March 2005 the alarmed and barred warehouse he’d just moved to was burgled and his whole stock worth £50,000 disappeared. As a “commercial” incident the police were again not interested; fortunately, everything was fully insured.

Sollars fought back from these calamities. Using email marketing and search optimization, he grew the customer base and website traffic and within two years was in profit.

Shopping Carts

“I started my online business in April 2002 using Actinic Catalog version 5.0, the ecommerce software recommended by my catalogue designer at the time. Actinic offered a free 30-day trial download of the software. It cost a few hundred quid at the time [currently £499]. I continued with it until last summer, 2011, when my technical team wrote our own front end and integrated it with our back end office system. Actinic took us from start-up to a £3 million company employing 14 people full time, which proves what a powerful platform it is.

“We learnt the basics of good page layout and design with Actinic and found it very easy to customize. The platform also worked reliably with four different back office systems and outlasted them all.”

Credit Card Payments

“I had only been online about six weeks when I was targeted by U.K. fraudsters. I shipped cartridges all over the country and lost £32,000 in less than a month. The British police could do nothing to catch the scamsters or get the money back.

“The fraud issue really colored Stinkyink’s first four years as it made it hard to get credit with suppliers as our balance sheet was so weak. It taught me the importance of having cash in the bank and watching my profit-and-loss statement like a hawk. I review it every month.”

“When you are starting out, just taking orders is a great thrill and fraud is the bottom of the list of problems. The Actinic payment solution incorporates The 3rd Man anti-fraud screening service — now bought out by Datacash — that claims to detect around 97 percent of all bogus orders. It takes the headache out of manual checking, gives me peace of mind and saves chargeback costs.

“Using The 3rd Man by itself is over a thousand pounds a month. Back in 2002 these services did not exist.”

Stinkyink also uses PayPal.

“In fact, the U.K. is the world’s most prolific user of PayPal. It is well worth the effort to utilize PayPal functionality on your website.”

Order Management

“I am a great believer in hands-on management, and will often be answering incoming phone calls, or on a busy Monday morning helping with the picking and packing in the warehouse. It keeps me in touch with the day-to-day problems that my customers have, and also with the productivity of our stores.

“I am a fervent believer in constant improvement and preach it to my team all of the time. Over time, all of the small improvements that we achieve add up to a significant improvement to our business.”

John Sollars in the Stinkyink warehouse.

Hosting

“Web hosting is really, really critical. Don’t just go for the first cheap option that you see; you will soon run out of bandwidth or server capacity. If one day you’re interviewed on television, your server could crash with the resulting traffic it receives. So be very, very careful who you select for your hosting requirements. When I first started, my account gave me email and a domain with some hosting included; I thought I could get away with using it for my website.

“In hindsight I was very fortunate when starting out. I was struggling to configure Actinic to work on my existing host and Teclan gave us a dedicated host server, costing about £350 per month. Teclan have been superb, always available at the end of the phone, listened to me, didn’t try to blame someone else when things went wrong and helped me manage my growth over the years.”

Employees

“Is your business really growing or is it just a blip? Can you afford to take someone on? What role do you need them to perform? Will you get into trouble with someone in a government department like health and safety? You may be running your own business, but there is always someone looking over your shoulder.”

Sollars was working from home when his first employees joined him. His first two joined after about a year: One was a part-time bookkeeper, and the other, who joined as a sales assistant, is still with Stinkyink 10 years later, although he swiftly moved from sales into stores and then purchasing and he is now purchasing manager.

“I’m not sure if it was because the business started in my home, but I treat my staff as part of my extended family. We had to move after about 18 months, the neighbors were complaining and my house was bursting at the seams!”

“In any small business, the entire team needs to ‘get stuck into’ whatever needs doing. As you grow, roles become more defined, but the flexibility of your entire team is essential for your success.”

Search Engine Optimization

“Search engines make a living from selling their ads alongside their organic results. So do you really think they will make it easy for you to optimize your website for loads of free traffic? All of your competitors are attempting to boost their own traffic and have probably been at it for much longer than you.”

Sollars believes that SEO is a discipline, a mix of science and art, which demands a long view and also the realization that Google can take away as easily as it gives if you put one foot out of place.

“SEO works, but it is not free; it takes time, it takes understanding and it takes commitment. We still do it in-house; we’ve spoken with various agencies and SEO companies and haven’t met a good fit for us yet.”

“My business is currently enjoying 98 percent organic traffic, and within our market sector we have the largest organic-only slice of search engine traffic. This has always been my preferred route to market. We have tried many times to make decent sales from Google AdWords, but in our particular niche, where margins are tight and average order values are low, I have never managed to achieve this happy state.”

Shipping

“Back in 2002, at the start of the Internet bubble, online businesses were mainly famous for not delivering on time — if at all — and there was massive skepticism about the web as a route to market. So we shipped all orders within 24 hours. That is still our philosophy today.”

Sollars’s strategy to sell something light and small online and send it to customers through the mail was what originally gave him the idea of selling printer ink cartridges online.

“In the early days I used to walk up to the post office with a shopping bag full of packets. Today a big Royal Mail truck arrives daily to pick up our cages of parcels. Royal Mail is the only option when you need to deliver effectively across the U.K. with a reliable next day service. Even with the proposed price increases, it is still by far the cheapest option for deliveries across Great Britain, and we tend to use them for small light deliveries into Europe as well.”

“Shipping costs are a real issue when working out your sales margins. After wages, shipping is the second largest cost on my monthly profit and loss statement.”

