Thankfully over time we’ve grown and now I don’t have to go at everything alone. First I had partners. Then we teamed up with a lawyer and an accountant. And then we started hiring employees. We have more money, more connections, and more experience. All also great things.

However, I haven’t really lost the mentality of “solving by learning”. Most of the time this is still a good thing. If I don’t know a specific programming technique, if I don’t know how to use a specific piece of software, if I don’t know enough about a service that could help grow our business, I’m more than happy to spend a weekend reading up on it until I know what I need to know to get the job done.

Other times though, I’ll foolishly dive in to something that isn’t my expertise, doesn’t need to be, and can be accomplished better by me not learning it. Either there’s someone else who can do it better – one of my partners or our employees – or there’s an existing service out there that solves the problem. This is odd to say, but it’s been a challenge to learn what to learn and what not to learn (that’s a tongue twister!). When you’re naturally used to learning and doing everything, delegating and outsourcing take some getting used to, as does determining exactly what to continue to do and learn vs what to outsource and delegate.

In the past we never would have been able to afford Google Apps for Business, Backupify, RescueTime, ProXPN, Pandora, or any of the many other services that we now happily pay for because they solve a business problem. In the past I probably would have spent considerable amounts of time attempting to solve the same problems for free. Worthwhile then for sure, not worthwhile now.

Another great recent example is our hosting provider LiquidWeb. We switched over to them in a matter of days during the great server disaster of 2008. I think that those few days took a few years off of my life. Just re-reading those posts stresses me out! After the dust settled, my initial instinct was to take control of everything involved with managing our servers. While not my expertise, I decided that I needed to learn how to be an expert systems administrator.

And so I started spending some nights and weekends learning. It only was natural. Except during that time something awesome happened. I had to start several tickets with the LiquidWeb “heroic support” and I came to notice a few patterns. Each email was responded to within minutes by a sysadmin who actually knew what he/she was doing! They were always happy to go above and beyond to solve the problem quickly. If I needed to call, a sysadmin always answered and could help me right away.

Over the years I’ve spent less and less time doing any of the sysadmin tasks that I do know how to do. For instance, I can install a SSL certificate. It’s not hard. But it does take me a few hours. Instead, I can just shoot them an email that says “I’d like a SSL on domain X at IP address Y and you can bill it to my account” and it’s done within a few hours. They have a team of experts willing to help any time we need it. Their service goes beyond anything I’ve ever experienced. Even though we pay them quite a bit of money for our two servers, I never expected to essentially have my own team of sysadmins available to me 24/7/365.

More recently, their migration team handled the transition of Detailed Image over to a new server. Moving DI (or any e-commerce site) is more complex than the average site because we needed to preserve our IP address, SSL, and be PCI compliant. There were a few minor minor hiccups, but overall they did a much better job than I ever could have and they did it in a matter of days from start to finish (the actual migration only took a few hours). There was frequent, clear, communication between myself and the engineer doing the work. It was like he was a member of our team.

Because of past server disasters, because of how critical having the site online is to our business, and because I naturally want to do anything that’s important myself, this was something that was hard to give up control on. But it also caused me to reflect on when it’s intelligent to do something myself and when it isn’t. We’re at the point where not ceding control to a migrations expert who does this every day for a living would be crazy.

…Plus I had backups upon backups in case anything went wrong, that also helped ease my nerves

*Fresh out of college, I also had the oft-assumed ability to learn quickly, a skill that I believe diminishes over time if you don’t continuously learn. One of the many reasons I think the best time in your life to start a company is when you’re in college (that link goes back to my third post ever, from 11/25/2005)

The answer is pretty simple: we don’t.

I’m of the opinion that business do not fail because of anything that their competition does or doesn’t do.  They fail because of what they do or don’t do.  The second you start focusing on your competition is the second that you stop focusing on your customers.

You also become a defensive company. You’re reacting to what others are doing instead of being aggressive and executing your vision. They may have some advantages that you don’t, but you have some advantages that they don’t.  Being small and agile is a huge advantage…if you decide to treat it that way and not as an excuse.

Maybe most important is that your competitor probably has different goals than you do. They might have antsy investors. They might be in a ton of debt. They might be burning through more cash than they’re bringing in.  All of those things lead companies to make bad decisions. You have know way of knowing when this is happening.  It probably happens more often than you’d think.  And you don’t want to get caught up in copying those bad decisions.

A few years ago I reviewed Stall Points, an exhaustive study of why companies fail.  One of my big takeaways was:

Most companies don’t fail/stall due to outside factors.  In fact, of the companies who “stalled” (defined as a significant downturn in revenue growth) only 13% were due to “external factors”.  In short:  business owners who blame the economy, or claim market saturation, or the government for failing are usually full of shit.  Most of the reasons companies fail are because they have internal strategic or organizational issues.   Stop worrying about the economy or the competition and start focusing on making your company great.

