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Shaun Ryan: [0:08] Welcome to the Ecommerce Podcast, Episode 3. I’m Shaun Ryan, CEO of SLI Systems, and today I’m talking to Richard Sexton from Carolina Rustica.

[0:11] I’ve got this question I’ve been asking others. What’s the first thing you ever bought online?

Richard Sexton: [0:16] [laughs] The first thing I ever bought was a Casio G Shock watch, which is this big, old, clunky, nigh indestructible watch that Casio made. I think they may have a slimmed down version today.

[0:30] But I bought it on eBay, and I was just absolutely tickled because it came from somewhere in Singapore, I think. And I got it like a week later, and I was bitten. In fact, I still have it eight years later, so there you go.

Shaun: [0:45] So can we start off by perhaps getting some background on yourself and how you came to be where you are today?

Richard: [0:52] Sure. In the early ’90s, I was in the corporate world. I had gotten my MBA from Kellogg at Northwestern, and was working in the corporate world. Just after a couple of years realized I just couldn’t tolerate the meetings and whatever, all the corporate waste. So I decided to get out.

[1:07] But before I did that, I have always been fascinated by Nepal and the Himalayas, and I do a lot of hiking and stuff like that. So I planned this one year trip around the world, and concentrating on Nepal, India, Thailand, Indonesia, and Australia, and managed to convince my then girlfriend, now wife… who was in between her third and fourth year of medical school… to come with me. So I quit my job, she went on leave, and we traveled around for a year.

[1:41] While we were traveling, we spent most of our time in Nepal. I just really sort of got into the Tibetan cause, and also sort of looking at ways to help them and fascinated by their art and their culture.

[2:00] So this idea came into my head as we were traveling that I would import some Tibetan handicrafts, direct from their refugee camps, when we got back… kind of start a small handicrafts type store when we got back here to North Carolina.

[2:13] And so, fast forward a year later. She’s back doing her residency in Concorde, North Carolina, north of Charlotte, and I opened up a store in downtown Charlotte that kind of mixed these Tibetan handicrafts that I imported direct with works by local artists. And furniture, to sort of display items and on a more practical note, more people are going to buy furniture than are going to buy a $500 Buddhist statue.

[2:38] And that was in ‘95. And then we started putting things online, sort of dabbling, playing around. I mean, this was in ‘96, the very early wild west of the Internet.

Shaun: [2:49] That’s extremely early, isn’t it?

Richard: [2:59] Yeah, when pay per click was five cents a keyword. I remember those days fondly. [laughs]

[3:00] And then, two years later, we actually changed the name. The store was called Himal Home Gallery the "Himal" coming from Himalayas. Two years later, we went online and changed the name, upgraded the store, called it Carolina Rustica, because we were selling more furniture than we were anything else. And it’s sort of been whiz bang since then, since 2000 when we put Carolina Rustica online.

Shaun: [3:21] And so, is most of your business done through the online store? You still have a physical store, right?

Richard: [3:27] That’s right. Yeah. In fact, we just expanded. We tripled our floor space last month. We moved into an old, turn of the century textile warehouse. There were a lot of textiles around here years ago, and now they’re putting the mills to good use. So anyway, yeah, it’s about 90 10: 90 percent online, 10 percent in store. We are trying to increase the amount of in store traffic.

[3:51] But having that retail store is an invaluable tool in helping to sell online, because, as part of this expansion, we moved all of our customer service people literally in the store.

[4:02] They’re kind of sitting in a section in the corner of the store. And if someone’s calling about a chandelier, they can say, "Oh yeah, I’m looking at it right now, and here’s what it looks like." And that has a very powerful impact. And also, there’s a credibility factor there as well.

Shaun: [4:17] Yeah. I can see that. It’s so much better than just thinking the person you’re talking to is in some cubicle somewhere.

