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We'll Sell It!
With dynamic leadership, explosive growth, and a savvy business model that allows customers to bring their goods to brick-andmortar locations to be sold on eBay, iSold It is our 2006 Priority Magazine Small Business of the Year
by Reed Richardson
From her very first customer, Elise Wetzel suspected that her new business, iSold It, might turn out to be something special. “I remember he came in wanting to sell a pair of custom- built, Tony Lama cowboy boots, size 13AAA,” Wetzel says, chuckling. “I thought to myself ‘Who is ever going to buy these things?’” Still, she followed through on what she was convinced was a novel business idea, photographing the boots, writing up a product description, and posting a listing on the online auction site eBay. When the boots quickly sold for $65, he was hooked, she says. “Less than a week later, he was back, with even more stuff for us to sell for him, and, to this day, he still comes in.”
He’s not alone. In fact, since that first store opened in Pasadena, CA, in December of 2003, hundreds of thousands of other customers across Europe, North America, and Australia have joined him. And by the time you pick up this magazine, the iSold It franchise will be well on its way to generating $100 million in total system-wide sales for 2006 and will have already opened its 200th franchise store worldwide (currently, they open at a rate of one new store every three days). But setting aside these impressive numbers, perhaps the most encouraging harbinger of iSold It’s bright future comes from the mouths of its very own customers.
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“There are two things we still commonly hear people say when they come into our stores,” notes Rick Wetzel, who is Elise’s husband and iSold It’s chairman. “When an employee begins to explain the ‘drop your stuff off, we sell it on eBay’ concept, the customers often interrupt and say, ‘Oh, I already get it! What a great idea!’ Then, that is usually followed up with them saying, ‘Gee, I wish I had thought of this first!’ ”
OVER THE COURSE of a year, we here at Priority interact with hundreds of small businesses, sharing their stories so that others can learn from their mistakes and profit from their successes. However, when it comes time to bestow our magazine’s Small Business of the Year Award, we look for those entrepreneurs that truly stand out, that have successfully combined passion and innovation with execution and results. So, in our previous issue, we put out a call for candidates and the nominations poured in from across the country.
The competition was indeed stiff, as you can see from reading about the other four Small Business of the Year Award finalists (see sidebar, opposite). These companies embody the best of what entrepreneurship is all about—taking an idea and making it soar—all the while celebrating the triumphs and enduring the occasional trip-ups that occur along the way.
But of all the small businesses we examined, iSold It’s fascinating story impressed our editorial staff and our publishing partners at Pitney Bowes more than any other. Its groundbreaking business model—an amalgam of a brick-and-mortar retail shop and an online consignment store—coupled with its astronomical growth these past two-and-a-half years made that company our clear choice. So, it is with great pride that we select iSold It as the well-deserved winner of The 2006 Priority Magazine Small Business of the Year Award.
See a need, fill a need
When Elise Wetzel took a sabbatical from her job as director of marketing at consumer goods giant Unilever in 2002, starting a small business was the last thing on her mind. Instead her focus for the next few years was going to be on her three-year-old daughter and two-year-old son. However, being a self-described Type A-personality with an MBA from Northwestern University’s Kellogg School of Management, it wasn’t long before Wetzel, then 36, found herself organizing a fundraising effort for a new playground at her children’s preschool.
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“Originally, the plan was to raise money by selling candy and gift wrap, but instead of buying something just to turn around and sell it, I suggested we clean out our closets and sell the stuff we already had on eBay,” Wetzel recalls. “And the thing about eBay is that you’re marketing your stuff to the entire country rather than just 20 or so people who might drive by your street and pay you two cents on the dollar at a rummage sale.”
Still, before Wetzel committed to spearheading this strategy, she decided to test it out herself. “I’d never sold on eBay before, so I tried it and I couldn’t believe how much work it was,” she says. “I had to borrow a digital camera, come up with details about the product, post the information on the website, and then, once the item sold, pack it up and ship it.”
Confronted with the prospect of multiplying this hassle by 160 households, the business manager in Wetzel quickly took over, and she soon started shopping for someone to outsource this task to. “Certainly there’s got to be a way to facilitate this,” she remembers thinking, but when the search came up empty, something clicked. “I definitely describe it as an ‘Aha!’ moment,” she says. “I thought of all the non-profits, businesses, and individuals who could gain so much from this type of service,” she recalls. “There was such a need for this.”