Product Sourcing

“Back in 2002, when I had no financial track record, one supplier said, ‘You will never make a living from trading on the Internet alone.’ I had to jump through hoops to get a trade account, even with a zero credit limit. For the first three years I maxed out my personal credit cards every month and had to pay our suppliers for every order I placed.

“Today, new suppliers phone me up and ask to visit, and all the while I don’t have to do very much to find new products.

“But to be competitive, you must have the best suppliers, and the best prices from those suppliers. When you achieve a reasonable level of turnover you can play one off against the other to reduce your prices. My biggest issue these days is managing new product releases and keeping the website up-to-date with the latest printer models and their cartridges.”

Inventory Management

“From day one I intentionally created a system that would cope with the requirements of inventory management as we grew.

“Initially, we would process our sales orders off the website, and input them manually into Sage [accounting and business software] to manage the stock. In the next stage of development, we downloaded the orders and imported them into Sage automatically, allowing the PC to allocate the stock and generate paperwork. This then enabled us to start using minimum and maximum stock levels for re-ordering.”

“We upgraded to Sage Line 200 and when we eventually outgrew its capabilities we moved onto another system — which I won’t name — for just six weeks before we had to move back to Sage.”

Since 2010 Stinkyink has been using Axis Diplomat to sync the website’s sales and inventory stock levels.

“When it was first installed our inventory stock value was £135,000. But within six months that had dropped to £75,000: brilliant! It manages older stock so as those units stop selling, we stop buying so that we don’t end up with a growing pile of obsolete products. Two years ago we turned over £1 million per year with three people in our stores, today we turn over £3 million per year with three full-time and one part-time person in stores, which is a truly magnificent achievement.”

Accounting Software

Sollars believes that any responsible businessperson needs a good integrated accounting system that includes inventory management, which is, in his opinion, essential.

“I’ve used both Sage Line 50 and QuickBooks from Intuit in the past and selected Sage for Stinkyink.com because it makes you do things properly.

“You can easily delete mistakes in QuickBooks, but with Sage you must reverse a journal entry so you have a full audit trail of everything you do. I think that Sage’s inventory management is better; so I opted for Sage Line 50.

“It’s a big effort for the layperson to understand any computerized accounting package but stick with it because it is vital to get this part of your business right! Sage’s support and training are second to none.

“As you grow, question if your system can grow with you. Sage Line 200 was much more robust, but much more demanding in system requirements, needing an SQL Server to run, which meant an upgrade of hardware and operating systems: an expensive project. To push the business forward we needed something more tailored to our requirements and implemented Axis Diplomat. Without this top-rated system I would need to employ at least another five or six people.”

Stinkyink home page.

Social Media

“What do you use Facebook for? And Twitter? Do you communicate with friends and family, do you feel resentment at being ‘sold to’ in this ‘private’ space?

“Savvy users have started to use it as a tool to get better service. What better way to get attention from a company than publicly berating it to thousands of followers, complaining you’ve received no response or assistance with a general inquiry?”

Sollars says social media channels are hard to attribute a bottom line figure to, but are valuable nonetheless.

“As a channel that can act as customer service, information giver, announcement provider all with a friendly smile, it really is invaluable to us.

“Making money out of it is another story. I really struggle to monetize social media. We are on Facebook and Twitter, @stinky_ink. We received very hostile feedback when we were trying to encourage Facebook users to “Like” us in return for special offers. They’d say things like, ‘Why should these individuals receive a saving just for having a Facebook account, when I can’t?’ I guess our demographic is people who don’t use Facebook and felt aggrieved to be left out!

“Even if Google is paying a lot of attention to ‘social media signals,’ whipping up a froth of enthusiasm about ink is a tough call at the best of times. Social media as a service? Nailed. A profitable service? Work in progress.”

Expense Control

“Understand where your cash is coming from, where it is going to and hopefully some of it will give you some profit. Don’t wait for your accountants to prepare your annual accounts, as the information is up to 18 months old. You must have good accurate accounts that you can rely on and make critical business decisions based on. If you are using decent, integrated accounting software, this information should be easy to prepare and present, but use it and understand what it is telling you.”

Sollars has invested significantly in streamlining the back office systems using Axisfirst software.

“In 2009 sales were 70 percent up on the previous year and growing rapidly. We are a high volume, low margin business and keeping overheads down is crucial. We struggled with manual, non-integrated systems for warehousing, purchase orders, accounting and order processing.

“By automating many tasks and integrating everything, the overall efficiency of the company increased by over 40 percent in 2010; net profit grew by 22 percent; and as turnover has increased our stock has decreased, improving cash flow.”

Customer Service

“Ignore customer service at your peril: with social media and review sites it is very easy to get a bad reputation and very difficult to restore it again.

“I have always told my team that we must treat our customers the way that we want to be treated when we buy online. We implement that from the moment they enter our website, all the way through to managing faults and returns.

“I want to provide, or exceed, the service I expect when I shop online. So if an order is hanging around after 24 hours, I get really cross. We provide an exceptional service with free next-day delivery and a no-quibble warranty, even free post labels for recycling old cartridges. Our efforts are definitely paying off as 50 percent of orders are now repeats.

“Returns are the bane of any web retailer’s life. When my wife buys clothing from [U.K. clothing chain] Next online, she will buy three different sizes and, after trying them on, send two back. You need a robust, manageable customer returns process, which leaves your customer feeling good, and keeps you in control of any issues. Make sure you integrate your returns into your accounts system.”

Biggest Mistakes

“Not starting online earlier.”

Biggest Successes

“Employing 14 people in a profitable business which celebrated its 10th anniversary in April 2012.”