Right time, right service

Matching logistics and the boom in buying and selling online was the unexpected combination that put Pack & Send founder Michael Paul on a trajectory that is still running. By AMITA TANDUKAR.

By Amita Tandukar

For Pack & Send founder Michael Paul, the key to finding new revenue streams was going back to basics: Listen to your customers.

When Paul started the Pack & Send logistics franchise in 1993, the internet was hardly understood as a communication tool, let alone a business tool.

Few people could have predicted then the potential of the secondhand goods exchange market that was uncovered by websites such as eBay. Today it is estimated one in three adult Australians has bought or sold a product on eBay.

Targeting online sellers who send unpackaged, odd shaped or fragile objects delivered 25% of Pack & Send’s $30 million annual revenue in 2006-07, and helped the chain achieve 20% sales growth compared to the previous year.

An early challenge for Paul was finding where Pack & Send could fit into the internet business model, which was gaining plenty of attention during the dot-com boom of the late 1990s.

Paul relied on the existing customer base to guide his approach. He heard from franchisees that customers were appearing to post items sold on eBay. “The first wave of goods being sold [on the internet] were new, so they were already packaged and that didn’t interest us, but once secondhand goods started being sold we knew that there was an opening,” he says.

Paul approached eBay Australia in 2001 and formed a partnership to include a link to the Pack & Send website on eBay help pages. “They were happy to meet us halfway as they saw it as a way to generate sales,” he says.

The most popular items shipped by online sellers through Pack & Send in 2008 are motor vehicles, musical instruments, electronic items and sporting goods. The company also identified several other sites with similar products, such as general auction site Oztion and commercial auction listings such as Grays Online.

Pack & Send has an increasing number of competitors. Smart Send is an Australian company targeting low-volume eBay sellers (but it will not send unpackaged goods).

And there are eBay consignment stores, like SimplySold founded by dstore founder Danny Gorog, which deals with goods dropped off for a service fee. Isoldit, a franchise chain started in the United States, is set to open stores in Australia shortly.

Paul says the company has been able to fend off competition by sticking to its specialist skill of packaging rather than being distracted by secondary activities such as selling items.

In adapting the company’s marketing strategy to the internet, Paul had to find a way to communicate with online customers.

To get Pack & Send set up in the first place, he and his wife knocked on doors. “We didn’t have much more than a flyer and a business card, and we knocked on doors,” he says. The business grew as customers returned and sent referrals from secondary sources such as courier companies.

To target online customers, they used word-of-mouth on the web. Pack & Send staff visited seminars and live online forums where eBay sellers learn about effective selling techniques. He targeted online exchange sites. Paul says favourable comments on the feedback pages are the life blood of online exchange sites. “Once one customer [in a category] uses us, we see an avalanche of other users,” he says.

Finding and winning business from high-volume online traders is a challenge for Pack & Send in the coming year.

According to Ebay Australia, more than 17,500 Australians use eBay as their primary or only source of income, while another 35,000 Australians run a business and use eBay as a secondary sales channel.

Paul says the strategy of offering inventory and storage services to these businesses is expected to boost revenue from online transactions above $7 million a year. “The businesses are sending more and more goods overseas,” he says.

One barrier to the future growth of the online services is the network of Pack & Send physical stores.

The franchise system expanded from the first store in 1993 to 20 stores by 1999, and 50 stores by 2003. “We wanted to establish a national network quickly, which tended to go against the grain of advice given to most franchisors. But we were in the logistics industry, so we needed strategic locations,” Paul recounts. “Of course the cost of servicing them was high because we were flying all over the country.”

The company needed to fund the expansion, but Paul was reluctant to make substantial changes to what he felt was a sound business plan. He was introduced to Barry Smorgon, an experienced businessman who worked for 25 years in the Smorgon family steel business, through a mutual contact who attended Paul’s business networking group, The Executive Connection.

Paul sold half the company to Smorgon in 1999, and since then Smorgon has acted as Pack & Send’s chairman. “We were privileged to have such a high profile investor and he was keen to let the strategic plan run its course,” Paul says.

There are currently 85 stores and Paul is fielding plenty of inquiries despite a general downturn in the franchise industry. Paul attributes the continuing interest from quality franchisees to the strong reputation the stores have gained in the corporate sector and the fact that existing franchisees are buying additional stores. About a quarter of the system is under multi-store ownership.

Paul’s tips on servicing virtual customers:

Research the habits of existing users and build an internet strategy around their needs rather than creating a new market.

Do not try to create a virtual community – market your products or services to a community that already exists. Pack & Send uses eBay forums and seminars to market services rather than developing expensive customer forums on its own website.

Use the virtual community to come up with ideas for new products and services quickly and cheaply. Pack & Send created an online form for calculating postage costs, a pickup service for online buyers and an item view service for rare or expensive items to be verified under supervision by the buyer under supervision.