The same goes for competitors.  They’re not causing you to fail. You’re causing you to fail.

Phil Libin, founder of Evernote shares a similar stance.  In his recent Entrepreneurial Thought Leaders talk at Stanford he said (59:48 in to the video if you’re interested):

But we do have a very specific philosophy about competition which is in all of my previous companies and in the companies that I’ve worked with or at in the past, we always had a list of our enemies, we always had like, oh, those guys, we always had like a list of people that like that’s our nemesis right there. And like we are going to crush those guys. We’ve always had that, one or two companies and it turned out it never mattered, never, not once – not once did the people that we focused on in the competition actually significantly play a role in terms of the success or failure of our company a few years later. It was always something else. And so with Evernote we decided explicitly – again because we are not that smart, it takes us three times to actually figure this out, we said explicitly we aren’t going to look at competition. We’re not going to look at it. We are not going to pay attention to it. Not because we are not threatened, of course we are threatened but because looking at it doesn’t help you, it doesn’t actually make your product better. The only way that you can win, the only way to increase your chances of actually succeeding is just to make a great product and you don’t do that by looking behind you. You do that by typing and looking at a screen. And so we don’t look at it. We don’t think about things that might potentially disrupt us. We do think a lot about partners and how we can work together and we have an API, we have about 7,000 partners. Many of them started as competitors but then wound up working in the ecosystem but ultimately the competitive threat I don’t think is in the top 20 threats to a company at this stage. And especially for of you guys, if you are thinking of being entrepreneurs, I think if you sort of lay out the possible things that can go wrong, that can kill your company, just like write them out in order of probability. The probability of your company failing because some competitor beats you is not in the top five. It’s probably not even in the top ten for early stage. And anything that’s not in the top five, like you don’t have time to think about it. So my advice is don’t even bother.

Now, this doesn’t mean that we don’t occasionally visit a competitor’s website to check what sales they’re running or how they’ve priced out a product. Or that we don’t pay attention to the industry as a whole.

What it means is that we don’t stalk their blogs, social media, and newsletters, and then scramble to change how we make decisions because of something that they announce. We have better things to do with our time.  We have our vision and our plan, one that we believe in, and that is what we focus on executing.

I was thinking a lot about this the other day. What factors go in to making a “balanced” decision? What I came up with was what I’ve decided to call the CAG model:

Customers – what are our customers saying? Are they complaining? Are they asking for a feature?  Are we getting a lot of emails that could be reduced by improving how we do something?

Analytics – what does the data say?  Are we losing customers? Are customers searching our site for something we don’t have? Are our conversion rates lower than they should be?

Gut – what do we think is the best for the short term and long term health of the business? Can we maintain whatever we create?  Are we creating more problems than we’re solving? Is there something else that’s more important to us? Does this decision help or hurt potential future initiatives?  How does this affect our current and future employees?

Not all decisions we make are weighted 1/3 each, but for most big decisions we’re giving quite a bit of weight to all of the above. For instance, it’s rare that we make a decision solely based upon our gut without investigating the other two.

This is probably one of the best reasons I’ve found for having partners.  There’s no way that I could make sound business decisions by myself at anywhere near the consistency that we do as a team.

Generally the person who brings up the idea has the most jaded perspective. If I deal with a ticked off customer and I see a way to fix a problem, I’m likely going to prioritize it higher than Greg or Mike might.  Their job is to ask questions like “how often do we see this problem?” and “is this more or less important than fixing other problems?”  Generally we’re able to come to a consensus pretty quickly, and if we aren’t there’s always an action item – say to collect more data or run a test – that will help us revisit the situation in the near future and make a good decision.

This process isn’t rocket science. I’m sure most good businesses do something similar, either consciously or subconsciously. Yet I think it’s critically important in helping us maximize our upside and minimize our downside when it comes to making most business decisions.

There are definitely no regrets to taking this approach though. We have a lot of success with the freemium model on SportsLizard, and going back a few years it worked pretty well on iPrioritize. There are also plenty of successful freemium web apps in the business-to-business arena. We knew this industry was different, but it was still worth taking a shot. The overwhelming consumer expectation is not to have to pay for news of any sort, even if our software makes it more efficient, easier to discover new news, etc etc. Right or wrong, that’s just the way it is. I love the free and open web, so you won’t hear me complaining. Plus, this doesn’t mean that we can’t charge for features in some capacity down the road. It just means that the functionality we have now will be available for free.

