Bootstrapping to $27 Million from Arizona: Jeremy Young, CEO of Tanga (Part 6)

Sramana Mitra: There is a company that we have done a case study on in Utah called Steals.com that’s in the baby product category and that does one deal a day.

Jeremy Young: Exactly. This was before any of those companies existed. We’ve been doing this for almost 10 years now.

Sramana Mitra: When you started this, did you have the partnership with the other website right from the beginning?

Jeremy Young: Yes.

Sramana Mitra: That was your primary customer acquisition strategy?

Jeremy Young: Correct.

Sramana Mitra: How did it ramp? How was it doing in the beginning?

Jeremy Young: It was amazing. When we launched, we had a big promotion. I think we had close to 50,000 people who were already signed up for the mailing list. It was a really successful way of jumpstarting the business and getting momentum. It’s the same thing that I did with windows95.com. It’s a really good model. If you don’t have any money, you got to find people who can help you push traffic and get sales, or you’re just going to flounder. That’s always been what I’ve tried to do with my businesses – create partnerships or create other types of websites that provide value to a like-minded customer that you can then advertise or push sales to.

Sramana Mitra: How much did you do the first year you were doing this?

Jeremy Young: I don’t know exactly, but we did over a million dollars in our first year.

Sramana Mitra: Were these board games that you were doing daily deals on have something special? Were they these German board games or were they just generic board games?

Jeremy Young: They were European games. Remember, I was liquidating my Uberplay board games. If you do a search for Uberplay, you can see a lot about that company. We probably did 50 different games.

Sramana Mitra: How did the inventory part of this work? When you were offering daily deals, was there a volume of deals or were you taking orders and fulfilling later? How did you work out the backend?

Jeremy Young: We had a warehouse where we had products sitting there. We would take the orders and just ship them out by UPS.

Sramana Mitra: You were basically putting your entire available inventory in this mode? The daily deal that you would offer on a particular product was designed to liquidate all the inventory that you had.

Jeremy Young: If possible. It didn’t happen all the time, but that’s exactly right. Some days, we would sell 2,000 products on one day. It depends on the product and price point. We would do drop shipping as well. We would send other people who had board games and had warehouse capabilities, and they would drop ship on our behalf. They would invoice us and we’d pay them.

Sramana Mitra: So in the first year, you did over a million dollars. How did it ramp? When was the first year of sales by the way?

Jeremy Young: It was 2007. We’ve been growing between 30% to 70% a year.

Sramana Mitra: As you are growing through this, the focus still remains on board games the entire time, or were there any other kind of strategic shifts that happened?

Jeremy Young: I considered this a hobby for me for the first three or four years. It was more for liquidating inventory. Some days, we’d put up a really bad product and sell five. I think what happened was I decided to try a couple of different verticals. I tried magazines and I tried jewelry. One day, I ended up doing a price mistake on a magazine. I can’t remember what it was but it was a significant price mistake but not to the point that I was losing money.

I ended up selling 3,000 subscriptions in 24 hours. It then really dawned on me that maybe the problem with the business to scale was not necessarily traffic or eyeballs. It’s possible that the problem with the business was product, price, and brand. Once I saw that happen, I realized that I could turn this into a real business. I started hiring people and focusing on how to build this into a large successful bootstrapped business. Last year, we did about $27 million in revenue and we’re hoping to do about $40 million this year.

Sramana Mitra: You still do just one deal a day?

Jeremy Young: No. We do lots and lots of deals. We have a whole marketplace of goods that people can just browse through and buy. The way that we drive a lot of our traffic is still through the amazing best-of-web, you-can’t-find-it-cheaper daily deals that we have on our front page that change every single day.

Sramana Mitra: There is this 24-hour deals and there are some other revenue channels that you are using to monetize your audience?

Jeremy Young: Correct. Whether you’re looking for cables for your iPhone or yoga pants, you can find really good deals on our website.

Sramana Mitra: It sounds like a very much diluted merchandising at this point. Earlier on, what you were describing was all board games. Now its seems like everything from everywhere. What’s the thinking behind your merchandising strategy?

Jeremy Young: My thinking was I can continue to do $1 million a year and turn it into a $50 million in a few years.

Sramana Mitra: There must be a logic to a merchandising strategy. Retail works in a certain way. It doesn’t really work that well if you’re going that broad.

Jeremy Young: We’ve made it work. We’re growing and bootstrapped. We talk to private equity companies that are interested in looking at us.

Sramana Mitra: I’m asking a question of how it works. There’s got to be a logic to a merchandising strategy. That’s the logic I’m asking you – something that we can learn from.

Jeremy Young: We merchandise and put products in front of people that they want. Let’s say that you come in and you’re looking at exercise equipments and yoga pants, those are the types of products we’re going to put in front of you and they’re going to be the best of web deal that you’re going to find. We put the right products in front of the right people.

Sramana Mitra: So you have some sort of technology behind the scenes that personalises this offering for specific customers?

Jeremy Young: Correct.

Sramana Mitra: What I’m seeing is a non-personalised version of that because this is the first time I’m on your site, but what most people see is the personalised version.

Jeremy Young: Yes, you’ll get emails that are personalised and you’ll get certain products that are personalised.

This segment is part 6 in the series : Bootstrapping to $27 Million from Arizona: Jeremy Young, CEO of Tanga
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