Richard: [4:23] Yeah. And we’re not a transactional company. We have a very high order value; about $350 to $400 per order. Half of our products online don’t even have prices because of manufacturer requirements. But we’re very high end, and so you have to call in. And so having that contact, you’re going to get a much higher order, a better repeat customer, and better margins.

Shaun: [4:52] So, if a lot of people are calling online, how do you track that, if they’ve come to your website and then they call you up, how do you track those conversions?

Richard: [4:58] It’s very difficult. You have to do it, really, on a macro level, because we don’t pester our customers, saying, "Well, did you find this on Google? Well, was it in the right hand column or the left hand?" [laughs] Most people don’t even know how they found you, in fact. So we have to track it on a very topmost level, and sort of work in generalities. So we use Google Analytics a lot.

[5:27] But that is a big challenge, is trying to figure out where the traffic comes from. Because probably 10 percent of our traffic is just direct reference, people typing in "Carolina Rustica." And who knows where they saw that?

[5:40] I mean, I’m happy for it. One of our strategies is to build our own brand name recognition, because we’d like to have a catalog at some point down the line and more stores. But that is definitely a big a challenge.

Shaun: [5:56] Yeah. I can see that. And it’s not the end of the world if you can’t track every sale. I mean, with traditional marketing, you couldn’t do that.

Richard: [6:02] Mm hmm.

Shaun: [6:04] So, because there’s that sort of opportunity to do that with online, people sometimes get a little obsessed over it.

Richard: [6:08] I think so, yeah.

Shaun: [6:09] So, can you reveal how much you sell online per month, or your growth figures?

Richard: [6:13] Our monthly revenues vary between, on the slow month, 250,000, to busy month, about 400,000. And this year, our growth will be flat with last year. I mean, we’re hoping to be flat.

[6:32] It’s really, in my 12 years of doing this, this is the most challenging environment I’ve ever operated in, and I’ve never seen consumer sentiment so deep in the pits.

[6:44] We’ll be fine. But one of the other challenges we face is the fact that there are a lot of desperate retailers out there who are marking things down at cost; just trying to get their money back and keep their doors open.

[7:01] So that presents a huge challenge to everybody, and there’s continual downward pressure on margins because of that price competition.

Shaun: [7:10] I suppose you’ve got an advantage there because you traditionally don’t compete on price.

Richard: [7:14] Yeah. And that’s the nice thing about kind of having the higher end lines, and also our own proprietary line that we design and have manufactured for us, is that we have a little more flexibility there.

[7:26] And we’re trying to divest ourselves of those much more price sensitive lines. Particularly in the lighting industry, kind of in the mid to lower level range, you’re just going to get creamed by guys like Lowes and Home Depot and people like that, so [laughs] there’s no point in even going there.

Shaun: [7:45] So is this going to be the first year where you haven’t seen growth, do you think?

Richard: [7:49] Yeah, it is. It will be.

Shaun: [7:51] And what sort of percentage growth have you seen, sort of year on year?

Richard: [7:53] About 40 percent.

Shaun: [7:57] Wow.

Richard: [7:59] It, last year, slowed markedly. And then, this year, like I said, if we’re flat, I’ll be happy. I mean, I regularly have furniture reps coming in saying, "These guys are down 20 percent. These guys are down 40 percent." Like I said, it’s a very challenging environment. And we’ll be fine, but the guys who I really kind of hope are going to do better are manufacturers, who have it worse than anyone because they’ve got an increase in costs on their supply side, and with lower market revenue on the other side. So it’s pretty tough.

Shaun: [8:36] What specifically are you doing to try and address these tough times, apart from getting rid of some of those pricings of products? Are there any other measures you’re taking?

Richard: [8:45] Well, on the cost side, we’ve consolidated all of our operations into this new location. So we’re taking out elements in our overhead.

[8:55] Being very selective in our pay per click budget… and this is where I have to put in a big plug for SLI. We’re just ecstatic with our Site Champion results. And the longer we have Site Champion the better placement we get in organic search with the index pages.