There were a few other important factors. We have worked out a lot of technical kinks. It takes a while with a site of this magnitude. We have almost 800k stories in our system right now. Every step, from “polling” RSS for new stories, to delivering them to our users, has needed a lot of work. We also had plenty of server issues early on. Not that things are perfect now (far from it), but we have enough information to say pretty confidently that we could handle a large influx of users. The pay wall indirectly acted as a barrier to slow down growth.

And finally, we have a lot of good momentum with LockerPulse right now. The Chrome Web App store brought in a lot of new people. Our widget has been very well received and is starting to drive us traffic. It’s rare that a day goes by without someone telling us how much they love the site, and without multiple site owners asking to have their blogs included on our site. There’s something to be said for keeping that momentum rolling. With George leaving the company last month, we’ve had to reshuffle everyone’s responsibilities. I’ve become more involved in Detailed Image on a day-to-day basis than I was before. I’m really excited for all of the projects I’ve taken on, but that does mean that LP development will slow a bit. Features that we anticipated might come out in the Spring now might be pushed back to the Fall. Had we kept the pay wall up to wait to see if college teams or fantasy sports features pushed our subscription rate over the edge, we risked losing almost an entire year of growth if we were wrong. Now, every single day we’ll be building our user base, collecting data and feedback, and slowly increasing our ad revenue.

I’ve been itching for a few weeks now to make this happen. I’m glad that it’s done, and looking forward to seeing how LockerPulse grows from here.

Outside my apartment early this morning

If you haven’t heard, it’s snowing a lot today in the Northeast. My constant interest in the weather, and the fact that I’m up early, has sort of led to me becoming the guy who makes the decision on whether or not to close the warehouse for the day. It wasn’t a very difficult decision today. The timing of this storm essentially makes for the worst-case scenario of bad commutes both ways. Plus all of the schools were closed too, which always solidifies my decision if I’m on the fence.

Still, when I turned on the news and looked at the traffic cams, the highways were jam packed because the majority of workplaces are attempting to conduct business as usual. Considering that most jobs are non-essential, and that there’s an inherit danger involved in driving in this weather, and that most people will spend more time in the car than they will at work because 30 minute commutes will take two hours, and that most people can do some or all of their work from home…well the whole thing just seems archaic and stupid to me. There will be people who get in accidents today, get stranded in the cold, get injured (or worse), all because they had to go to work.

Seriously people, if you’re not a police officer or a doctor, stay home. If you run a company or have enough influence to make decisions about this kind of stuff, make your employees stay home. Live to fight another day. Even in the worst of winters there are at most a handful of these days around here. It’s not worth risking your life for a snow storm that will cleaned up by tomorrow. Also – it’s not like you’re going to get much work done when everyone spends the majority of their day cleaning their car and driving 10 MPH in a foul mood.

I couldn’t live with myself if one of my partners or one of my employees got in to an accident because I prioritized shipping some car cleaning products over their safety. And even if we did go in today and were able to ship out our orders, there’s no guarantee that they would go anywhere further than our local FedEx depot today. They’ll probably be delivered just as fast if they ship out tomorrow. On their site it says:

Unavoidable service delays should be expected due to local road conditions and in areas that have issued a state of emergency. Our top priority is the safety and well-being of our employees and contractors. FedEx is committed to providing service to the best of our ability in areas that can be safely accessed and where conditions have improved.

Most commerce slows down on days like these anyways, so why not just give your employees the day off, kick back and enjoy the snow day, and get back to work tomorrow?

Yesterday we launched a dedicated mobile site for Detailed Image. Above are a few screenshots. Overall I’m extremely pleased with how it came out. The functionality is nearly 100% of the full site. That said, the story of how this mobile site came about over the past two weeks is much more interesting than the functionality of the site so that’s going to be the focus of this post.

Why a Mobile Site?

I think the main answer to this is obvious – more and more people are browsing the web from mobile devices. The second reason, and what threw me off course on the scope of this project, was to simplify functionality. The Detailed Image site when it was launched in early 2009 was one of the few e-commerce sites that really pushed the use of AJAX. Some features, such as a dropdown notification after adding a product to cart (instead of being taken off page), or adding/removing products from your cart, or applying a coupon code, greatly benefit from a usability perspective. Initially, that level of javascript processing wasn’t possible on mobile phones. In 2009 the majority of the people trying to buy from an iPhone ran into issues and couldn’t complete their purchase. If you recall, it was one of the four major reasons that people failed our checkout.

