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Shaun Ryan: [0:02] I’m Shaun Ryan, from SLI Systems, and this e-commerce podcast. Today I’m talking to Ben Kirshner, owner and founder of Coffee for Less and Elite SEM. Hi, Ben. How are you doing?

Ben Kirshner: [0:12] Good, Shaun. How you are you?

Shaun: [0:13] Good. Thanks very much for coming here. Now, traditional first question: What was the first thing you ever bought online?

Ben: [0:19] Going back probably to 1996 or 1997, I would have to say probably college textbooks. I got into my Internet business – I started in college – so probably a textbook online is one of the first things I probably bought. I can even go back further than that. I probably bought something when I was on Prodigy, back in the early days of the Internet. I can’t remember exactly what it was, but it was definitely using Prodigy back in the day.

Shaun: [0:48] I see. So you’ve been online for a long time.

Ben: [0:52] Yeah.

Shaun: [0:53] How about your most recent purchase, can you remember that?

Ben: [0:57] Oh, yeah, definitely. Freshpair.com, have you ever been on that site?

Shaun: [1:01] Now, I have. What is that site about?

Ben: [1:06] It’s a great site: funny enough and embarrassingly enough, my undershirts, some underwear and socks.

Shaun: [1:13] Underwear, yeah right.

Ben: [1:15] Underwear, socks, undershirts and some dress socks, is why I went on. I actually emailed the owners of the site saying how great of an experience I had on their site. I thought it was a great e-commerce experience. I thought they had a great product mix and very clean, easy-to-navigate site. I emailed them, and I generally don’t do that. But I emailed them to congratulate them on having such a great e-commerce site.

Shaun: [1:38] Actually, I remember someone pointing that out to me quite a while ago. So tell me, what’s different about the site? What did you like about it?

Ben: [1:44] I thought it was a very clean experience. It was very easy to check out, very easy to navigate and very easy to find what I was looking for. You know when you’re ordering dress socks, who knows how big they are or if they’re with elastic. It was just a really easy experience to find what I was looking for.

[2:03] I think there was one size fits all. The prices were amazing; the prices were really, really low. I live in New York City, so we don’t have Wal-Marts and Targets at our disposal. And I don’t really feel like spending $40 in dress socks.

Shaun: [2:16] [laughs]

Ben: [2:16] So it was a great alternative to get into a discount retailer. The shipping was fast. It was really an overall great experience with them.

Shaun: [2:25] Excellent. Now Ben, can you give me some background about yourself?

Ben: [2:29] Sure. I went to George Washington University. That’s where I really got into the whole e-commerce online business. I started an account with Goto.com, which eventually became Overture, which eventually became Yahoo! Search Marketing. Basically what I was doing is I was buying keywords. A lot of people say to me, “Hey, what is the secret to your success?” I say that the secret to my success is just being fast, faster than anyone else in that keyword space, on Goto.com back in the day.

[3:02] When you did a search for any of the coffees that I was selling on my website at the time, I was ranked number one and naturally made sales. That’s how I started my Internet career back in probably ‘97 or ‘98. That was my first run at e-commerce.

Shaun: [3:21] You started selling coffee. Why was that?

Ben: [3:23] My family has a coffee business that my father and mother started in 1975. It’s called an office coffee service, so it’s a type of service where you’re in an office. They deliver the cream, the sugar, the hot chocolate, the cups, the stirrers, and the machine – of course, the equipment. When it breaks, you call them, they come and fix it. It’s a very service-based business.

[3:47] So what I decided to do, in about ‘97 or ‘98, is I put a brochure site up. I didn’t know anything about e-commerce or online marketing at that point. I just put a brochure site up that said, hey, we’re Coffee Serve, Inc. We sell Starbucks coffee, this coffee, and Green Mountain coffee and that coffee. We’re getting ranked, naturally, number one, because as I said, we were the first one doing it.

Shaun: [4:09] Yeah.

