The secrets to this online retailer’s success may be simple, but they helped it grow tremendously in the face of robust competition. Bob Herman of Rochester, Minn. wouldn’t be in business for himself today if he had given up after failing in the early days of online commerce. But Herman wasn’t cowed when the Web-based computer sales business that he’d developed in his basement folded two years after its launch in 1998. Instead, he got back in the saddle with a new enterprise that’s enjoyed steady growth since inception.
Herman’s success story is called BuyOnlineNow.com, an online retail operation that supplies office products to customers who range in type from individuals to major corporations. Since inception in 2000, the company has grown from $200,000 in annual sales to $28.6 million.
Progress hasn’t happened in the absence of competition. On the contrary, Herman acknowledges that the furniture, organizers, and other products he sells are available from thousands of retailers. Some of those include office products giants that try to leverage scale for pricing advantages.
Yet BuyOnlineNow.com has thrived nonetheless with average annual growth of more than 50%. The secret, Herman said, has a lot to do with providing exceptional service, even to the point of taking a pass on other opportunities when they stand to threaten that core value.
“We could have grown a lot faster, but it wouldn’t have been the right thing to do,” said Herman, who is BuyOnlineNow.com’s CEO and president. “We make promises to our customers to keep the service up to a certain level. We have to hold up those promises before we can take on more business.”
For Herman, doing what’s right is a guiding principle with roots in his youth. He grew up in Rolling Meadows, Ill. as the son of a Baptist preacher. He learned much about the importance of taking moral stands on principle even when it isn’t easy to do. That background, he says, has served him well in business.
A stand out
Among the long-view practices that Herman takes to heart is a habit of reinvesting in the business. That’s largely enabled BuyOnlineNow.com to stand out from the competition.
For example, the company doesn’t rely exclusively on software to make sure its shipments arrive on time. Staffers make phone calls to ensure no glitches have occurred. If a problem does happen, the callers move quickly to remedy the situation. That means customers get their products faster than when the onus is on them to identify a problem, take initiative, and begin the troubleshooting process.
“We think it’s our responsibility to know what’s happening with our shipments, right up until they arrive at our customers’ locations,” Herman said. “As much as the world is computerized, a lot of this logistics stuff just doesn’t get all tied together. With some of this stuff, humans just do it better than computers.”
This type of approach is more manpower-intensive than a fully computerized one would be, Herman acknowledged. BuyOnlineNow.com employs 34 workers. But this approach helps account for the fact that more than 60% of the firm’s sales represent repeat business. Customers know they’re not on their own to follow through on a shipment, he said, and they appreciate having a support system in place.
Investing to improve service has meant adding a new component to the business over the past year. Prior to a year ago, BuyOnlineNow.com had no inventory of its own. It worked exclusively with suppliers (just one for the first five years and 50 today) that shipped orders to customers. But the company now stocks a 5,000-square-foot warehouse facility adjacent to its 7,200-square-foot office headquarters in Rochester. Here, workers pack and ship some 300 electronics products.
Although stocked products represent just a fraction of all available merchandise, Herman notes that these electronics account for a significant 7% to 8% of annual revenues. And by stocking them in a warehouse, the company shaves several days off shipping timetables. That’s because the alternative has been to ship directly from manufacturers that usually aren’t able to get products to destinations in less than a week.
BuyOnlineNow.com does incur some additional costs and logistical challenges, but those investments are expected to pay off. Herman noted that the amount of shopping that Americans do online continues to grow each year.
Investments in Web infrastructure have been critical as well. Herman said the company’s survival has depended in part on search engine optimization analyses. These have helped site designers keeps the firm’s Web presence both up-to-date and easy for potential shoppers to find. A recent site upgrade, which went live on May 18, cost so much that Herman said: “I get woozy if I think about it.” But those investments have made the site faster, cleaner, and easier to use, all of which add up to a better customer experience for this service-focused enterprise.
As the company grows, Herman says, decisionmakers are careful not to get overextended. Shipping to Europe, for instance, wouldn’t make sense because it would be cost-prohibitive to try to move heavy, not-very-expensive items across long distances.
But Herman sees much opportunity for the company to grow its current markets, both in the US and Canada, by sticking with what he calls the Sam Walton model of offering a bargain, providing a good service, and working hard.
“I’m always surprised by how simple it is when we describe what we do,” Herman said. “It’s basically trying to provide good service and keep pushing the boundaries of what that means.”