A penny spent is a lot of time saved

• Josh Mehlman
• 6 October 2009
• Page 1 of 2 : single page

Penny Flanders launched second-hand clothing emporium Miss Money Penny in February 2009. The idea behind it occurred to her about six months earlier. 

"Within the space of four weeks, about five girlfriends said to me, ‘I've got all these clothes in my wardrobe and they've got tags on them and I don't want to take them to markets, and I don't like eBay, and I don't want to go down to consignment stores because they look you up and down'," she says. Spotting an opportunity, Flanders entered a national competition for women trying to start an online business, and won. She received a free website design as part of the prize, and got things going.

More than six months down the track and Penny has over 200 sellers, but is finding the administrative side of the website is slowing her down because she has to approve and reformat each item for sale. She is worried that the site isn't earning as much income as she would have liked. And she would like to know the best way to promote the site to get more sellers listing their products, and more buyers looking to buy them.

Challenges:

1. Reduce the amount of time spent manually updating the website 
2. Grow the site to the point where it's earning a decent income
3. Promote the site to get more people buying and selling

The panel

• Jonathan Crossfield, Netregistry.  Expertise: online content
• Laurence Harrould, Aviel. Expertise: business and personal coaching
• Terri Winter, top3 by design. Expertise: online retail
• Josh Mehlman. Moderator

Challenge 1: How can you grow a business if you're drowning in admin work?

Josh: Penny, you mentioned that a lot of people don't like eBay. What's wrong with it?

Penny: There is a lot of clutter to get through. My buyers don't want to fossick around for things, they want to have all of the hard work taken out of it for them. They don't want to search through 1500 dresses on eBay, they just want the cream of the crop already selected for them by our professional stylists.

Josh: That's very similar to the model Terri's design store is based on.

Terri: Our business is very much based on curating and editing a selection. Fashion adds that other dimension of difficulty because there is the aspect that people have to feel comfortable it's going to fit.

With my shop, you don't have to check if a candelabra fits you or not. Do you reject some of the products people put up for sale?

Penny: I do, that's my key point of difference. But this is a big issue for my business because it makes admin very extensive. I actually don't get a lot of submissions that aren't right, but the system I'm using slows me down.

“Any business that’s actually profitable in the first year is pretty unusual, given that that’s when you’ve got all the expenses and no income”

I get the selling forms that sellers have submitted with images attached. I have to resize the images in Photoshop, re-upload them onto the system and fill out all the product description details.

For each item, it takes me about 15 minutes. So, if I'm listing 100 items a week, it's a whole lot of administrative work that is taking me away from marketing the business.

Jonathan: Is there a reason you don't have the system set up for people to create their own listings in the correct format and have them in a holding pattern for you to hit ‘approve'?

Penny: I didn't have a lot of money to spend on developing a website and I believe it is quite expensive to get one built from scratch with that functionality.

Terri: I think that your workload is going to be too high, too manual, especially as your business grows. That's kind of what's happened to us, because a lot of our systems were very manual. It's better to start the right way, even if you're not as busy now, because you get the right systems in place.

What if products automatically went up, but then you had some sort of system where the community could vote on things and send you notices if they thought something wasn't appropriate?

Jonathan: You've got to weigh that additional cost against the extra time that you're putting into it at the moment, because that is also a valuable resource. If it's taking you all these extra hours to do that work manually, you need to work out what is the dollar value of that and decide if it's worth putting that money into the website instead.

Terri: In another couple of years when you're even busier, you won't have the time to do the upgrade properly. It just gets harder and harder.

Challenge 2: How long will it take until the business is profitable?

Josh: Laurence, you've worked with quite a few start-up businesses. How long generally does it take before things really kick off?

Laurence: Well, the general figure is that you've got to give it three years. Any business that's actually profitable in the first year is pretty unusual, especially given that that's when you've got all the expenses, the set-up costs and no income. So you can pretty much write-off the first year.

Penny: Good, I feel better about that.

Laurence: The fact that you are about six months in and you're starting to think about how your processes are going to work, I think that's pretty standard.

Penny: I guess I was nervous about whether the concept was going to work. If I grow, I get nervous because I've just got all this admin to do. I'm even thinking of putting on a junior for $15 an hour to help me, as an interim thing. But it sounds like I would be better off investing the money in a system that is more automated.

