Internet only companies thrive in online environment
While Governor Jim Douglas and the Vermont Legislature debate how to best bring broadband Internet connections to all of the state, a goal he has set for 2010, several Vermont companies say they are already thriving as online only businesses.
While this may be so, Mike Quinn, Commissioner of the Department of Economic Development, acknowledged that companies whose only presence is in cyberspace are a rarity in Vermont. Most Internet businesses, he said, are hybrids, brick and mortar companies with an online component.
Quinn said the governor has recognized that for the future of the Vermont economy, delivering broadband is crucial. “That’s why he set the goal for 2010. It’s not a simple goal but three years out.”
According to Quinn, 85 percent of Vermonters are currently covered by broadband and DSL service. However, he admitted, “there are still gaps, and we believe that is critical.”
He sees fuller broadband coverage, especially in the pockets where none currently exists, fostering science-based businesses or software developers.
“It is about being able to work wherever you are and delivering your plans around the world.”
The Internet is not new to many of the state’s businesses. Most companies, from the mom and pop variety to our largest employers, have some sort of a World Wide Web presence usually in the form of a company web site and email contact point. These sites are relatively inexpensive to set up and maintain. They are most often part of a company’s overall advertising and marketing program. Some also include a retail component and product is sold through a secure web page. Business web sites have become as important as a business card and brochure and as a means of contacting the company via email.
Expanding on the use of the web, as an informational tool available to anyone with a computer and telephone is the web based business model. Here, companies use the web as their sole business location. A growing number of auction sites use this model. These companies have mushroomed with the explosion of auction type sales attributed primarily to eBay, the world’s largest and best-known Internet auction site. Three Chittenden County businesses, Globalgaragesale. net, GoTradingPost.com, and Vbaystore.com, have seen profits surge as a result of this business model.
Also using the Internet as its sole storefront” are businesses whose primary function is the exchange of information. Newsbank, an archive service for media, located in Chester, is an example.
Then, there is Dealer.com, a Burlington company working with the nation’s automobile dealerships to set up websites and market cars online.
Online Auction Houses Thrive
Globalgaragesale.net based in Winooski is the brainchild of Erik Holcomb, 29, and his partner Peter Becker, 42. Since December 2003 these two entrepreneurs have seen gross sales at their company go from an initial $76,000 In 2004 to $680,000 in 2006. The two men, who left jobs as landscapers, say they found a solution to their lack of winter work when they turned their penchant for selling unwanted items online through eBay into a business of their own.
Their business was inspired when a friend asked them to sell musical equipment through eBay in 2003. They earned a fee for their efforts and decided to operate a business doing for others what they had done for their friend.
“We thought a business would be a great idea,” said Holcomb. “We figured our friend wasn’t the only one who needed us to sell for them on eBay.”
Just three years ago, said Holcomb, “a lot of people in Vermont were not eBay savvy.” Selling the concept of being an online auctioneer to Vermonters took some time and. advertising. The partners began advertising in 2004 in local Burlington newspapers such as Seven Days.
With just $400 start up cash and rented space in a small warehouse on West Canal Street in Winooski that they already used as a tie-dye tee shirt factory, they opened for business.
The company takes a commission in a sliding scale based on the price of the item sold. On average globalgaragesale. net earns a third of the sale price, which includes all fees it has to pay to eBay, which includes credit card processing of sales. Holcomb said eBay sales last year totaled $5 to $7 billion.
What makes eBay so successful, and thus the best online auction site, said Holcomb, is that people worldwide can trade with others with no tariffs or other trade problems. His company has sold items to China, Europe, 40 countries in all.
“Its amazing that anybody can use eBay to buy and sell,” he said.
EBay is so popular that many businesses use it to liquidate their overstock and returned merchandise.
“We’re trying to get a piece of that action by helping Vermont businesses get a niche to sell their goods,” noted Holcomb.
He said the key to making money is “hard work and doing good work for the people. We work hard for every job and we build a client list and loyal customer base.” They also have pretty humorous radio ads.
The key to eBaying, he explained, is also ”honesty and integrity of the whole system. Through the feedback system that eBay has, people can check your reputation.”