Ben: [4:11] From there, it just grew from a brochure site to our first e-commerce site, which I think was in ‘98 or ‘99. We used, I think it was called, not ShareSite… I forget the name of it, but you could check out through live-chat integration.

Shaun: [4:26] Yeah.

Ben: [4:27] And back in the day, in ‘99 and 2000, e-commerce carts were pretty expensive. So we grew out of that. We got our first e-commerce cart in 2000 and grew out of that, in 2001 got another one and in 2004 decided to build our own. Right now we’re using our own proprietary cart.

Shaun: [4:44] Excellent, that’s been fantastic growth. Then, you also have Elite SEM. What can you tell me about that company?

Ben: [4:56] Sure, in 2000, when I graduated college, I went to work for 24/7 Media. At the time, they were representing Goto.com. They were selling the banners. So when you went to search for, say, insurance on Goto.com, 24/7 Media was selling the banner on top of that. I noticed hey, this search stuff is really working. And while banners weren’t giving the best results for direct response marketing, that site certainly was. So I said hey, I have to get into search space.

[5:29] In 2001, I left 24/7 Media selling banners, and I started my first search marketing firm. We grew from three people; I joined two founders. We grew from three people to 30 people in a short amount of time. And in 2004 I left there and started what is now Elite SEM. Basically what I thought to myself was hey, if I can make money from myself doing search marketing, why don’t I do it for others? That’s what really gave me the drive to start a search marketing firm in the first place.

[5:59] Since 2004, we have about 18 employees. We have two offices, one in New York and one in San Francisco. The interesting thing about it is, because I own Coffee for Less, which is an e-commerce site, I understand the owner’s perspective. When a company is working with is, I’m in their shoes. I tell them I’m not just a salesperson. I know there pains, from merchant accounts, to credit card processing, to the whole gamut of the e-commerce game. I’ve done it.

[6:30] We don’t just do search marketing. We also do e-commerce consulting as well, because I have that background.

Shaun: [6:36] Right, that’s interesting. How do you split your time between the two companies?

Ben: [6:42] Splitting time, that’s a tough one. [6:45] [laughter]

Ben: [6:46] I give a lot of credit to my staff in both companies. I am very, very fortunate to have such a great team behind me. I’ll tell you a little more about the coffee side, in a second. At Elite SEM, I have great employees who are totally dedicated to their accounts, and who work very, very hard to keep the clients happy. I’m fortunate and I’m proud to say, since 2004 no one has left voluntarily, if you will.

Shaun: [7:11] That’s great.

Ben: [7:13] Yeah, we’ve had tremendous growth. We have a good system in place. Elite SEM is running, and it’s doing really well. The clients are very happy. At Coffee for Less, my philosophy has been to outsource. Owning a service company, I truly believe that not one company can do everything perfectly.

Shaun: [7:33] Yeah.

Ben: [7:33] So my philosophy is to outsource a lot of Coffee for Less; the responsibilities are outsourced. We outsource everything. Our e-commerce technology is outsourced. We own our code; it’s a proprietary code. But we work with a company who’s basically our technical go-to guys.

Shaun: [7:50] Who is that company?

Ben: [7:52] It’s called AdvanceWare Solutions.

Shaun: [7:54] OK.

Ben: [7:54] We outsource; they are the company that does our e-commerce. We outsource our affiliate marketing to a company to a company called Gen3 Marketing. We outsource our email service provider. Our search engine marketing, of course, is outsourced to Elite SEM.

Shaun: [8:07] Yeah.

Ben: [8:08] We use a company called Akadek for our search optimization. We outsource our comparison shopping engine management. We outsource our media buying. We recently started outsourcing some of our fulfillment to a company called Webgistix.

Shaun: [8:21] Wow.

Ben: [8:22] We have our own warehouse in Philadelphia, but we’ve started to get some West Coast fulfillment. We just started working with them. We did outsource our customer service, but we just brought that in house. I was inspired by Tony Shea from Zappos.com.

Shaun: [8:41] Yeah.

