Deal Radar 2010: Probus OneTouch

ProbusOneTouch is a family of Web sites that makes premium-quality products available to customers at factory direct prices. The company handles the e-commerce element as well as product sourcing, supply chain management, and warehousing and fulfillment.

The Minnesota-based company was founded in 2003 by its president, George Lee, who already purchased and sold almost everything he needed on the Internet. His objective was to create a business that supported his personal values. Prior to founding Probus OneTouch, Lee and his partner Tom McCullough purchased several First Alert consumer product divisions from the Sunbeam Corporation. This venture provided products to big-box retailers. Prior to leaving the corporate environment, Lee was a senior executive in the electronic financial services industry with MasterCard International, DataCard, First Bank, and CitiBank, and he was a principal in two software companies.

Probus has five proprietary branded product categories: Promark Offroad.com, which has products for ATVs (all-terrain vehicles) and Jeeps; 1MassageStore.com for home and professional massage products; DuraShieldCovers.com, which sells covers for sport vehicles; KillZoneHunting, for hunting products; and the forthcoming RollMobile.com for mobility products. Products in each category are sold through three e-commerce channels (.com, Amazon, and eBay). The company says that there were over 1.5 million unique visitors to its sites in 2009, more than one-third of whom were on PromarkOffroad.com. 1MassageStore followed with just under half a million visitors, then KillZone Hunting with about 275,000 and finally DuraShield with about 160,000. The buyer demographics are unique to each channel, and there is rarely crossover by buyers among channels, a strategy that Probus has found works well for it.

The company uses a five-step Stage-Gate process to assess the market opportunity for new products and product categories. Based on its Internet key word search volume, the team assigns a revenue value to each new product or product category opportunity, which are prioritized according to this value.

When Probus was founded, there was little for sale in the company’s target product categories on eBay, and there were many small competitors. eBay was Probus’s primary online channel for a couple of years because it was able to dominate its product categories with better pricing. When the company explored the dot-com Internet channel, it found a similar competitive situation. The picture for this channel is similar today: in each segment, there are many small competitors, some that have a range of products and others that are very specialized.

Probus believes that what sets it apart is that it controls the product and buying experience from the creation to the end of life of the product. It contracts directly with manufactures to make products that are unique to its specifications, manages the logistics to get products delivered to its warehouses, manages its own e-commerce stores, ships products directly to the customer, and provides customer service and warranty work. Because there are no other parties in the supply chain, ProbusOneTouch can sell its products at lower prices than competitors.

The company gained traction by first creating a private-label brand in a generic market then taking the best features from competitors in an effort to put all of them into a “best of the best” available on the market product. The next step was trying, through “trial and error, to be honest,” said Lee, different tactics to understand what triggers buying behavior in each e-commerce channel.

Probus, which takes its name from the Latin word for integrity, also aims to be a business that allows people to put their families first. It’s a close-knit company, with 11 of its 35 employees coming from three families. Philanthropy is another important dimension of the company, which Lee says donates a significant portion of its profits to organizations that employees choose. These include groups with a religious mission, such as Christian charities for the homeless, as well as secular organizations such as the Courage Center for people with disabilities.

ProbusOneTouch closed 2009 at $6.8 million in revenue and says that it is on track to double revenue this year. Profitability is in the average range for direct marketers. The company was funded with initial capital from the two partners. Since inception, funding needs have come from cash flow. Lee says that as the company continues on its growth path, it may require additional funding. The ideal investor would be able to help Probus leverage core competencies and identify competencies needed to support the company’s target growth.

Lee plans to add more vertical product lines, either private-label or branded, and to launch an online dealer/distributor network. As for an exit, he says, “Exit, ha. Retirement is doing what you love. I am retired and spend 50 to 60 hours a week doing what I love. I hope to exit in a horizontal box.”

Recommended Readings
Forbes Column 2009: Retailers: Embrace Web 3.0
Deal Radar 2010: RepeaterStore
Deal Radar 2009: Sheet Music Plus

This segment is a part in the series : Deal Radar 2010