My Original Strategy

Given that reasoning, our original strategy was to build a completely separate mobile site at m.DetailedImage.com similar to how we built our scaled back mobile site for LockerPulse. The mobile site would have stripped down functionality, removing the need for javascript in the shopping process to accommodate phone browsers. Just to get all of the portions of the site critical to shopping (home page, browsing, item pages, registration, checkout, etc) I figured it would take 1-2 months plus testing time. While the back-end functionality would remain the same and utilize all of the existing classes, the front-end would be totally new.

Initially I had this in my dev plan for early 2011, prior to our Spring rush. Then I looked at the stats and saw that about 6% of our visitors were coming from mobile devices. I decided to try to bust ass and get it done prior to the Holidays – even an increase in conversion rate of a percentage or two amongst those mobile users would make it worth my time. However, as I sat down to map the project out I started to freak out a bit (this was only last Monday, some 11 days ago). There was no way that I could get it done prior to the holidays and still get everything else done that I had planned. In addition, I wasn’t really looking forward to all of the tedious testing. What to do?

When I mentioned my plan to work on the mobile site, George pointed out that many people were in fact checking out OK on their devices. That prompted me to look into the data a bit more. Turns out that all throughout 2010 people have been checking out fine using their mobile devices. Only 1 failed checkout, in February, and I’m pretty sure it was one of the other reasons that caused it. All in all, lots of sales through mobile devices, almost all on iOS and Android. It does make sense – given the advance in the Webkit browsers that both use, any javascript issues from early 2009 that I assumed were still there are now gone. Just for good measure I picked up my Android phone and tested everything I could think of – no issues.

That completely changed my approach. Now we’re not talking about functionality at all. We’re talking strictly aesthetics, which led me to the idea…

My New Strategy

What if we simply just served a new stylesheet to mobile users? It would be inserted into the header after all of the other stylesheets so that it would over-ride the main styles and display them properly for mobile devices. I remembered MOBIFY, a company that will “mobify” your site in minutes with the same approach.

I whipped open Firefox, opened up Firebug, and within minutes had proved my concept to myself. From the LockerPulse site, I remembered all of the “rules” for mobile design – full width, no sidebars, variable font sizes, small images, etc. It was pretty easy to show myself that it was possible. I was so excited – the benefits of doing it this way are astronomical (see below).

Instead of spending months, I spent a handful of days going page by page through Detailed Image and re-styling the pages, although once the template was done many of the pages already looked just fine. Only ~150 styles were required to transform the entire site. We benefited immensely from haven written all W3C compliant HTML and structuring our CSS well. I had to write one small javascript function, do tiny bit of work with the HTML served (such as changing the doctype to a mobile doctype), and build in the device detection from LockerPulse, and we were all set.

How it Works

When someone is determined to be a mobile user, we simply change the doctype declaration and add in the new stylesheet and javascript function. Everything – including both blogs, the guides, reviews, and the entire shopping process – still has the functionality that it does on the main site. How do we determine if someone is a mobile user? There are a few ways:

• URL variable – the URL variable “mobile” can be toggled on any page of the site to put you in or take you out of “mobile site mode” (i.e. www.detailedimage.com?mobile=on). m.DetailedImage.com simply directs there. There are links in the footer of both versions to go back and forth (no visitor ever actually has to use the URL variable).
• Cookie – once the URL variable is set one way or another, the rest of your session will remain that way unless you change your mind and click one of the links in the footer.
• Device detection – if there isn’t a URL variable or a cookie, we use a class I built for LockerPulse to detect whether or not you’re using a mobile device. Given that it’s been proven on LP, this was a very quick implementation.

Pros/Cons

First, the pros:

• Way faster – took less than two weeks from idea to implementation!
• Little/no maintenance, very scalable – assuming we stick to our coding/styling standards, new pages should look just fine without any work. Occasionally we’ll need to do something minor like hide an element, shrink an image, or remove a border.
• Cool features that help mobile browsing – I never would have thought to include the autosuggest for the search box in a mobile version, but it’s maybe even more important because of how tedious it is to type on a mobile screen. In the same manner, drilling through products by criteria such as brand, price, and usage become even more helpful on a small screen.
• The entire site – the blogs and the guides are a large portion of our traffic. It’s great to get those into a readable format for someone who has a few seconds to kill on their phone.
• No redirects – no redirects to maintain, and if the device detection happens to be wrong there’s no messy incorrect redirects going on.

Of course, there are a few cons:

• Extra HTML – a dedicated site would have only the HTML necessary for the mobile site. Our mobile pages serve up some elements, only to have them hidden with CSS.
• A lot of requests – in the same manner, we have our main stylesheet, only to have an additional request being made to another stylesheet that over-writes a large portion of the original stylesheet.