“Do it Right” from the start
Right away, Elise’s husband, Rick, recognized the vast growth potential in Elise’s idea. And with an MBA of his own and an extensive background in strategic marketing—for seven years, he ran Nestle’s $400 million Friskies business—Rick knows whereof he speaks. Plus, there’s his almost unmatched understanding of how to take a thriving business and franchise it, something born out of his own entrepreneurial success—the wildly successful Wetzel’s Pretzels brand, which he co-founded in 1994. That company, where Wetzel still maintains the role of president, now has over 250 locations worldwide.
“Rick really encouraged me to go try it, and from the very beginning he said I might have the foundation for a great franchise,” Elise says. “So we decided to ‘do it right’ from the start, which meant really investing upfront in marketing, in-store graphics, developing a catchy logo, all with an eye toward making the store work not only in Pasadena, but anywhere in the country.” And as his wife was busy setting up that first store in the fall of 2003, Rick says, “I began getting franchise documents drawn up and ready, just in case.” Little did they know how soon they would need them.
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The “Jelly Belly” Moment
After factoring in the costs of overhead and the labor-intensive nature of listing each item on eBay (each product takes about one hour of time), the Wetzels settled upon a sales commission of 30 percent, above and beyond eBay’s own transaction fees and charges for payment processing. (As a result, the average iSold It product, which today typically sells for around $100 on eBay, will net the original owner roughly $63. For big-ticket items, though, iSold It’s commission works on a sliding scale, taking 30 percent of the sales price up to $500 but only 20 percent on the remaining amount above that. And out of recognition of iSold It’s charitable roots, the Wetzels put in place a policy that lets sellers easily divert their proceeds to the charity of their choice. While franchisees can independently set their sales commission rates, all of them still adhere to the charitable giving policy.)
By early January 2004, word about the store had swept through Pasadena, Elise recalls, and business started booming. “Some days I wanted to lock the doors and just say, ‘No more merchandise allowed in!’” she jokes. Not long after, the media started calling. First, CNN did a story about the store, which increased traffic into the store even more. But when USA Today put a lengthy feature about iSold It on the cover of its Money section, people all over the country were suddenly introduced to Elise’s idea.
“That USA Today story was what I call our Jelly Belly moment,” Rick says, referring to the gourmet jellybean company that experienced explosive growth in the 1980s after then President Ronald Reagan raved about its products to the media. Almost immediately after the article ran, many serious franchise offers started rolling in. (Today, iSold It gets as many as 50 franchise inquiries a day.) “[That story] cracked it wide open for us,” he says. “It gave us a momentum that we’ve never really relinquished.”
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Tiger by the Tail
That momentum soon took its toll on both Wetzels, however. “It was quickly becoming more than I could handle,” Elise acknowledges. And, ironically, for someone who had stopped working specifically to spend more time raising her children, she now found her time increasingly consumed by her small business. Rick, too, found himself torn between his pretzel business and his wife’s booming new enterprise. “Pretty early on we realized we had a tiger by the tail,” Rick says. “That’s when I started looking for some sort of partner to light this thing up and I thought that there were a lot of synergies between iSold It and the packand- ship business—even the facilities look similar.”
So, in May of 2004, only six months after opening the first iSold It store, Rick called up Ken Sully, who had helped grow the Mailboxes, Etc. franchise to more than 3,000 locations across 47 countries worldwide. Living in San Diego at the time, Sully, now 56, says he immediately became interested in applying his experience to building out iSold It into an international presence. “As Rick said, I’ve ‘been to the top of the mountain before’ and I know what it takes for a business to be scalable,” Sully recalls. “Rick was so just so excited and so contagious, I said yes within a couple of weeks, right around the time they opened their first franchise store.”
