A niche e-retailer finds growth by swimming with sharks, and selling through Amazon
March 3, 2016 10:55 AM
It’s fair to say Stephan Aarstol, founder and CEO of Tower Paddle Boards, takes a modern approach to business building.
In 2010 Aarstol saw a niche, emerging product category, stand-up paddleboards, and started designing and manufacturing them, selling them direct to consumers on TowerPaddleBoards.com. Then in 2011 he got publicity—and $150,000 in funding—via reality TV by taking a dip in ABC’s Shark Tank. Billionaire investor Mark Cuban ponied up the cash in exchange for a 30% stake in the business and remains involved in the company.
Scaling up, Aarstol in 2012 began selling the boards—hardboards and inflatable boards—through Amazon.com Inc.’s marketplace, where stand-up paddleboards were a new product category. “There were about 180 SKUs, and we had 120 of them,” Aarstol says. “We operated as a monopoly for a few years.”
The category’s SKU count quickly spiraled up and today there are about 1,900 listings for stand-up boards on Amazon. As it became tougher to stand out, Aarstol was receptive when Amazon reached out in 2014 to talk about Tower Paddle Boards participating in a program then in development. The program, Amazon Exclusives, showcases products offered by marketplace sellers only on Amazon, meaning the products aren’t available on other mass e-retail sites or in stores. (Direct-to-consumer sales on TowerPaddleBoards.com or through Tower’s company store in San Diego aren’t restricted.)
Aarstol’s Amazon sales had steadily climbed, and in 2014 sales via Amazon amounted to about $2 million, or 40% of Tower’s 2014 revenue of $5 million. By joining Exclusives, Tower Paddle Boards products would be featured on an Exclusives page, be highlighted in email promotions Amazon sent to consumers and receive other branding support to put products in front of more eyeballs. For example, Amazon in January featured Aarstol and Tower Paddle Boards’ small business story in a profile it ran on Amazon’s home-page feature carousel.
“The competition in paddleboards had increased dramatically,” Aarstol says. “If we didn’t do Exclusives and have the extra promotion sales on Amazon might have been flat.”
In exchange, Amazon takes a larger cut of each sale than the percentage it takes for a non-Exclusive marketplace sale. In Tower Paddle Boards’ case, Amazon takes a 20% commission, up from the 15% before the Exclusives agreement. Aarstol considers the increase a cost of doing business and reasons he’s getting his money’s worth, particularly with Amazon handling fulfillment on most orders and all payment processing fees and fraud risk.
Aarstol’s meeting with Amazon executives about Tower’s participation in Exclusives was included in a follow-up appearance in “Beyond the Tank” that aired in January.
As 2015 progressed, Tower’s sales on Amazon rose. Aarstol says the company did $3.2 million in sales through Amazon, or about 44% of its full-year sales of $7.2 million. The branding work has also helped Tower’s search optimization on search engines. On Google, TowerPaddleBoards.com is among the top five organic results for the “stand-up paddleboard” search. For the search “inflatable stand-up paddleboard,” it is the top result.
The company is extending its product selection beyond paddleboards to include sunglasses, board shorts, snorkels and other beach-style products. It also has launched a content site, Tower.life, and a digital magazine from which it distributes articles via email twice a week. The intention, Aarstol says, is to make Tower into a lifestyle brand so it can continue growing.