Clearly, the cons are NBD (no big deal) given the relative advantages of the pros.

SEO Impact

But how does this affect how search engines see the site? Good question. Thankfully Google answers it in full in their recently updated SEO guide (I know I’ve said it before in my essay, but it’s a must-read for any site owner – who better to get your advice from than the search engine itself?).

Google does two things that are really smart – they have separate sitemap syntax for mobile sites, and they use a separate user agent when crawling mobile sites. The first lets you submit your mobile sitemap to them. In our case, the URLs I submitted were exactly the same as the ones in our regular sitemap. The difference being that they’ll send Googlebot-Mobile instead of Googlebot to visit those mobile URLs. By adding Googlebot-Mobile to your device detection, you’re serving your mobile pages to the mobile crawler and your normal pages to the normal crawler. It’s explained in full in their guide, but basically they just want you to show them what you show a visitor of the same criteria (mobile vs non mobile) and you’ll be fine.

Business Impact

Bottom line: I just got a two month project done in two weeks, and got it done better. For me, this serves as a reminder to always challenge my own assumptions. Things change fast in the web world. What wouldn’t have worked in September 2009 worked just fine in September 2010.

Still, we always try to stop fraud in it’s tracks.  Since we don’t ever win a chargeback case after it happens*, we try to stall suspicious orders in hope of having it still in our possession (or in the possession of FedEx) when we get the chargeback .  Until yesterday though, we never actually stopped someone.  Once, Greg we missed calling off delivery by minutes. He then tried calling the customer at the phone number they registered with and actually got someone on the phone, but they denied knowing anything.

Anyway, flash forward to yesterday. We finally got someone. Here’s my best account of the time line:

• Middle of last week a customer places an order for an abnormally large quantity of one product.  His billing address passed verification (meaning that his billing address matched the billing address on his credit card) but of course he was shipping it to another address in another state.  He was smart enough to give the person in the other state the same last name. He also paid an exorbitant amount for expedited shipping.
• Greg flagged it for all of those reasons.  We did have the inventory to fill the order, but it would have left us with next to nothing for the product, so we likely would have wanted to hold the order for a week or two regardless.  He put the order in our “pending” system and shot me an email asking my opinion.
• I replied “Hmm.  His AVS and CSC both matched for his billing address. We could require that he ship the order to the billing address, which would pretty much 100% eliminate the possibility of fraud. When you email him to let him know they’re on backorder you could inquire as to what he’s using them for and if he’ll be ordering regularly so we can stock inventory accordingly.  That might give us a little more insight. ”
• Greg contacted him and he replied quickly (less than a day).  He said he ran a business and was reselling them (which might have been true), and that we could ship it to his billing address, but it would really suck that he would have to then ship it again.  He was trying to guilt us into shipping it out.
• And it worked.  We decided to finally ship it out on Monday.
• Later that afternoon, Greg received an email from someone with the same name as the buyer.  The “real” customer never ordered with us, has had several other fraudulent charges on his card recently, has just canceled his card, and told us not to ship the order because it’s fraud.
• Greg called FedEx and had the package re-routed back to us.  Scammer stopped.

Although we lucked into it in this case, we now have a new policy: large first time orders from people we don’t know must be shipped to a verified billing address. I think requiring this on every order is overkill.  It might even be overkill to require it on every single first order.  But on a big first order that’s not from a legit business this is a more than acceptable policy.

*in that post last year I wrote “Despite being able to provide tracking information to prove delivery for every single chargeback filed against us, we have lost all but one case.” I think I misspoke – I’m fairly certain that I confirmed later on with George that said “win” was a case of “blackmail” where the buyer rescinded the chargeback himself, which does happen from time to time.

Let’s take, for example, a brand new company that’s getting into the blue widget business.  For fun, let’s call the owner Carlos. Widgets cost $50, and retail for $100.  For simplicity, we’ll assume that Carlos has to pay in cash up front (which is somewhat common when you just start out), that he orders once per month, and that he receives his inventory immediately (clearly, not very common).

Carlos has saved up and he has $5k to start out with, so he buys 100x widgets.  In the spreadsheet, Qty is the quantity that Carlos has in stock, COGS stands for cost of goods sold (Carlos’ cost on the items), and Retail is the retail value of the inventory.

Now, 30 days later Carlos is doing pretty good.  He’s sold 75 out of his 100 blue widgets.

Time to reorder!  Since demand is increasing, Carlos needs to spend all $7,500 in his bank account to buy 150x blue widgets. Now he has 175 in stock, but no cash.