To that end, globalgargesale.net writes quality descriptions of each item, takes professional digital pictures to post with each product placed at its online store, and handles all customer support and emails from potential buyers. It also answers phone inquiries. In its three years in operation it has fielded nearly 4,000 feedback statements from buyers and built a 99.9 percent positive rating.
Holcomb said his company has had sellers who travel from Canada, New York and Massachusetts to its warehouse to drop-off items. The most valuable item the company has sold was a baseball trophy from 1875. That seller was offered $5,000 privately but globalgaragesale.net sold it for $76,000 in May 2005.
The most common items the company sells are china, and similar antiques but war artifacts, figurines like Star Wars and GI Joe, musical instruments and enameled porcelain signs also sell well. Classic cars, such as a 1969 Chevy Camaro, which the company auctioned for $54,000, are also popular. The strangest item Holcomb and Becker have auctioned is the former Colchester town vault made in the 1850s, which weighed 5,000 pounds. That vault sold for $2,200 to a buyer in Michigan.
Holcomb said he is surprised at how well his company has done.
“We thought it would take off but not this fast.” Because globalgaragesale.net is becoming so successful the two entrepreneurs have started a franchising business. Some have called them the Ben & Jerry’s of eBay sales, and they are hoping to spread their business model and make a profit doing it. As Global Garage Sale Franchising LLC they hope to promote their new business and support franchisees.
Holcomb said the cost of opening other stores themselves is expensive.
“We want other stores open and the fastest and best way is to franchise our business,” he explained. “Weve made a model that is easy for others to learn and adapt to.”
A franchise will cost an initial fee of $18,000 and Holcomb estimates that the total startup cost will be $50,000 to $85,000 with warehouse space, insurance, legal fees and cash on hand.
The partners will run classes for franchisees and for others who want to learn how to buy and sell on eBay.
So good are Holcomb and Becker at this business that they will be featured in the third edition of the eBay Bible by Jim Griffith, a former Vermonter and the fifth employee of that company.
A School Project Led To A Growing eBay Auction Site
Two Champlain College graduates, Peter Jewett, 24, and Peter Bruhn, 22, have turned a school project begun in the summer of 2004 into another eBay auction site, GoTradingPost.com.
“I had to do a website for an e-commerce class,” explained Jewett. Initially he sold ski equipment at a website he established called secondhandski.com. Soon, he realized that “everything was selling on eBay instead of my on line classified site.
“EBay is the place,” Jewett acknowledged. “There are more buyers and sellers there. When someone wants to buy something that’s where they go.”
Jewett’s original school project morphed into an eBay business. Now, in its third year, the two partners have two employees and several Champlain College interns also work for them.
Monthly sales are $25,000. In 2005 the site sold $60,000 worth of items. “If we can keep the growth up,” said Jewett, “2007 will be a good year.” Sales are growing at 600 percent per year, but he admits that figure “should be hard to keep up, but we will try for it.”
GoTradingPost.com is entering the online car auction business, a move Jewett describes as “big money.”
Why an online car auction? According to him, “you can find exactly what you want. For people who want specific cars it works well and there are good deals on eBay.” He believes online commerce works in favor of buyers because it takes less time to locate a specific vehicle than other, more conventional ways.
Another business niche here is a Saturday antique show at the company’s 237 North Avenue warehouse. “We have warehouse space here and rent to dealers and advertise for buyers,” said Jewett of the enterprise.
The company is also entering the estate auction business with themed auctions such as an Americana auction.
Another aspect of its business is sponsoring non-profit based auctions. Here, the company asks sellers to donate five percent of its profit from a sale which Jewett and Bruhn match. So far, this model has raised $500 for Vermont Cares, and money for the King Street Youth Center, all with no effort involved by the recipients.
Jewett, energetic, and constantly smiling, said a business like his “takes an original idea to be successful.”
“To start you need a knowledge of the Internet and an untapped market.” He also believes that by “connecting people who aren’t savvy to the Internet,” he can make a good living.
While his business and globalgaragesale.net are run by computer savvy and relatively young entrepreneurs, “it’s not a young person’s business.” What it takes,” he argues, “is a lot of interest and time.”
“We started up in our apartment with a desk top computer. We haven’t invested a single dollar in this besides our time. It doesn’t really require a lot of seed capital,” he said.