Ben: [8:41] I was fortunate enough to go through their tour. I would encourage anyone who’s in Las Vegas, and Tony might kill me for saying this, but anyone who’s in Las Vegas, call Zappos. They have this amazing tour of their facility. They are totally transparent. They are an amazing company. It’s a jaw-dropping, eye-opening experience, what goes on in that place. They were so warm and welcoming and transparent with everything they do. [9:06] One of the things that I really took away from it was the ownership of customer service. Because at the end of the day, you’re only as good as your customer service.

Shaun: [9:12] Yeah.

Ben: [9:13] We were outsourcing that, and we brought a lot of it back in-house. That’s probably the only thing we really do have in-house. Of course, we have an e-commerce manager as well who’s great. We’re doing our social media in-house as well. But for the most part, all of the vendors – we use vendors for everything. We’ve found them to be priced appropriately. [9:33] The big thing is, you know, because back to the philosophy of using the best of the best, they work with a lot of great clients. They’re actually the feeder of information to me of hey Ben, maybe you should try this. And Ben, this client tried that; you should try this. So it’s been a great effort.

[9:49] A lot of my e-commerce clients that we do the search for do everything in-house. There’s something to be said for that as well. I’ve just found from my own experiences that outsourcing some of the roles has been fruitful.

Shaun: [10:01] Yeah, no. I can understand the approach, because it let’s you focus on what’s special about your business and the core skills that you have in the industry. Tell me, how much does the Coffee for Less site sell online?

Ben: [10:15] We do about ten million dollars a year, a million dollars a month on average.

Shaun: [10:20] Yeah.

Ben: [10:21] This year we’re going to process about 200, 000 orders in total.

Shaun: [10:26] Wow, that’s a lot of coffee.

Ben: [10:27] It’s been growing very, very well. Yeah exactly, people love their coffee.

Shaun: [10:31] [laughs]

Ben: [10:32] Even in a recession, people are still drinking their coffee.

Shaun: [10:34] That’s great. Are you still seeing growth?

Ben: [10:37] Yeah, we’re definitely growing. We’ve been growing at a very, very nice clip over the last five years. We’re averaging well over 50 percent growth a year over five years, primarily driven from the demand in single-cup coffee. Single-cup coffee, as you know or if you don’t know, is making one cup at a time. It’s kind of a coffeehouse type cup experience in your home.

[11:02] So there are pods. There are proprietary systems from Keurig and FLAVIA, Senseo, Melitta, and there are tons of different pod coffees out there. The growth of that industry has really benefited our site, because we’re ranked so well, naturally, for a lot of great keywords. We generally get a lot of the traffic, and we sell the goods.

Shaun: [11:26] Is that one of your main sources of traffic, is your natural search?

Ben: [11:29] Yeah. We’re direct marketers at heart. We get all of our traffic from Google, naturally. Of course we do a lot of paid advertising, search hit marketing. We also do banners. We do comparison shopping. We do affiliate marketing. Those are pretty much the big drivers: search affiliate marketing and comparison shopping.

Shaun: [11:53] Great.

Ben: [11:54] Banners is a small component.

Shaun: [11:56] OK, right. So, you’d recommend other e-commerce sites to be doing all of those.

Ben: [12:02] Oh absolutely, yeah. I think the biggest challenge that I see, that most e-commerce companies face – even from the Elite SEM side – when we’re working with clients is, what is a customer worth? I think that is kind of the biggest challenge. Sometimes we get customers who call us and say hey, a new customer to us is worth $10. And that might not be reasonable. And another customer may say we’re willing to pay $100. I like to hear how people calculate what their cost per acquisition is worth.

[12:30] Because some clients are very short-minded, short-term focus: their profit this year, this year and this year. And others are more long-term focused. We kind of took the Amazon approach back when we started in 2000. They lost money for many years, and now they’re the kings of e-commerce.

[12:46] We took the similar philosophy. For four years, we basically didn’t make a lot of money. I don’t think we lost money. But we just didn’t make a lot, because we were growing our acquisitions and our customer database.

Shaun: [12:57] Yeah.

