Company description: Online shoe retailer
Founders: Tony Hsieh, 29, and Nick Swinmurn, 30
Year started: 1999
Location: San Francisco
2003 sales projections: $65 million
Getting a Nordstrom buyer to be your senior vice president of merchandising when you haven't even started your company seems tricky. Getting an entrepreneur who just sold his company to Microsoft to invest seems impossible. But MacGyver's got nothin' on Nick Swinmurn. "[I did this] at a time when anything seemed possible," says Swinmurn, who got the idea for his shoe dotcom after a frustrating quest for shoes at the mall. "It was an idea that made sense."
Posing as a recruiter for a small brand looking for a merchandising guru, Swinmurn persuaded Nordstrom buyer Fred Mossler to meet with him. "Then I spilled the beans on the plan," he says. "He thought it was a good idea and ended up coming on board."
Mossler's background and contacts jump-started the San Francisco company, says Swinmurn, and also persuaded Tony Hsieh to use some of the $270 million he earned from selling LinkExchange to Microsoft in 1998 to fund Swinmurn's idea. It took some convincing, however. "I almost deleted his e-mail," says Hsieh, now Zappos.com's CEO, of Swinmurn's initial pitch. "On the surface, it seemed like the quintessential poster child for a bad dotcom idea."
Learning the market size was $40 billion, and $2 billion was already being sold via mail order catalogs, helped. "Over time," says Hsieh, "I saw there was a lot of potential for the company." Potential indeed: They've achieved $32 million in sales, with $65 million projected for 2003.
Offering free expedited shipping (even on returns) and changing the name from ShoeSite to Zappos helped the pair distinguish themselves in an otherwise crowded 1999 dotcom marketplace. With a careful eye toward stellar customer service, they're shooting for sales of $1 billion-which isn't far-fetched, considering they closed a deal with Wells Fargo on a $6 million revolving credit line in June. "We're focused on being not just the best footwear company," explains Hsieh, "but the best e-commerce company." -Karen E. Spaeder
|Learn how you can become a young millionaire in our Q&A with author and Young Entrepreneurs Network founder Jennifer Kushell.|
Entrepreneur: You weren't the only ones to come up with the idea for a shoe site, but you're one of the most successful and well-known. Why?
Nick Swinmurn: It's the little things, like our competitors stuck with names that were some derivative of "shoes." Also, we met with big, traditional VCs, but we weren't appealing to them at the time. It turned out to be good in the long run because in working with Tony, instead we put money into making things as efficient as possible rather than throwing money into big mistakes.
Tony Hsieh: We're [driven by] having the best possible customer experience-and that goes to our decision to warehouse our own shoes. If you go to our site, our top brands have 200 to 300 styles-a good selection. But we also really focus on what happens after we get the credit card [number] from the customer.
Under Armour Performance
Company description: Sports apparel
Founder: Kevin Plank, 31
Year started: 1996
2002 sales: $55 million
On day one of testing Kevin Plank's moisture-wicking T-shirts on the football field, fellow University of Maryland players were laughing and poking fun at each other, amused by the shirts' lingerie-like material. "Day Two, they were scratching their heads," Plank says. "Day Three, they were all saying, 'Hey, can I have one?'"
It's that kind of enthusiasm that launched Plank's Baltimore company, Under Armour Performance Apparel, which started in 1996 as nothing more than a way to keep athletes dry and comfortable under their gear. The company is now set to nearly double its 2002 sales of $55 million.
It also helped that Plank had contacts in the entertainment industry. The first big break was a product appearance in the 1999 film Any Given Sunday, before which Plank took out a $25,000 ad in ESPN magazine. "We took a big gamble," says Plank, who initially financed his venture with $20,000 of his own cash, $40,000 in credit cards and a quarter-million-dollar SBA loan.
Now in 4,500 retail stores nationwide and the official supplier for the NHL, MLB and other leagues, Plank's apparel line is doing more than just outlasting a day on the field. -K.E.S.
Entrepreneur: How do you stay competitive when large brands are coming out with their own lines of performance apparel?
Kevin Plank: We can only be concerned about ourselves and the job that we do. At the same time, we're very aware of them. At Under Armour, we've devised a way to explain that there's something better than wearing a cotton T-shirt. It's about educating consumers that there's this thing called performance apparel. The industry of cotton is the bigger competitor.
Entrepreneur: What were some of the things you did
when you got your SBA loan?
Plank: The first thing was to pay back all the people I'd borrowed money from. [Then it was] investing in the product. We'd decided our partners were going to be the biggest partners out there. I thought, "In order to compete, I'm gonna need some big friends." We got the type of vendors and partners who could write the big checks.
Entrepreneur: Any words of advice for
entrepreneurs who have a breakthrough product? Where do they
Plank: The first thing is that you've got to believe in your product. There are some long days, some lonely days, days when there's not a dime in the checking account. It's those fighting-through moments. I got some good advice early on: You need to find out if your product will sell. I found myself spending the first four or five months going through the legal process. But it's about being the first to market, being faster than the other guy. If you're late, it's not going to matter who carries the legal document.
Good Fortunes and Corporate
Company description: M&M licenser for ad specialty market and personalized cookies
Founder: Karen Belasco Staitman, 39
Year started: 1995
Location: Canoga Park, California
2003 sales projections: $8 million
Anybody can come up with a business idea. finding a great idea in the midst of a business failure-that takes the unique talent of someone like Karen Belasco Staitman. This serial entrepreneur started a mail order catalog business in 1994, selling specialty gift items. The venture didn't work out, but one item did: giant, chocolate-dipped fortune cookies with personalized messages inside, perfect for weddings, birthdays and other special occasions. "The cookies were very popular," she says. "So I just started peddling the cookies."
She launched her Good Fortunes business in 1995 and was inspired again in 2001 to start Corporate CandyWorks, a licensing venture with M&M/Mars to create personalized color candies for the ad specialty market. Both businesses coexist in her Canoga Park, California, family-friendly facility, where this mother of three created an on-site room for her children and her employees' children to hang out. "I know every one of my employees' children," she says. "They come here; they play with my kids. That happens all the time."
Belasco Staitman expects Good Fortunes and Corporate CandyWorks' combined revenues to hit $8 million this year. And things are set to explode in 2004. Belasco Staitman has just signed a deal with a huge e-tailer to offer her products online, and has expanded her factory by 500 percent, which promises to pump sales to $35 million in the next three to four years. Still, she hasn't forgotten the lessons she learned in her failed start-ups. "I'm truly the eternal optimist," says Belasco Staitman. "I always think I can do it, and I always find a way to do it." -Nichole L. Torres
Entrepreneur: You focus a great deal on balancing your family with your work life, and you've been able to build your company and still be a mom. How do you strike a balance?
Karen Belasco Staitman: When I started the company, I just got married and I was pregnant by the time we moved into this facility. My mom always told me that family always has to come first, and it truly does. And she said, since you're going to be in the factory, you need to build a place for the child to be with you because it's important that your children are there with you. At first, that was relatively easy. I kept my oldest Jake in the office with me, and I would just work phone calls around when he was sleeping and napping. And then the second one came along, and the third one came along, and the factory grew bigger, and we had a playroom in the back. But then I did have to hire people to help me manage both [areas of my life].