Things keep going well for Carlos.  In fact, he’s decided to expand his business into green widgets.  At day 60 he’s down to 50 blue widgets.  He orders 150x again, but also buys in to the green widgets with another investment of $5k for 100x.

Wait a second.  Things are going pretty good, but Carlos keeps spinning his wheels when it comes to cash flow.  When he has a lot of cash on hand, he keeps having to spend it all on inventory to accommodate his growth.  When inventory looks good, he doesn’t have any cash.  He’s profiting, but there’s no profit to spend on anything other than inventory.

Us

Now multiply this over several product lines, with multiple vendors, all of which have different payment terms (cash, credit cards, Net 30), and all of which have various delivery times, and then factor in shipping damages, warehouse space, shelving units, packing material, employees, marketing, and probably 50 other factors, and you basically have us.  It’s easy to see how, despite really fast growth and  lots of cash coming in and out, there isn’t a whole lot left, even if you’re showing a large profit.

The situations that really kill us are vendors that we spend a lot of money with but also have slow lead times, forcing us to forecast out further than 30 days.  For example, we might place an order in July to cover us through September.  We get the products, have 30 days to pay for them, even though we won’t turn the inventory over for several more months.  At which time, we’ll be placing an even bigger order with the same company.  It’s a vicious cycle.

It’s a problem that we’ll probably never rid ourselves of completely.  The interesting thing is that this problem doesn’t stop as you grow.  If anything, it might get worse.  Take the case of Zappos.

The Super Duper Gigantic Company

In an excerpt from his new book, Delivering Happiness, in last month’s Inc Magazine, Tony Hsieh authored an article titled  Why I Sold Zappos.  Essentially, to sum it up for you, the reason was because of inventory:

At the time, Zappos relied on a revolving line of credit of $100 million to buy inventory. But our lending agreements required us to hit projected revenue and profitability targets each month. If we missed our numbers even by a small amount, the banks had the right to walk away from the loans, creating a possible cash-flow crisis that might theoretically bankrupt us. In early 2009, there weren’t a lot of banks eager to give out $100 million to a business in our situation.

That wasn’t our only potential cash-flow problem. Our line of credit was “asset backed,” meaning that we could borrow between 50 percent and 60 percent of the value of our inventory. But the value of our inventory wasn’t based on what we’d paid. It was based on the amount of money we could reasonably collect if the company were liquidated. As the economy deteriorated, the appraised value of our inventory began to fall, which meant that even if we hit our numbers, we might eventually find ourselves without enough cash to buy inventory.

These issues had nothing to do with the underlying performance of our business, but they increased tensions on our board of directors.

The fact that Zappos had these issues is both scary and reassuring at the same time.

Solutions?

We discuss this a lot. It’s probably our biggest growing pain, even more so than hiring, scaling our technology, or developing our warehouse operations. Now, most companies aren’t Zappos, they’re more like us. Is there any solution to this problem?

Yes, there is, and we personally know several e-commerce companies that no longer have this problem. Their solution: they have a shit load of cash. They don’t rely on bank lines to buy inventory. Somewhat of a necessity in the beginning, you can see from Zappos how bank lines can sour quickly based upon factors outside of your control. We’ve also experienced a TON of red tape trying to get new lines or increase existing ones. When the application process involves 10 meetings, personal credit checks, personal tax returns, the SBA’s backing, and a 100 page business plan, you have to question whether it’s worthwhile. Unfortunately for Zappos, they’re too big to solve the problem with cash. They’ve outgrown any potential “sweet spot.”

There are really only two ways for a retail business to get a shit load of cash. 1) You start out with it because you’re rich. 2) You slowly but surely build it up over years and years of profits.

Since #1 doesn’t apply to us, #2 is what we’re shooting for. #2 is how we’ve seen other successful e-commerce companies do it. This isn’t a one or two year thing, it’s a 5-15 year thing. It means absolutely minimizing other expenses (most notably, new product lines, employees and warehouse costs) until that revolving cash flow cycle eventually starts to turn in your favor. If you’re profiting, it will (and if you’re not, well, you’ll be out of business). We see it slowly getting better. The difficult part is controlling expansion – expand too slow and you lose market share, expand too fast and you hit the reset button and start that bad cash flow cycle all over again.

It’s a fascinating topic, one that I think is often taken for granted when starting a retail venture. At first glance, you just wrongly assume that if you’re profiting you’ll have no cash flow problems, which definitely isn’t the case.

Side note: as I’m about to hit “post” I realize that this is my 400th post since switching to WordPress and moving this blog from SportsLizard, where I had another 296. It kind of blows my mind to think that I’ve written almost 700 posts over the last five years. If anything, I suppose it shows I’m consistent when I apply myself to something. Thank you to everyone who has ever read, commented, or emailed!