Jewett and Bruhn are not following Becker and Holcomb into franchising. “A lot of companies want to franchise this model and, a lot of people get into it and don’t know what they are doing,” said Jewett. “You need to find a niche,” he suggested.
“Franchising is nothing new, that’s what everyone’s trying to do with this model,” he cautioned. “We are trying to run a hub and spoke model.”
In this model, GoTradingPost.com is centralizing the selling and storage and administration of items. The spokes, he explained, are existing businesses that want to supplement income by accepting items for his company for sale online. He envisions music stores accepting items for sale and GoTradingPost. com listing them on eBay. “That business gets a percentage of value without doing much,” he explained. “That addresses how we get more items to sell. We put out more spokes.”
According to Jewett, he and Bruhn have become successful because of “a lot of experimentation.” Also, he admits, “we were lucky, we started while in school. Now we are out and it’s game time.”
“We are able to do this without a mold of preconceived notions,” he acknowledged. “That’s part of what makes this a successful business.”
A Real Time Auctioneer Gets Involved in eBay
Just a year ago Wes Paro purchased the Vbaystore.com in Williston from its original owner. Paro, 50, had experience in the antique and auction business having worked for the Hirchak Company of Morrisville.
The Vbaystore.com is another eBay-based business. The company conducts 50 to 75 auctions a week and sells 75 percent of the items it offers. It’s collection storefront as located at Taft Corners at the Taft Farms Plaza.
“For me it’s a good business,” said Paro. “Its an easy job, I’m interested in what comes through the door and the history of the items and I understand the items that come in. I have the knowledge to sell and pack the items properly.”
According to Paro, the online auction business model has passed the early stages of development but has not yet peaked. “It’s not a mature market in Vermont,” he observed. “Elsewhere around the country there are eBay storefronts in most local shopping malls.”
For Paro, as with the other online auction houses, most clients are people who “don’t know how to use a computer and don’t want to learn, and those who don’t have the time (to auction item themselves.)”
Paro said the auction model is successful because “people know there is a bigger market for an item…. It drives people to look in the back of their closet to see what they might make a few bucks on.”
At some point he sees market saturation for his type of business, especially as more sellers working from their homes enter the field or, as more at home online auction sites emerge.
He, too, envisions selling franchises but admits that he “needs a track record to offer a franchise.”
Dealer.Com Helps Car Dealerships Sell Cars
The offices of Dealer.com in the Maltex Building in Burlington are abuzz with 20 something workers sitting behind flat panel computer stations entering data. From an office, a visitor overhears marketing tips being shared while the word “Google” emerges frequently from the conversation.
Here, on Pine Street, is one of Burlington’s fastest growing companies. The company currently employs 100 people full time, many at salaries of $40,000 and higher. And, the company has plans to add 50-75 people this year. “We are a growing company, there is a lot of demand for our product,” acknowledged company president Mark Bonfigli.
“Our company has a fun culture,” said Bonfigli. Most employees here are under 40.
What Dealer.com does is build websites for auto dealerships and work as a marketing tool and web site solution. It also creates an online lead management system for the dealers. These aspects are integrated so dealers, according to Bonfigli, “can use the tools Dealer.com creates to drive customers to the web site, convert to phone calls, email leads and manage and close the leads, then manage the relationship after they are a customer.”
Bonfigli, who started the company in 1997, after he and his brother Andrew began Earthcars in Williston in 1994, said that while less than 1 percent of cars are sold online, 80 percent of sales originate from the Internet.
There are 100,000 auto dealers in the US including used car dealers, said Bonfigli. According to him, they all needed to find a better way of marketing their inventory and selling cars faster. “This is the least expensive and the most effective form of advertising,” he said of the Internet site.
Dealer.com can set up a website for a few hundred a month. The average small Vermont dealer would pay $400 monthly for an entire marketing package, he noted.
The key to this type of web-based site, one the company has become expert at, is search engine technology. According to Bonfigli, “every dealer using our website component is linked into Google seamlessly.”
This vehicle link can also show up in the shopping bag on Google, a valuable marketing device.
Dealer.com has automated the process. Most dealerships in the US have an accounting system that Dealer.com dials into then moves the inventory data to the Dealer.com website. That inventory is then marketed online.