Ben: [12:58] Now we’re at the point where we can cut off all of our marketing and be extremely profitable. But we’re still in customer acquisition mode, because there are still a lot of customers who aren’t ordering from us, or aren’t ordering their coffee online. So we’re still in customer acquisition mode. Maybe in five years from now, we can shut off all marketing and just rely on the customers who know us, have bookmarked us, are in our auto-ship program and our loyalty club and then turn off advertising completely.

Shaun: [13:22] Yeah, and then your margins will go up.

Ben: [13:24] Exactly, yeah.

Shaun: [13:26] OK, great. Tell me, is there a marketing campaign that you are particularly proud of?

Ben: [13:34] No, I can’t think of one. As a direct marketer, we haven’t really done anything offline. That’s one of the big initiatives for next year and this year is do more offline advertising and take advantage of some of the low rates we see in TV and print. It’s just not on the priority list right now. I think I definitely see the value in offline advertising, in building a brand. We just haven’t had the opportunity. Or I don’t think we have the in-house knowledge to know what we’re doing.

Shaun: [14:05] Right.

Ben: [14:06] Probably a 2010 type of issue…

Shaun: [14:07] I’m guessing you will outsource it.

Ben: [14:11] Absolutely. [14:12] [laughter]

Ben: [14:13] With the right partner… Now don’t take me wrong, but there are companies that we outsource to that completely that screw up. It’s about finding the right partner. And fortunately for me, I have good employees. I also have very, very good partners who help me grow my business. They’re not just sales people; they are really partners.

Shaun: [14:31] Yeah.

Ben: [14:32] They help us grow the business, and they are priced appropriately. At the end of the day if the comparison shopping channel is going to cost me $10, 000 a month to outsource, sure I’d bring it in-house. Because it would cost me $5, 000 to have a full time person dedicated to that. They realize that, too. So they price themselves accordingly, where it’s not worth me having it in-house. It’s worth me outsourcing, because they have all of the knowledge of how it all works anyway.

Shaun: [14:55] Yeah.

Ben: [14:57] We just have found it to be a much leaner model of doing business.

Shaun: [15:00] OK, great. You’ve touched on a number of the technologies that you’re using. What do you think works best?

Ben: [15:06] It’s hard to say. We have a lot of different… We just talked about the vendors. Our cart, as I said, is proprietary. We, once again, we build it from the ground up. There are a lot of features and functionalities that we don’t have that we rely on outside vendors for. So yeah, I’ll put out some of the other vendors that we use. On our carts, especially, we use LivePerson for customer service.

Shaun: [15:37] Yeah.

Ben: [15:38] We use SLI Systems for our site search and Sitebrand for our behavioral targeting. We use the McAfee secure site logo for our PCI compliance, and that also helps with conversion rates. We use Borderfree to ship seamlessly to Canada. We recently added AlertBot, which does our website monitoring.

[15:59] Very shortly, we’re evaluating a company to do product recommendations. That’s one of the things we’re debating to build in-house or outsource it. We’re going through the pricing procedures right now to help lift our ASP and our conversion rates.

[16:15] But which works best? They all work great. At the end of the day, we’re always looking for technologies that will lift our conversion rate. These types of companies, this is the business they do, is lift your conversion rates. I tell all vendors listening to me out there, if you have a product that’s going to lift my conversion rates, bring it on. We’ll test it and try it.

[16:33] CPC prices are going up. There is more competition out there. To survive, you constantly need to lift that conversion rate and lower that balance rate; we’re working on that as well.

Shaun: [16:45] What tools do you use to measure the conversion rates? What analytics package are you using?

Ben: [16:50] We currently use Google Analytics. We actually outsourced our analytics; we hired an analytics manager who basically does all of our reporting, shows us what we should do, and does business rules testing. He says hey, test this product rate price; lower the price. He gives us reports every month. Yeah, we have an analytics consultant on staff as well, who helps us weed through all of those numbers.

[17:17] I test them all; I played with them all. All of our clients use them all. They’re all fantastic. It’s just a matter of what you need out of them. You know?

