E-retailer eBags goes high-tech
December 31, 2015 11:15 AM
An online handbag and luggage retailer’s executives are opening their own wallets and betting big on themselves after the company’s largest investor decided to cash out. They’re also betting that luggage with advanced technology will help the web-only retailer significantly boost its sales.
“I certainly wouldn’t have bought the shares if I had had concerns,” says eBags Inc. CEO Mike Edwards, who is now one of the company’s top two shareholders along with co-founder and executive vice president Peter Cobb. “Why would we (the new investors) risk our own fortunes?”
The executives with eBags, No. 174 in the 2015 Internet Retailer Top 500 Guide, along with a handful of new investors, bought the remaining stock owned by Benchmark Capital.
“Any time you invest money, you don’t do it unless you can see a tremendous return,” Edwards says.
Edwards says Benchmark had owned an unspecified “double-digit percentage stake” in the e-retailer, but opted to sell out because it was liquidating a fund that included its investment in eBags and other companies. Other companies in the fund included epinions, Equinix and Living.com, according to Crunchbase’s list of Benchmark’s investments.
Edwards says Benchmark had already sold its interests in the other companies, and that eBags was its lone remaining holding. Benchmark, which declined to comment for this story, had invested in the only two funding rounds eBags ever offered, in May 1999 and in December 1999. Benchmark also was an early investor in eBay, Instagram, Optimizely, Stitch Fix and Twitter, according to Crunchbase.
Analyst Neil Stern of McMillanDoolittle retail consulting firm says Benchmark appeared to be looking to monetize its eBags investment, but eBags wasn’t yet ready for another transaction or to go public. Stern says eBags appears healthy, pointing to a company press release that says its sales on Cyber Monday hit a record high that it made big sales gains on its mobile website on Black Friday, the following weekend and on Cyber Monday.
Since Edwards started as eBags CEO on Aug. 3, three of eBags’ five board members have left: Benchmark Capital co-founder and partner Bob Kagle; Slow Ventures partner Will Quist, who sat on the board as managing director at Industry Ventures, and Mary Beth Lewis, an independent board member and senior instructor of marketing at the University of Colorado-Boulder’s Leeds School of Business. Industry Ventures is a significant investor in eBags, Edwards says.
Edwards says they left because their job responsibilities changed or for other reasons. Reached for comment, Lewis said she left prior to the Benchmark selloff and declined to say more.
EBags Chairman Jon Nordmark says in a separate interview that rather than replace the board members, the retailer has brought on strategic advisors to help the CEO, the board and the executive team. They are Faisal Masud, executive vice president, global e-commerce at Staples, and Scott Henry, chief financial officer at Magic Leap who previously helped form Beats Music and the Beats branded music streaming service. The company’s new initiative is to entice travelers who are frequently connected to the Internet to eBags products with the same passion that Lululemon Athletica Inc.’s customers are attached to yoga, Nordmark says. Lululemon is No. 108 in the 2015 Top 500.
Edwards came to eBags from Staples Inc., No. 4 in the 2015 Top 500, where he oversaw the office supplies retailer’s merchandising strategy and new business development, assortment planning and vendor programs for the retail, online and contract sales divisions.
Edwards says eBags needs to add technology to its products, change its pricing strategy, expand sales internationally and grow its private-label sales, which account for slightly more than 20% of eBags’ total sales.
“My goal is to create a $1 billion global travel lifestyle, content and product marketplace connected to every part of a travelers’ journey,” Edwards says. He says he sees a growth pattern at eBags similar to that of Lucy Activewear, where as CEO he led the company from $7 million in sales in 2004 to its sale for $110 million in 2007 to VF Corporation. EBags’ 2014 online sales amounted to $180.4 million, according to an Internet Retailer estimate. Edwards foresees eBags hitting the $1 billion mark in five to seven years.
One step eBags took to increase sales was to begin in the fall of 2015 to accept orders from consumers in more than 200 countries. Orders are fulfilled by BorderFree, a unit of Pitney Bowes Inc., that provides international delivery services for 40 of the Top 1000 online retailers in North America, according to Top500Guide.com. In the first two months, growth in the international business has exceeded 25% month over month, says chief technology officer Mike Frazzini.
EBags shut down its own international e-commerce operations in late 2009, citing losses, and has since sold through Amazon marketplaces in France and Germany. EBags officials says the e-retailer will continue to sell on Amazon.com marketplaces in the United States and abroad.
Edwards says eBags’ other initiatives include:
- Launching a mobile app in the spring that will connect to all of eBags’ products through a bag tag. The tag will track the product’s location and user rewards, and the app will provide the consumer with additional rewards as he travels.
- Developing with startup company Twyst a travel bag that will have tiny antennae woven inside so that the bag becomes a radio frequency identification technology (RFID) reader. It can read all items inside the bag that the user puts stickers on. If an item is missing, such as headphones, the bag issues a signal to alert the user’s smartphone. The product is expected to launch in late spring.
- Working with eBags Chairman Nordmark, who is the CEO of Internet of Things startup Iterate Studio, to test 10 new technologies each quarter to make it easier for shoppers to browse and buy on mobile and desktop devices with the goal of increasing conversion.
- Became a distributor of Bluesmart luggage, which began shipping in December, that connects wirelessly to a smartphone so that a traveler can remotely locate and lock his suitcase. The suitcase has a built-in battery to charge up the phone and connects to a mobile app that lets the user keep track of his travel history and get travel and distance alerts. It sells for $399.
- Introduced a Steals of the Day section on the eBags website in early November, in which select products are offered as bargains for limited periods. He says the deals are driving incremental traffic and that eBags has seen greater than double-digit sales growth since November on this section of the website.
- Debuted women’s activewear in mid-December from manufacturers such as Patagonia, Icebreaker and Scottevest in a bid to reach women who travel frequently and like comfortable clothes.