With this technology Dealer.com has done over 4000 websites for auto dealers since 1998. By the end of 2007 sales will “be in the tens of millions.” This makes Dealer.com the third largest vendor in the US for auto dealers behind Reynolds & Reynolds and Cobalt. Dealer. com also maintains an office in Manhattan Beach, CA because southern California is the largest auto market in the country. “We’re going to continue to grow and be a leader in automotive web marketing,” predicts Bonfigli.
The company is growing so fast that it occupies offices on every floor of the Maltex Building and is, according to Bonfigli, “pretty much out of space.”
Bonfigli is now taking Dealer.com in a new direction and will launch a nationwide earthcars.com web site later this year. That company will be an environmental automotive shopping site for “green” cars. These include hybrids and electric vehicles both new and used. He said the site would include “anything you want to learn about green cars.” He expects to work with thousands of dealerships who will partner to bring a green car inventory to earthcars.com.”
Earthcars is used by the dealership in Williston, but in March that site will go national.
Currently the company is getting the inventory ready and putting relationships in place. Some work on the site, such as photography, is being donated because, Bonfigli said, “the companies believe in the social aspect of stopping global warming.”
“We’re trying to do our part,” said Bonfigli. “It’s difficult to help auto dealers with marketing and getting rid of paper. We need to help dealers get those cars faster and get people to shift to earthfriendly vehicles.”
He said a demand for high performance electric cars exists. “People need to accept them, and think they are cool,” he explained.
Newsbank Gets The News To Libraries And Researchers
Newsbank, a private company in Chester, collects data and publishes research database. According to COO Mike Walker, “our main core business is around the area of news. We focus on republishing news data and digitizing Americana Data.”
The company has a customer base in the tens of thousands.
Although corporate offices are in Naples, Fla., over 200 of the 320 employees work in Vermont.
Originally the company was named Readex and its main business was microfilming. That company was purchased in 1983 and became Newsbank.
Newsbank, Walker explained, produces many types of databases and licenses them to institutions. “We sell them a product for their patrons or students such as Access World News,” he said.
2000 news feeds arrive daily in Chester from newspapers, news periodicals, news wires and blogs on four high-speed T1 telephone lines purchased through AT&T and Sprint services via VTel. Walker said the cost of the lines is “a five-digit figure on a monthly basis.” But without these data lines Newsbank could not operate.
The T1 line brings in the transmissions from publishers and then Newsbank normalizes the data and moves it to an AT&T data center in Watertown MA, where customers access content from. For example, he said, newspapers use this “Newsroom,” and newspaper librarians use it for research or background on stories.
The company is involved in digitization from hard copy of historic newspapers and documents, and also microfilm and microfiche as it builds digital collections.
Currently, Newsbank is creating the Archive of Americana using early American books from 1690 to 1800 that it digitizes. This product is available at universities. “We convert digital images to searchable text and we have catalog records and an index. You Can look at a page or whole book online,” said Walker.
Newsbank also has compiled the largest collection of early American newspapers and placed them online.
The work can be tedious as company engineers scan old books and newspapers. Sometimes, said Walker, his company will borrow books and documents, such as from Dartmouth College where it obtained the US Congressional Serial Set, which are all the publications of the Congress and Senate to 1981 totaling 12 million pages.
So many scans require a lot of hard drive storage and Newsbank has 68 terabytes. A terabyte is over 1,000 gigabytes.
Another product is www.genealogybank.com a genealogy site containing vast amounts of information from obituaries, military records, historic records, the Social Security death index and other documents. A subscribe pays $99 a year or $20 month. Walker said this is his company’s “strongest thrust right now.”
Newsbank is also developing a consumer oriented online history site as yet unnamed.
“It’s a market we looked at for a long time, we have unique content no one else has,” explained Walker. With millions of people doing online research Walker believes the websites will be financially successful.
“We are going through fairly substantial growth since 1997 when the Internet substantially changed the way we do business,” said Walker. “It is easier to deliver information to customers over the Internet then by CD ROM and the mails. There is no time lag from the mails.”
There is growth in all aspects of Newsbank, said Walker, and the company is adding engineers in Keane NH and El Paso Texas where a large labor force exists.
Walker said technology and broadband is not a problem. “Chester has a cell tower and the cell service is good. This part of the state is good.”
Copyright Boutin-McQuiston, Inc. Feb 01, 2007
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