We recently spoke with Jamie Salvatori about how his company fared in 2011. He is the founder and owner of Vat19, an established ecommerce business that sells unique gift items. He’s also a Practical eCommerce blogger, at “The (eCommerce) Corner Office.”
Practical eCommerce: How was 2011 for Vat19?
Jamie Salvatori: “2011 was good. We had a great time. We found a lot of really cool products to add to our site, increasing our SKU count. We were able to increase our staff a little bit, which went along with some healthy increases in sales and profits. So overall we had a good 2011.”
PEC: Can you tell us the percentage of growth you experienced, perhaps in top-line revenue?
Salvatori: “Sure. Our number of orders went up maybe 65 percent over the previous year . Our average order size stayed about the same, and that was able to help us translate into approximately 100 percent increase in profit over the last year.”
PEC: That is a wonderful accomplishment.
Salvatori: “They’re smaller numbers, so it’s easier to make big increases on smaller numbers than really big numbers.”
PEC: You mentioned you increased your inventory count, SKU count. How many inventory items do you carry?
Salvatori: “Everything that we sell in our website we stock in our facility The numbers of SKUs I’m not entirely certain, with variations of products such as color or size differences. I’m not entirely sure how many of those we added. Top-level products would probably have been about 120 new items. We don’t add at a ferocious pace — adding new products to the website — because we can take a different approach in terms of really putting a lot of effort into how we promote each product we sell, in terms of taking a lot of our own photographs, writing our own descriptions, creating video for almost every product that we sell. That pace of two or so a week is pretty good for us and I think that brings us to about 400 — or a little over — top level products on the site.”
PEC: Give our readers some examples of the type of products you sell, maybe your best selling products.
Salvatori: “Sure. We like to call our products ‘curiously awesome’ and what that means is just exactly what you said earlier, ‘unique gift items,’ stuff that you might not find everywhere, stuff that is fun, functional and has that unique gift factor to it. Something that you can give to somebody and that person is going to go, ‘Whoa, I’ve never seen that before. That’s crazy.’
“One that was really popular is called Guitar Pick Punch. Imagine it’s sort of a stapler, but you take it to old credit cards or all the IP cards — sort of all the stuff that is made out of plastic — and you just sort of punch it like a stapler and it punches out guitar picks. Kind of wild little product but then we couldn’t keep those in stock. That was crazy.
“Another product that was very popular was a knitted hat — like a stocking cap — but it also has a knitted beard attachment. You have to see a picture of it but it makes it look like you’re wearing a beard. It’s kind of silly. We weren’t totally certain when we started selling it that it was going to be popular, and then we couldn’t keep them in stock. They just flew out the door. It’s always fun to add new products and not know how they are going to do and then watch something go kind of crazy on you.”
PEC: What about mistakes? Were there decisions you made in 2011 that you wish now you wouldn’t have made?
Salvatori: “Most of the time, my regrets are ‘we should have started that way earlier’ or something like that, or ‘we should have made more of that decision’ or something. I can’t pinpoint anything specifically where we said ‘oh that was really stupid’. But we came up with some interesting ideas and I wish we had started them earlier.
“I can give you a couple of examples. We get a lot of our traffic from YouTube and I just feel like we should have done more earlier with YouTube. We started our second channel on YouTube late this year and we never thought anybody would be interested in the behind the scenes of how we make our videos. People were clamoring for more of that, so we should have sort of been doing that all along. I also feel like we got into Twitter really late. We just never really bothered with it until — I’m almost ashamed to say — four or five months ago where we started really putting more effort into what we’re doing on Twitter. So all these are things I wish we had done earlier.”
PEC: Tell us about the second channel on YouTube.
Salvatori: “Well, we’ve got a primary channel on YouTube; there’s really no distinction as far as YouTube is concerned between your primary channel and your second channel. That’s just sort of something that people — YouTube content creators — have created. So, our primary channel is just a regular channel on YouTube. It has all of our product videos — basically commercials for the products that we sell. Anybody that subscribes to that channel is notified when we create new product commercials. Then, we created this second channel where we only upload into that channel behind-the-scenes or blooper-type stuff from the product videos that we’ve created. So if somebody is a fan and wants to know more, or is really interested in what we’re doing, he could also subscribe to this second channel and be notified when we create more of those videos. We’re taking content that is already there. I mean these are bloopers or behind-the-scenes footage that we already have and we’re being able to create more value there.
“Fans get more of a connection with us and it allows more people to find us on YouTube. Also if somebody is searching for something on YouTube that we happen to sell, we have two videos that could show up in those results, as opposed to just one.”
PEC: Shifting gears, tell us about your platform, your order fulfillment process, accounting systems, that sort of thing.
Salvatori: “Okay. I’ll start with the easyt stuff. With accounting we just use QuickBooks. For order fulfillment we actually use a custom piece of software that we made, but it’s not that complicated, in addition to some stuff provided by just your regular vendors. Right now, we only ship via UPS and USPS. For USPS, we use Dazzle by Endicia to print all of our labels. For UPS we use their API. They have a ship API that lets you create your own shipping labels. So that’s how we create all of our labels.
“As far as physically doing our fulfillment, we just use a batch-picking process, which means we take all of our orders and we break them down into manageable batches of 50 orders at a time. We have a list that has all of the items that go into those 50 orders. We pick all of those items off our shelves, put them on the carts, and then from those carts we fulfill each of the individual orders from that batch. Everything is bar-coded; we use UPC barcodes to make sure that the right product is going into the right box. That’s how we handle the fulfillment aspect.”
