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Lighting products brighten the sales picture at Online Stores

February 1, 2017 01:03 PM
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Online Stores LLC has been in business since 2002, and CEO Kevin Hickey says a lot has changed over the past 15 years. In particular, he says, “When we first started in the early 2000s it was pretty easy to make money. As time has gone on it’s become increasingly difficult to make money.”

The result is that the company, which operates eight e-commerce sites, has gone from making solid profits a decade ago to much more modest profits today. But Hickey has a plan to increase profits by launching more e-commerce sites, thus spreading his overhead over a larger sales base. Online Stores sold $36 million online in 2016, up from $33 million a year earlier, and Hickey is hoping his expansion plans will get him close to $50 million in sales in 2017.

To get there, he plans to launch new websites that will sell specialized construction gear, such as to painters, roofers, carpenters and asphalt workers. That could add as many as 10 new e-commerce sites this year, Hickey says.

“We find the more specialized the website the more we improve the customer satisfaction and conversion rate and repeat business,” he says. The company, No. 463 in the Internet Retailer 2016 Top 500 Guide, already sells construction gear at three e-commerce sites: DiscountSafetyGear.com, ConstructionGear.com and SafetyGirl.com.

Safetygirl.com originally sold items like pepper spray and stun guns that women might use to defend themselves, as well as women’s work clothing. But Online Stores changed its focus last year after Amazon.com Inc. (No. 1 in the Top 500) began selling more self-defense products and Google objected to Online Stores advertising products it deemed weapons, Hickey says.

Online Stores now features the women’s work clothing and safety gear on Safetygirl.com, including its own brand of women’s work clothing and boots. “There are not many people doing that, so we’re getting some traction,” Hickey says.

Another big growth driver has been the company’s newest e-commerce site, Lightup.com, which features LED light panels designed to replace the fluorescent lighting used in many stores and offices. “They look much nicer than fluorescent tubes, last longer, they’re more efficient, people can get rebates to switch to them,” Hickey says. “People are just starting to realize these things exist, so there’s a long way to go before we fully penetrate the market and get people switched over to them.”

Hickey says sales on Lightup.com have been doubling month over month since the site launched in September. Seeing an opportunity in lighting, he is in negotiations to acquire an online lighting retailer, which he would not name. Once that deal is complete, he expects to open another e-commerce site selling lighting products.

Hickey says he has cut costs by investing in information technology, ensuring, for example that his enterprise resources planning system is connected to his suppliers so he knows what they have in stock and, when they’re out of stock, when they expect replenishment product to arrive. That’s allowed him to reduce employee head count to about 80 now from about 130 in 2010-11, even as the company’s revenue has increased by nearly 30%.

As is the case for many online sellers, Amazon is both a major competitor and an important sales channel for Hickey. About 20-25% of the company’s revenue comes from sales on Amazon, including the Amazon Business section of Amazon.com. Hickey caters to businesses buying on Amazon by offering discounts on bulk orders. He’s also started to offer some personalization of goods on Amazon, though he says that has proven tricky as Amazon’s marketplace is not designed with customization in mind.

Meanwhile, Online Stores differentiates itself from Amazon and other competitors with its own branded products in categories as diverse as duct tape, flags and women’s steel-toed boots.

It also offers construction companies the option to customize hard hats so that workers will be more likely to wear them, Hickey says. “We take a standard hard hat and decorate it with a finish that ranges to flags or skulls from a zombie movie or camouflage,” he says. “We have 30 or 40 designs of hard hats. It’s all unique product that nobody else has got. And I don’t see Amazon getting into the business of making flags or customizing hard hats.”

To help fuel its expansion, Online Stores raised $2 million in funding last year from two suppliers, Hickey says. The company, based in New Stanton, Pa., near Pittsburgh, operates a 110,000-square-foot facility there, from which it handles most of its own fulfillment and does some manufacturing. Part of the growth plan is to open a second distribution center, probably in Reno, Nev., to serve the West Coast. That will also cut the time to receive goods from China by about a week, Hickey says.

Online Stores, which has been in business since 2002, operates other niche websites, with its largest business being selling flags at United-States-Flag.com. It also sells tea and pool toys on dedicated websites.

While consumers are welcome to buy on its sites, 60% of the company’s online sales go to businesses, which is fine with Hickey. “B2B transactions are a little bit bigger and businesses are not completely driven by price,” he says. “They want customer service, they want to be able to call us on the phone to ask questions, ask for our advice from time to time. Consumers are more driven by price than businesses are, and less likely to come back for repeat business.”

 

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