The answer is pretty simple: because in many instances there are trade-offs.  There’s always the initial time spent up front. But sometimes even with the automation you end up creating more work for yourself in maintenance. Or, even worse, you lessen your customer’s experience.

I have one really simple rule when trying to decide whether something gets automated or doesn’t.  If it saves us time, requires little to no maintenance, is scalable, doesn’t negatively impact the customer experience (in many cases, we’re trying to improve the customer experience), AND the end gain is worth the upfront time and resources to make the feature happen, then we do it.  Otherwise we don’t.

A good example of a successful automation is the failed checkouts on Detailed Image.  That’s a win for everyone across the board.  Since we implemented that, the number of failed checkouts has dropped to only a few per week, with almost no multiple failures from the same user.  Previously customers would fail over and over and over again because they didn’t know what was happening.  We gave the customer the information needed to solve their own problem, and they have 100% of the time.  I used to answer emails from customers regularly, but since then I haven’t received one.  And they’re less frustrated because they can solve their own problem immediately instead of awaiting an email from us.  Win/win.

On the other side of the page, we haven’t fully automated our inventory system, specifically ordering from vendors and managing “out of stock” items.  The comments on that post were fantastic.  Probably better than the post itself.  A lot of people posed questions about why we couldn’t go any further.  I did my best to explain our situation and why a fully automated system could potentially cause more headaches for both us and our customers, in addition to the upfront time to create, test, and deploy the features.

A more extreme idea would be to try to automate customer service.  The customer emails us, we scan our large database of replies, and automatically email them back our closest match.  Sounds crazy, but it’s possible.  Most companies that do this do a hybrid version where they send back suggestions automatically but still have a real person follow up.  We might do that at some point. However, that would require a lot of upfront time/money/work, and it would probably piss people off.  One of our best competitive advantages is that we reply to our emails with real replies from real people, and we do it relatively quickly.  Instead of fighting everything with automation, the best long term business solution to handling our ever-increasing volume of customer service emails might simply be to just hire a customer service rep.  All of the programming in the world can’t create the quality answers that a good employee can.

With every single business problem we always go through this same iterative thought process.  It makes for interesting conversation because we can attempt to automate just about anything.  Just because you can do something though, doesn’t mean you should.  Or, as Kumar said, “just cause you’re hung like a moose doesn’t mean you gotta do porn!”

Much like closing down Tastefully Driven, there were a lot of reasons behind our decision, but it can all pretty much be summed up by saying that it was too much work for how small of a part of our business it was, and that we’d rather focus our time and energy elsewhere. However, unlike with Tastefully Driven, I think this will get a little backlash from our customers, which I’ll touch on more below.

Here is the in-depth reasoning behind our decision:

• Customs forms – we got them semi-automated, but there is still a decent amount of work that needs to be put into correctly filling out the customs form for every single international order.
• Customer service – often times international customers take longer to place an order and ask more questions (understandably so because of the higher shipping charge and long delivery time).  In conjunction with the language barriers, the average international customer requires quite a bit more customer service work than a domestic customer does.
• Fraud – chargeback fraud and other shady orders tend to come more frequently from international customers.  Our $6k chargeback was international (although I still take full responsibility for not having realized earlier what he was doing).  Supposedly fraudulent transactions occur nearly 3 times as frequently on international orders as they do for domestic orders.
• FedEx – we ship domestically using FedEx, but after putting in quite a bit of work and having several meetings with them, ultimately couldn’t come up with an international shipping process that made sense, both financially and in terms of our effort per order. If anything, both were worse than USPS so we stuck with them.
• Our industrial park – most international customers we’ve spoken with prefer USPS.  Unfortunately our industrial park is a private park.  USPS is not allowed in.  We have to go to the post office to get our mail.  We also had to go to the post office to drop off every single international order.  As we’ve grown, that has become a larger and larger pain.  Many times during the holidays we could barely get the boxes into our cars, only to get there and have someone working who wasn’t strong enough to lift the box (we had to help them put it in a cart in the lobby that they could then roll back to the mail room).  Had we been able to get a pick up in our park, things might have been different.
• Liquids – shipping liquids internationally is a pain, and unfortunately a good portion of our products are liquid.
• Tracking & claims – this was one thing FedEx offered that was attractive to us.  FedEx has pretty decent international tracking and a quick claims process.  The postal service does not.  It didn’t happen often, but it’s a pain to try to track down a package in Brazil that hasn’t had the tracking information updated in months.  We never get a response when we submit for a package trace or a reimbursement for the lost package.  We almost always have to bite the bullet and re-ship the package, not to mention deal with all of the customer service.  For domestic orders this does not happen.  When an order is lost we can always get a trace within 24 hours and a reimbursement if FedEx lost or damaged the package.
• Freight forwarding – I’d estimate that well over 50% of our international orders use US based freight forwarders anyway.  When an international customer attempts to checkout now, they are sent to a page explaining that we no longer ship internationally and that they might want to consider a forwarding service like Bongo International.  We decided not to try to work with Bongo (or any other freight forwarder) on integrating with our shopping cart because of the time involved, the potential liability if the freight forwarder screws up or does something illegal, and the potential for even more international customer service.
• Employees – as we start to enter our next growth phase, we’re making sure that everything we do can be easily taught to an employee.  International shipping is much more complex than domestic shipping.  Why spend 3x longer training someone because of the complexities that international shipping entails?  I’d rather have our employees hone in on becoming really good at the core stuff we do, as opposed to cluttering their mind with situations and processes that account for a small portion of the business.
• Programming – every time we added a new feature  to the site, I’d have to not only account for how it impacted domestic customers, but the international, APO, and US Territory customers as well.  Because those are more complex, I’d spend 15% of my time on the US customers, and 85% on getting the rest to work flawlessly, especially when switching back and forth between addresses in different regions.  Imagine a US customer proceeding to the checkout page with an aerosol product in their cart, then changing their address to a US Territory using our AJAX form on the checkout page.  Well, US Territory orders have to fly via air and therefore cannot receive ORM-D products.  There are a hundred similar scenarios that had to be handled seamlessly or it could cause a big problem. It’s enough to make someone’s head spin.  When ~95% of DI’s orders are shipped domestically, this just doesn’t seem like the best use of my time…or anyone’s time for that matter.