Jonathan: If you know it's not working perfectly now, you're not in the best position to make a judgment call. I think you really need to look at fixing these issues and then give it some time when the website is working at its optimum. Then see if your sales are increasing each month. Even if it's not going as quickly as you'd like, you can see if the trend is going in the right direction and work out how long it's going to be before you hit that sweet spot.

Penny: The thing that's worrying me at the moment is, some things are selling really quickly but there are others that have been on there for a while and people are getting disappointed that it's taking so long.

Josh: I don't usually give advice, but one of the things about selling online is there may be items that sit there for ages until someone comes along and says, "Oh, my goodness, I've been looking for this for five years and you finally have one."

And since it doesn't cost you anything to hold the inventory, I can't see the harm in having those kind of long-tail products on your site.

Laurence: The big thing is to work out your vision for the business, in terms of the site itself, the technical side, the income you're expecting out of it, the lifestyle you want and what the brand will be. Then think about what you want to be doing in four years time; given the whole internet world will be totally different then, start looking at what you need to set up now - systems, processes, the technical stuff - so that it can grow with you.

Challenge 3: How do I build up my customer list and grow the business?

Jonathan: How are buyers currently finding this site and making the purchase?

Penny: A lot come directly to the site as a result of PR that I've done, but that's only going to last so long because it was new and exciting.

I've also done some newsletter ads on Missy Confidential that have been really great, but it costs me $500 every time. It's a great member acquisition program but I don't make any money out of the sales.

Jonathan: When you get people coming to your site based on your PR activities, they are already informed about the brand before they go to the site. You want to get the site to a stage where people visit without you necessarily having communicated that message to them directly.

When I went to the home page, it doesn't scream to me that this is a second-hand clothing site where you can buy and sell. If you go to the homepage of eBay, it is very, very clear what eBay is. Although your homepage looks great and it has been well designed, it says nothing about what the purpose of the site is.

With websites, experts estimate you've got about four seconds to get your message across before the reader clicks away to find something else.

Laurence: It actually took me a while to work out how you actually buy anything on the site. It almost feels like it's easier to sell things than to buy them.

Jonathan: How many sellers do you have on your site?

Penny: Probably about 200.

Jonathan: They are your best resource to work out what to do next. Ask them, "How would you like this site to work?" They might have some fantastic ideas that you haven't thought of and that we can't come up with, because we're not selling antique cocktail dresses.

The more you can get your website to not only make the listings but market itself and create the sale, then you can sit back and let the community grow your website for you.

Josh: OK, so that's the sellers taken care of, but it sounds like you need to drive the number of buyers so there's more interest.

Penny: Definitely. That would keep the sellers happy as well, because they're only going to sell as long as the gear is moving quickly.

Laurence: Is it mainly your sellers who buy from each other, or is it a separate group of buyers?

Penny: I get a lot of buyers coming in from my newsletters. I'm starting to send out a weekly newsletter, listing all the new products that have just come in, to about 1500 people. The benefit of signing up for the newsletter is you get to see it before anyone else does.

Terri: That's your best bet really, especially when you don't want to spend a lot of money.

Penny: That's actually working really well, so my key objective is to build up that database and get people to subscribe. I had a newsletter promotion where you could win some earrings if you spread the word.

Jonathan: Here you already have 1500 people who have signed up for the newsletter and you probably get quite a few sales from that email marketing.

I'm thinking your email marketing is your best strategy to acquire new customers. How do you get them to sign up? You've got to give them something of value to make them want to enter their email address.

At the moment, you've just got the one word ‘subscribe' on your site. If the email newsletter is going to be your front line strategy, it needs to be front and centre on your site. It is going to be about how you can convert people into newsletter subscribers and then convert people from the newsletter into sales.

You might rejig the homepage to make room for some items from the newsletter. Then you could say: "Sign up for our newsletter and get 10 more of these exclusive items in your email inbox every week."

Terri: If you're going to put yourself out there as editing the collection, you need to enhance your credibility as knowing what's a hot buy and what's not. You could have an editor's pick maybe and add some editorial comments to what the people are saying about the clothes they're selling. #