When we met Drew Friedman in 2006, he'd already been a successful eBay seller since before the turn of the century. Friedman, the president of White Mountain Trading Company, buys and sells Mount Blanc specialty pens and other high-end merchandise.
I doubt that my business would have been as profitable from the start without my prior experience in the world of sales
His background of more than 20 years in business was a help when he started his e-commerce business, but as anyone who's been doing this for such a long time knows, that didn't mean there weren't challenges, changes and plenty of turns in the road in his journey.
Sales background starts merchant off right
Schepp: What did you do before you got into e-commerce, and how does that experience help you as an online merchant today?
Friedman: I was the national sales manager for a manufacturing firm traveling all over Canada and the U.S. When hired in 1998, I was charged with figuring out how the Internet and e-commerce were going to help increase our sales and decrease our selling costs.
I worked with distributor reps from 9 a.m. to 5 p.m. every day all around the country. Then, from 5 p.m. to 9 p.m. every night in my hotel room, I surfed the Web trying to understand, in particular, what the "B2B Revolution" was, and how it would help our manufacturing firm accomplish those goals.
I discovered over my two years of research that I, personally, could use the Web as a tool to broker deals myself. The Internet allowed an individual, like me, to scour a greater territory for merchandise on B2B sites (like TradeOut.com, back in the day), and offer them for re-sale on a site like eBay.
Having an extensive background in sales/marketing/selling before starting my own business better prepared me for the necessary "deal making" that comes with being an online merchant. I doubt that my business would have been as profitable from the start without my prior experience in the world of sales.
In fact, today, I still observe other online merchants, whether in chat rooms, discussion boards or seller forums, who seem to lack even the basic skills for trade (buying and selling), finance (cash flow, profit, etc.), and inventory management (sales velocity, how much can I afford to hold, what can I sell at higher/lower profit, etc.).
Further, having managed 60-plus field sales reps, I was better prepared to manage my own employees, interpersonal relationships with vendors as well as customers, and the personnel working for the companies representing the forums on which I sold products.
Sellers face more competition, higher operating costs
Although it seemed to take a very long time for the 'legacy' bricks-and-mortar retail industry to respond to e-commerce, they finally got the lead out
Schepp: You've sold on eBay, Amazon and your own website. And you've been around e-commerce for years. How has it changed?
Friedman: First, although it seemed to take a very long time for the "legacy" bricks-and-mortar retail industry to respond to e-commerce, they finally got the lead out, and are adapting to the world of online retail…strongly.
The legacy retailers in specialty and mass merchant retail are leveraging their purchasing power, devoting resources and specifically targeting their customer bases much better than years past.
Second, the still relatively low barriers to entry in e-commerce have given rise to more competition today than 10 to15 years ago. Deals on merchandise are being chased by a larger number of e-commerce businesses, more sellers put downward pressure on pricing, a crowded field makes it more difficult to be heard, and smaller, slower, less focused e-commerce sellers are finding it more challenging to turn a profit.
Next, operational costs have climbed. Worldwide marketplaces, like eBay and Amazon, are now able to exact larger commissions on sales. Although sites like eBay tout "free" listings, their backend take rates have climbed. Revised pricing schedules may have eliminated the double dipping of charging listing fees up front, but the commission on successful sales has actually climbed.
Despite some of these negative aspects to e-commerce, the technical changes in payment processing have improved dramatically, allowing for faster shipment of merchandise. Integrated shipping tools make it easier for sellers to process invoices and prepare shipments, and social media has given sellers another opportunity to market their goods and services.
Sellers like me used to wait for checks and money orders in the mail, hold payment until clearance, then ship product. We sometimes stood in line at the post office, FedEx and UPS Store to expedite shipments. And we waited until customers found our items in the right categories on marketplaces, or stumbled across our websites through serendipity. In all those areas, today's e-commerce industry makes those days feel like the age of the dinosaurs.
Our business model is still very similar to that of the day we started where we look for product that may have niche demand, be in short supply, and where pricing remains strong
Merchant goes back to marketplaces
Schepp: How has your own business changed through the years?
Friedman: We started as eBay sellers in 1999 after several years as predominantly a buyer. Our business was nearly entirely based on eBay until 2006, when we expanded online onto the Amazon marketplace and opened our own brick-and-mortar specialty retail business with the motto "We're here with bricks and clicks!"
Our business was interrupted in 2009 with a sudden and unexpected physical move halfway across the U.S., which forced us to close our brick-and-mortar business and dramatically scale back our online efforts for nearly two years. Subsequently, we've rebuilt the business as online only again and finished fiscal year 2014 at just under $350,000 in annual sales.
Our business model is still very similar to that of the day we started where we look for product that may have niche demand, be in short supply, and where pricing remains strong. Because our product mix can vary so dramatically from day to day, we feel our model is best supported on the national e-commerce sites, like eBay and Amazon and we currently do not have an e-commerce ready website.
In the next part of our interview, we'll look at some of the tough choices Friedman has made in terms of where he markets his merchandise, how he promotes his business, and how his customers have and have not changed since those early days.