[9:21] So we look at our organic search… probably about 85 percent of our traffic is organic search… which is pretty high. And of that, the Site Champion results have a pretty healthy portion. So we rely on the integration of our organic search with our paid search to sort of manage our advertising costs.

[9:47] Then just looking at higher end lines, like I said, it’s a good time if you’re a retailer and you’re doing OK, you’ll have access to a lot more lines you might not have had access to before when times are good and they’re a little more picky. So for a smaller player like us, there’s actually a big opportunity there.

Shaun: [10:03] That’s really interesting to hear, because everyone’s normally so gloomy. It’s a very positive approach to be looking for those opportunities in times like this.

Richard: [10:12] Oh, yeah. Yeah.

Shaun: [10:14] So the main way you get customers to your site is through the natural search, and you’re doing paid search as well. What other techniques are you using to drive people to your site?

Richard: [10:21] We’ve got a newsletter we send out, and that helps. We try and do regular press releases, that type of thing. And as I said before, we’re sort of gearing up for the very beginning of a catalogue.

[10:37] But as kind of a multi channel marketer, you’ve got to really look at your options carefully because in paid search you can blow through your total advertising budget pretty quickly. So we try and spread it out as much as we can.

Shaun: [10:54] And you manage that in house, correct?

Richard: [10:56] That’s right, yeah. We do absolutely everything in house that we possibly can.

[11:01] And when I say in house, it’s kind of laughable. I mean, there are 10 of us who work at the company. We’re very, very small relative to our competitors, so we have very high revenue per headcount.

[11:17] But I think one nice thing about us is that when you call you’re always going to get a real person picking up the phone immediately; and it might be me, it might be somebody in customer service, it might be our shipping guy.

[11:28] Everybody is trained to focus on customer service. In these times, you want to make sure that people are recommending you and giving glowing reports. That’s really where we strive to make our biggest advances in word of mouth, is by reputation and working also with the trade; with designers and builders and architects.

Shaun: [11:52] As you grow, that’s probably one of your challenges, is to make sure that you maintain that level of customer service, right?

Richard: [11:59] Yeah, absolutely. We are totally committed to that, and we’re really trying to do everything within reason to keep our customer happy.

Shaun: [12:10] So what time of year is your peak time, and do you have to bring extra staff onto that?

Richard: [12:16] October is pretty much our peak month. Because on a lot of our furniture items, we have a four to six week lead time, so people are ordering in October for the holidays.

Shaun: [12:27] Right.

Richard: [12:28] So that tends to be a very, very strong month. January is also a strong month. This January was not so great, but who knows what’s going to happen? You know, all the rules are kind of thrown out again because the business cycle is in such turmoil.

[12:44] I don’t even bother doing a budget anymore because there are so many macroeconomic factors out of our control. You’re going to be wrong no matter what you do, so you just have to manage your costs on one side, and invest wisely on the other side.

Shaun: [13:01] Now let’s talk a little bit about the technical side of things. What technologies are you using to run your ecommerce site?

Richard: [13:06] In October we migrated to a new platform after a six month integration period. We were using a rickety but highly effective ecommerce cart called X Cart. But we completely overloaded, and the site was crashing every week at the same time, and there were security issues and stuff like that, so we migrated to a new ecommerce platform provider in October.

[13:36] And again, this is another unsolicited plug for SLI, but SLI was critical in that upgrade and migration. Because all of our Site Champion results migrated over and most importantly, we were still struggling… and still are a little bit… with navigation on our site.

[14:00] Of course site search is going to pull your bacon out of the fire every time when you have navigation where you’re trying to second guess the exact path that the customer’s going to follow to a particular product. Onsite search results are always going to get them there without any question. So that was absolutely critical in our transition.

[14:25] And there are a lot of issues that we’re still kind of struggling with, but we’ll work through them. But the biggest challenge that they have is we’ve got… for any given product, we might have two or three sets of options, resulting in a possible 10,000 skews, 10,000 unique skews for an individual product. That’s a very hard thing to convey on a site.