Shaun: [17:25] Yeah.

Ben: [17:25] Omniture’s great; CoreMetrics is great.

Shaun: [17:27] What are your biggest headaches?

Ben: [17:30] [laughs] You know I would say before six months ago, a lot of it was our shipping and fulfillment. We’re dealing with coffee; that does have expiration dates.

Shaun: [17:43] Yeah.

Ben: [17:44] So part of my biggest challenge is the whole fulfillment-procurement process. I’m teaching it myself this late in the game. I should have learned it a lot earlier. I’m not an operations guy; I’m a marketing guy.

Shaun: [17:57] Right.

Ben: [17:58] So I’ve kind of had to jump in and be the operations guy, I figure. Fortunately, I found this great outsource fulfillment center who are working hand-in-hand with me to walk me through it, help me out and guide me. But that’s been our biggest headache is fulfillment: getting our products out in time and making sure that the fulfillment centers in their own warehouse are sending product that has the best dating. Because certain manufacturers send us things that should have six month expirations. We get it and it has two months left on expiration, because it’s been sitting in their warehouse, and then figuring it out.

Shaun: [18:27] Yeah.

Ben: [18:28] OK, should we send it back to them, or should we keep it? We have orders waiting to be sent, so it’s more… The procurement-fulfillment has probably been my biggest headache if I had to name one.

Shaun: [18:38] Yeah, no and I can see it’s an important part of the overall experience. As you saw with your FreshPair experience, if you can get the product nice and quickly, then the customers love it.

Ben: [18:47] Yeah.

Shaun: [18:49] So, Ben, how do keep up with the latest trends in e-commerce and in search marketing?

Ben: [18:54] For me from the e-commerce standpoint, I’m obviously going to the trade shows. We’re avid readers of Retailer magazine. I’m fortunate since I have this dual job of owning and SEM firm and owning an e-commerce site, we talk to our clients. We see what they’re doing and what they’re using. I like to be very transparent with all my clients and have them talk to each other. So if a client calls me and says hey, should I use Omniture? I say hey, talk to these two clients who use Omniture. Talk to these two guys who use CoreMetrics. Hear for yourself instead of talking to the salespeople to get the real lowdown of what you’re looking for.

[19:30] I’m very much in information-sharing mode between our clients and between the vendors – between all of those outsource vendors we work with. They also have clients. We’re getting information fed from everywhere. There are a lot of partnerships out there. So Gen3 Marketing affiliate managers might be partnered with a company, and they make an introduction to me. And I make an introduction to my client. We’re constantly keeping the flow of information going.

[19:56] We listen to podcasts, like this. We’re always at the trade shows and reading the magazines. It’s hard to keep up with it all, because there is a lot of information out there. But you have to, if you want to stay up. I would say that the other big thing is the Internet Retailer Top 500 Guide is also a bible for us. We’re constantly looking at what other people are doing and what other e-commerce technologies are doing, innovating and taking some ideas from them and putting it on our site.

Shaun: [20:24] Excellent. That’s fantastic. Ben, I’ll wrap it up there. You’ve given us some fantastic information. You obviously have a unique perspective, because you’re running an e-commerce site and for ILDC, and you’re consulting with a bunch of e-commerce sites. I want to thank you very much for your time today. I’m sure our listeners will have got some extremely useful information and a whole bunch of vendors that they can follow up on. So, thank you very much.

Ben: [20:52] My pleasure, I’m happy to help. If anyone wants to contact me, I’d be happy to make introductions to some of the vendors we’re working with. We’re extremely happy with all of them.

Shaun: [20:59] And what’s the best way of contacting you, Ben?

Ben: [21:02] You can email me ben@coffeeforless.com.

Shaun: [21:05] Excellent. Thank you very much.

Ben: [21:07] And if any of the listeners out there want some coffee, I’d be happy to respond with a coupon as well.

Shaun: [21:12] Fantastic. That was the e-commerce podcast. I’m Shaun Ryan from SLI systems. Tune in next time. [0:00] [audio ends]