PEC: What about your shopping cart?
Salvatori: “That is also something that we wrote ourselves. But there’s nothing in there that you couldn’t find in off-the-shelf software. The only reason we made it ourselves is because I have a background in computer science. I just started developing it — because when you’re starting a business you don’t want to spend money where you don’t have to. Back when I was starting, a lot of the shopping carts wanted a piece of the transaction for their fee, based on how many transactions you were doing. I didn’t like that idea, so I started making my own. But there’s nothing that we’ve developed that you couldn’t get from any of the major shopping cart suppliers or even some of the free open source ones.”
PEC: When did you launch Vat19?
Salvatori: “We started selling stuff online in 2003, but we were selling just a small subset of products. We didn’t really get into to being a full-time ecommerce company until 2007. So there was about three years that we were selling some stuff online, but our business was also offering service-based stuff.”
PEC: Let’s discuss marketing, please. How do you consumers find your site? What methods do you use?
Salvatori: “The hardest thing to do in the world is to get people to come to your website. We’ve probably tried everything. It’s just a question of how well those things work and how much you have to pay for them. Right now, our most effective way to get people to our site is via our YouTube channels and our videos. We found that to work pretty well. But, we also have had success trying search engine optimization techniques, which are free in terms of money but not in terms of time. There’s a lot of time involved there and, in my opinion, you’ve got to find that point where you just say, ‘Stop. This extra ten hours spent on search engine optimization is going to have such a tiny effect and Google might change their mind three months down the road and it will maybe have a negative effect or no effect in the future.’ So you’ve really got to temper how much you spend on SEO. You can go nuts.
“Pay–per-click has been something that we’ve always done, and it always works pretty well. The only problem that we’ve ever found with pay–per-click is that it can’t scale enormously well. You can’t necessarily command more people to search the terms that are converting well for you. So, if you’ve tapped out a search term that is working well for you, how do you increase that? You can’t. I mean you can tweak as much as you want to get some tiny increases in the click-through rate and maybe some tiny increases in your conversion rate. But rarely are you going to be able to tweak that ad text once it’s fairly optimized to the point where you can double your click through rate on a pay-per-click campaign. Also, for us, the types of products that we sell are unique; people don’t necessarily know that they exist. So pay-per-click is sort of hit or miss for us.
“Other ways that we get people to our site is through social media — Facebook and Twitter. For Facebook, we have a lot of fun with it. It is a fun way to connect with your fan base and all that. But really, you are not going to see a huge conversion rate from Facebook. You are not going to see a lot of people jumping from posts that you put on there, to then go to your website and convert. I think with Facebook, you just kind of get sucked into it; it’s hard to pull someone out of Facebook to go do anything else. They might jump over to look at your web page. But really they are ‘Facebooking’, so they jump back right away and go back to going through all their Wall posts and stuff. That can be a difficult task, to do direct marketing or direct sales through Facebook.”
PEC: Have you tried daily deal offers, such as Groupon or Living Social or your own daily deals?
Salvatori: “I have not tried any of the daily deal sites and I don’t intend to. I’m not a fan of their business model at all and I don’t intend to try. Their concept is that it’s a marketing expense or something like that. In my opinion, I think it’s a disaster for a traditional retailer. If you offer some sort of service — a recurring service like a massage studio or something like that — it could make sense. But from my opinion, a daily deal site is flawed in a lot of ways.
“One, it trains people who use your daily deal site that your stuff is worth half of what it really is. So the person that gets the huge discount probably isn’t going to come back and pay full price later. Why should they? They got it at half-off before. It’s also sending a message to your existing customers — your current customers that have paid full price — that they missed out. And why did they have to pay double? I just don’t like that concept.
“The daily deal companies pitch that if you get 500 new customers, those new customers — some percentage of them — are going to come back later and buy full price. I just don’t buy that. And if you get 500 new customers you’ve probably spent, say, $5,000 to get those customers. They are just people that like coupons and getting good deals. So, I see no value in it whatsoever. I get offered it all the time and I turn them all down. I think it is a terrible idea.”
PEC: What about 2012? Do you have plans that you can tell us about?
Salvatori: “Our plans are to continue doing the stuff that’s been working for us: trying to find the cool products that we think people will like, trying to create more videos, increase the frequency that we turn out our videos for YouTube. There are small little things that we’re looking at doing on our website. We are going to add gift cards this year to our website, but there is nothing really fundamental or sweeping that we are going to be changing in terms of our business model. We just hope to do more of what we have been doing.
“Behind the scenes, we are physically expanding our building. We are adding 10,000 square feet of warehouse to our facilities so that we can get our fulfillment operations to be even more efficient than they are now. Possibly we can extend our cut-off window. Right now, if you order by 2:00 p.m., we ship that day. We’re hoping to push that a little later into the day, once we have added this space onto our building. So these are some of the things we are excited about.”
PEC: Any final thoughts for our readers, ecommerce merchants?
Salvatori: “Doing this or any other business is extremely difficult, and there is no magic bullet. In my experience you have to keep grinding this thing out. It’s an everyday grind and you just keep going after it.
“My other thing I think about a lot is don’t mimic Amazon. They are the biggest ecommerce store in the world, but they are not an extremely profitable store, despite their huge revenue. So, be careful how much you want to copy what they are doing because if they can’t make a lot of profits with billions of revenue, when are you, as a smaller merchant, going to? If you are a much smaller store you have got to think a lot differently than what they do.”