[14:50] So that’s the other reason why we allow people to call us, so we can discuss the different options for the products.

Shaun: [14:56] So what is the platform that you migrated to?

Richard: [14:59] The company’s called DMinSite.

Shaun: [15:02] Oh, yeah.

Richard: [15:04] Based in Cincinnati, and I believe actually you have a couple other clients who share that same platform. So that, we actually launched with them in October.

[15:13] And it’s a very sophisticated platform. It’s ideally suited for multi channel marketers who have got a catalogue that they’re trying to work in conjunction with their website. And since that’s the direction we wanted to go, it’s a good fit.

[15:31] Increasing navigation, when you’ve got the number of products online that we do, that’s always one of the biggest challenges. Because you have to get inside your customer’s head and try and figure out, "OK, they’re looking in canopy beds, but now they want to look at only full size canopy beds by this manufacturer." And trying to go through that sorting process can be a challenge.

Shaun: [15:55] Yeah. That’s one we see across a lot of our customers as well.

[15:59] We also see exactly what’s happening with you. We see the people that are running online stores are increasingly becoming more multi channel. So they may have started off as a catalogue or got an online store or a physical store; they’re online, they’re looking at catalogue. Multi channel merchants are definitely becoming more the norm from what I’m seeing.

Richard: [16:17] Yeah. And that’s kind of the holy triumvirate of marketing, is when you have a retail location, or multiple locations, working in harmony with your website and your catalogue. And it is interchangeable as far as the customer is concerned.

[16:38] The user experience is the same thing in the catalogue or in the store or on their website. I mean, you’ve really figured it out at that point. But the problem is, not many folks have. Because it’s difficult, if not impossible, managing different physical locations and then different marketing spaces at the same time.

Shaun: [17:01] It was interesting, at the ACCM conference I went to in Boston last year, just seeing the sort of clash. Because the catalogers have been around for a long time, and there’s quite an established science on how to do that properly. And that clashes with the online, where everyone’s still working out the best practices, it’s very fluid, and things are changing all the time.

Richard: [17:24] Exactly. It’s very dynamic. And I have this theory that these catalogers come up with all these unique terms for their industry just to keep the rest of us confused and sort of guarantee their job security. [laughs] What they’re talking about is no different than what we’re doing online. The metrics are the same. The analytics are the same.

[17:42] But you’re absolutely right. They have a certain way of doing things. I mean, it’s an extremely competitive space, having catalogs.

[17:56] But I think having a website keeps you on your toes more than anything because the feedback is instantaneous. It’s extremely judgmental. If you have a wrong price on your site and, for whatever reason, you might not be able to honor that price, a customer can review you instantly on any number of venues, and it’s there it’s stuck, forever.

Shaun: [18:20] Yeah. And that just keeps you on your toes, doesn’t it?

Richard: [18:23] It really does. [laughs] It really does, exactly. So you have to be responsive. And the feedback, like I said, is instantaneous, whereas, in a catalog, you might not necessarily know what you’re missing.

[18:38] I think our going from the web space into the catalog space is going to actually be a fairly… I’m not going to say easy transition, but a natural one for us to make. And we won’t have the same kind of challenge as going the other direction.

Shaun: [18:53] Now, I was going to ask you what your biggest headache is. You’ve talked about a number of things, but what do you think is your current biggest headache; the macroeconomic situation?

Richard: [19:01] Well, no. I mean, that’s everybody. You just deal with it the best you can. The price competition coupled with the increasing pay per click costs really put a squeeze on you.

[19:14] We don’t have an unlimited budget. I like to get a certain ROI on our advertising keywords. So that is really something that we have to deal with all the time, and it kind of colors everything that we do.