In addition to this, we are switching Hawaii and Alaska from USPS back to FedEx.  We changed to USPS in September of last year because several customers requested it, but now we’re switching back so that we can completely eliminate the post office from our shipping offerings.  I feel bad about this because the change was so recent, but these orders are an extremely small percentage of our customers so unfortunately they’ll have to pay a little more to use FedEx (which, in my opinion, is worth the extra money because of the reliability and traceability…but that’s just me).

Last night I wrapped up all of the programming and deployed the changes.  As I mentioned above, international customers are now redirected to a page explaining that we no longer ship internationally.  We tell them that to proceed to checkout they’ll need to change their default address to a US address.  We also display a message in their My Account page.  And obviously we made it so that new registrants must have US addresses. As much work as it was to get that stuff functioning properly, it was more work to update our FAQs, Terms of Service, various other pages and screenshots across the site, and change the shipping quote system to only allow US addresses.  I was happy to get it all done.

As I touched on in the beginning, I do expect some backlash from our international customers.  There will probably be a few not-so-nice emails. We have a lot of loyal international customers that have been with Detailed Image for years, some predating when Detailed Image became part of Pure Adapt.  For the most part, I think we’ve done our best to give them a positive experience, and any time you do that you will have a few loyal customers who don’t like that your business decision negatively impacts them.

APO (military) customers are even more tricky.  There aren’t a lot of them, but the ones we do have are very passionate.  They’ve had a tendency in the past to complain when certain shipping discounts only applied to the 48 contiguous states (i.e. places we shipped FedEx to).  It sucks that FedEx doesn’t ship to APOs or PO Boxes, but they don’t.  We did try to integrate their SmartPost shipping service that does just that, but that was a fucking nightmare that almost cost us thousands of dollars and pissed off hundreds of customers (not worth getting into).  We’ve had a few disgruntled APO customers contact us in the past with some pretty harsh remarks.  Stuff like “we’re at war protecting your ass and you’re so greedy that you can’t even offer us free shipping like you do to other US customers”.  It’s tough to deal with because we obviously have a great deal of respect for everyone in the armed forces.

But unfortunately they aren’t our target market and it’s just not a good move for our business to continue to serve them. It would be awesome if they shipped their orders to a family member in the states who could then get it to them, but we understand that many may start shopping elsewhere.  Much like with Tastefully Driven, we are essentially giving new orders and new customers to our competitors, which at the end of the day is fine by us.

This was definitely the right thing for us to do for the long term health of our business.  We’ll be able to do a lot more for our domestic customers with a lot less effort by not having to factor in the international implications of everything we do. The right time of the year to do something like this is January, when sales are slowest and we’ve got the time to handle the project correctly without distraction, so that’s what we did.

We have two more of these types of announcements coming in the next ~2 weeks.  Once the dust settles I’ll step back and analyze what we’re left with and where we’re going from here.  Exciting stuff.