Kevin Paterson

Kevin Paterson started online cosmetics retailer Fresh as a test. After working through eCommerce consultancy and web design group Simple Net, he felt he could do better than the clients who continued to ignore recommendations to move online.

Now, the business is turning over $2.5 million a year. Paterson spoke to SmartCompany about running an online store, why he doesn’t want any investment right now, and why outsourcing shipment and fulfilment is one of the best choices he’s made.

I have more of a web background.

In 2004 we were looking for a project to get our hands dirty, and we actually made a retailer ourselves, managing it, running it, and so on. It was really a pet project for SimpleNet to grow, but after about 12-16 months it looked profitable. Three years ago is when it really started to kick off.

To be honest we started getting frustrated with our clients. There is just a lack of talent about web and knowledge about eCommerce, so that’s why Fresh started. We wanted to see if we could do it ourselves and ran down the development of SimpleNet. It just became too frustrating dealing with these big retailers.

A major focus for us will be moving away from people wanting bargains to people wanting an experience. We feel we can offer that type of approach. We’re not selling perfume or make-up, but we’re offering you a solution.

Instead of us saying for Valentine’s Day to go out and buy perfume, we offered some resources instead. Things like what make-up works with others, and so on; whereas with our competitors, StrawberryNet, there’s just nothing like that. It’s just price competitiveness. We don’t want to go into a price battle.

We’ve outsourced out fulfilment, it’s all from a central location. We do the customer service here, and marketing and web, and we’re more just the office.

For us it’s not our strength, there are people who do it really well, so why not use them? We could probably do it cheaper if we set it up, but you need a lot of money to invest in that first of all. Managing that is not what we want to do.

It lets us worry about the web and support side of things rather than fulfilment. Although we have to keep on the contracts and make sure they’re managing certain requirements. It’s worked pretty well so far.

Even through some of the metrics we do, we know our customers fairly well. On our regular database we have about 35,000, but there’s probably about 100,000 names we would have. It’s a good number, but we’re trying to get that 100,000 very loyal.

We have a lot of customers who were loyal who have started Googling around who may have found a cheaper price. We’re trying to win them back through loyalty and building that offer to them.

I’ve been in eCommerce for a while, and I think we’re in phase two now. There is still going to be a discount element to the web, but people want more. If you can offer them more…if you look at the pure play retailers in the US or Britain, they’re already at that level.

I’m not keen on investors to be honest, although some money would be nice.

We’ve had discussions with a couple of investors, but why add that stress to your life? They don’t just give you money to play around with; they want to see it come back tenfold.

I want to build this organically and build a brand rather than just make money. But saying that, I’m not stupid, I know it would grow us dramatically. Lots of strings, and from what I’ve seen, I keep my eyes on the pure plays and they have a lot of money – but they either don’t reach that mark, or they do, and they get sold.

I’m a big fan of using technology to do jobs. That sounds terrible, but for an example, we used to have someone doing marketing. But a program we just built in the back-end of the website automates that stuff. Stuff like, if they haven’t bought something for a while, they get a reminder.

There are about four or six things our system does automatically that pretty much replaces our engagement person. It’s based on history, skin concerns, likes, dislikes. It’s fantastic. I’m not anti-people, but it works.

I think we lack a lot of talent here in terms of eCommerce. The big guys have to get their act together so people can come out here.

Look at the major online retailers here; they’ve all come out of eBay – DealsDirect and Catch of the Day. They got their grounding and popped up a website. I’m not taking anything away from them, but no one out here is really taking it and going for it. The UK and US are still 10 years ahead of us.

We’re going to open Mr Fresh and focus on men. We’re excited about that. We think there’s a market there. With the technology it’s something we can do that’s very cost-effective and we can roll out that model very quickly and easily.