When Sully officially came aboard as iSold It’s new president and CEO in July 2004 (Rick took over the post of chairman, while Elise maintains an advisory role with the company), he set about building a franchise infrastructure that could keep pace with the phenomenal interest in the idea. A signature piece of this is iSold It’s “store-in-a-box” concept. “The goal is after the franchise paperwork is signed and the site selection process is complete, we get our franchisees up and running as quickly as possible,” Sully explains. “So, our corporate team, with some subcontracting, has developed complete, pre-packaged material kits that show up at the location with everything that franchise needs. We can take the location from bare sheetrock to open for business in two days. There’s no need for them [the franchisees] to focus on trying to put all the different parts together themselves.”
By standardizing and simplifying the franchise start-up process, Rick explains that the “store-in-a-box” concept achieves two goals critical to maintaining iSold It’s continued growth. “Number one, it reinforces our brand, giving every store a con- sistency of look and execution,” he says. “Second, it keeps costs low, which, in turn, means the threshold for buying a franchise is lower, as well.” Currently, franchisees pay only $85,500 for a fully operational store, plus working capital. This has encouraged many investors to buy the rights to open multiple stores and, as a result, more than 900 iSold It franchises are currently under contract worldwide.
Cater to Your Customers, Protect Your Partners
The relationship between iSold It and eBay is unquestionably symbiotic; they both help the other succeed. So, perhaps it’s no surprise that Sully has cultivated strong personal ties with the executives there. “I talk daily with Bill Cobb (eBay’s CEO) and I [instant message] Walt duFlock all the time,” he says. DuFlock, senior manager in charge of eBay’s Trading Assistant program, agrees, saying that eBay and iSold It have a very friendly, albeit informal, working relationship. “Anything we can do to help them find more sales opportunities, we’re happy to do it.”
Consequently, iSold It’s total sales, including franchises, have grown so quickly that the company now claims to be the nation’s top seller on eBay. (DuFlock demurred on citing actual sales rankings, but he did acknowledge that iSold It was “one of the biggest sellers” on his company’s website.)
To ensure its customers have a positive experience and to avoid weakening eBay’s overall brand, Sully says his company constantly works on maximizing overall sell-thru of items dropped off in their stores. “Most people typically bring in five to ten items at a time,” he says. “Our first step is to look at them and give the seller a pretty good idea of what they’re likely to get for each item, based on eBay’s historical sales data.”
This process, something Rick Wetzel calls “triage,” helps manage customer expectations up front and improves employee productivity. “Sometimes we have to say to customers, ‘It’s really not worth selling this, why not donate it to a charity,’ ” Wetzel explains. The customers usually appreciate this honesty, he says, while eBay likes that its site doesn’t lose any of its cachet because of unsold items.
Growing Up, Growing Out
Going forward, iSold It plans to open 3,000 stores in all 50 states, and expand incrementally overseas, primarily in countries where eBay has an established, mature marketplace. However, once his company reaches that level of market penetration, Sully says iSold It can still be an engine for tremendous sales growth. “Although there are over 200 million users registered on eBay worldwide, only 8 percent of them have ever sold something on eBay,” he notes. “We haven’t even scratched the surface.”
And just like at Mailboxes, Etc., Sully sees the iSold It storefront as a platform for a whole range of additional services beyond consumer-to-consumer auction sales. “eBay is a milewide and an inch-deep,” he says. “In other words, it’s not good for selling a lot of the same items.” To address the lucrative businessto- business and business-to-consumer market, which includes bulk lots of similar items like office furniture and technology equipment, Sully says he’s starting trials of more traditional consignment models in some franchises. In addition, iSold It is also experimenting with flat fee-based, rather than commission-based, services for sales of large items like cars and even real estate.
To further speed expansion of new programs, says Rick Wetzel, last year iSold It brought in $7.25 million in venture capital. “We’re investing heavily in infrastructure, new technologies, and trial marketing to strap on even more in-store growth. The amount of services we can bolt on really is endless,” he says. He lists entertainment ticket reselling, digital photography printing, cash-now pawn services, and a trade-in, trade-up technology exchange program with Best Buy among several ideas the company is testing.
“Ultimately, wherever we go with it, we’ll run it to be profitable,” says Wetzel, who, along with his wife, remains heavily involved in the marketing of the company, not to mention the obvious emotional investment the couple has in iSold It’s fantastic journey. “It’s something so different and so new and so special,” Sully adds, summing up everyone’s mood, “it becomes exciting to feel like you’re changing the world.