[19:41] The other thing for us is conveying customer information, or product information to our customers, in a way that doesn’t disappoint them but also makes sure that we get the sale. In other words, if we have a product that a manufacturer has to make from scratch, and it takes six to eight weeks…

[19:57] The web also has this instantaneous gratification, as far as purchases go. Even if it says six to eight weeks, a customer will call us two days later and ask us if it’s shipped yet. [laughs] "No. We put the order in immediately, but it’s six to eight weeks." On a good day, yeah, it might be four to five weeks.

[20:16] And so that’s kind of a fine line. We don’t keep everything in stock, particularly with all the options, as I mentioned before. So, trying to get information out there to customers, to be realistic, but also not trying to be overly negative or onerous about a particular product or the delivery conditions.

[20:38] We ship everything curb side. That means sometimes the driver might take it into your garage, or he may not. If you want to pay more, you can. But fuel costs are just outrageous right now, so we have to be very parsimonious in our shipping. Conveying that information, like I said, without putting people off, is kind of a fine line.

Shaun: [21:01] Do you have anything else you’d like to add; anything else that you think other retailers might like to know about you that they might be able to apply to their stores?

Richard: [21:11] I would actually like to say, as far as SLI goes, you guys are true partners to our company. And again, this is unsolicited. But in all of our growth, in all of our transitions, it has been so easy working with the engineers and the marketing people. It’s really been a fruitful relationship.

[21:37] We integrate search in ways that I don’t think even you guys have probably thought of. For example, you might be looking at a towel rack for the wall. Not in every case, but we’ll have a link that will say, "Click here to see all of these select towel racks, sorted by price." And we’ll have built in an SLI search for a results page that generates that exact query.

[22:08] And we use queries in landing pages, in pay per click campaigns. Let’s say we’re doing a campaign for the keyword "round modern cocktail table." We don’t have a category for round, modern cocktail tables. But we can do an on site search and use that URL query in our actual landing page for the pay per click campaign. And voila, you hit our ad and it’s going to generate that search, and you’re going to get five round modern cocktail tables, thinking, "Yeah, yeah." And really, it’s just a neat application for the tools.

[22:49] Thinking of navigation and thinking of how people perceive your product, that’s, I think, what we all have to keep honing in on and refining. And it’s not a matter of throwing as much money at the search engines and seeing what sticks.

[23:09] And the other thing is keeping your focus. I mean, we compete against much larger online stores that will have 50 URLs, each one specific to a particular furniture product. So you get whatever, curtain rods and drapery.com or something like that. I’m just making that up. That’s great, I guess if you can manage it.

[23:39] But you have to know your products, too. It’s not just a matter of having as many products on your site and hoping that somebody’s going to buy them. You have to kind of keep your focus.

[23:52] And I think that’s critical because search and navigation are important, but if people see that you’re all over the board, it’s going to be very difficult for them to find what they’re looking for. And it’s tempting to throw everything, including the kitchen sink, into your website, but it’s not necessarily going to increase your revenue.

Shaun: [24:16] There’s been a lot of very interesting stuff that you’ve told me. And you have a fascinating story.

[24:22] I’m sure you have no regrets of moving out of the corporate world into this business. You obviously love it.

Richard: [24:29] Yeah. Well, if you had asked me a few days ago, when I was moving my 5,000th box of iron stuff from one warehouse to the other… I had to pitch in because we’re so short staffed… I might have told you differently; [laughs] but now that I have gotten my wind back, yeah.

[24:42] I mean, it is so exciting. And you kind of forget what it’s like on the other side. We’ve got great days. We have some not so great days. But I have never had a boring day.

Shaun: [24:54] That’s fantastic to hear. Well, Richard, thank you very much. I really appreciate you taking the time to talk to me. And good luck in the future.

Richard: [25:03] Thank you, Shaun. I appreciate it.

Shaun: For more information, go to ecommercepodcast.com. If you have got any feedback or questions, send them to questions@ecommercepodcast.com.

[25:12] I’m Shaun Ryan, from SLI Systems. We’ll see you next time. Thank you.