Best of the Small Business Web: House of the Rising Sun
BY Leigh Buchanan
At Daddy's Junky Music, dynamic online auctions turn aging inventory into hefty revenues.
Company: Daddy's Junky Music Inc. Revenues: $33 million Web address: www.rockauction.com Site launch cost: $10,000 Current technology profile: OpenSite Auctions, C2net Stronghold, Verisign OnSite, Sun Sparc server, DigitalNATION, Cyber Cash Why we love it: Dynamic on-line auctions turn aging inventory into hefty revenues Categories of success: ROI & Innovation
Two years ago, the rock group Limp Bizkit was an innovative but obscure performer; today it's so mainstream that it seems positively déclassé. The same could be said of on-line auctions. But in December 1997, when no one knew from eBay, Daddy's Junky Music began putting its own electric guitars and other musical instruments on the digital block. Today revenues from the Manchester, N.H., company's on-line auction division, RockAuction.com, average $30,000 a week.
Daddy's birth legend bears the slightly disreputable cast of a Seattle garage band. Its founder, Fred Bramante, was playing rock in college in the late '60s when he heard about a guy who was selling his guitar to raise bail money. Bramante, who in addition to his entrepreneurial activities has upon occasion sought the governorship of New Hampshire, bought the instrument, shined it up, and sold it for a profit. He then continued buying and selling used instruments part-time until 1972, when he took on a partner and leased a storefront in Norwalk, Conn., that had been vacant for 30 years. Inspired by the broken glass and dead pigeons on the floor, Bramante's young son christened the new business "Daddy's Junky Music." The name stuck. How could it not?
Although Daddy's origins are in rock, it is very much a business -- a business that suffered from having too much cash trapped in slow-moving inventory. "A significant part of our inventory is essentially computers: microprocessor-based keyboards and synthesizers," says Robert Timmins, the company's first vice-president of E-commerce. "That kind of thing gets obsolete very quickly." For a while the company ran a liquidation center out of its Boston store, but it required a lot of hard selling from a knowledgeable staff, and not many customers showed up.
Then in 1982, Bramante began staging live auctions as grand-opening promotions for new stores. Those events attracted about 200 bidders each and proved far more efficient at moving Daddy's tired, poor, and huddled inventory than the liquidation centers did. "My motto is 'When things get cheap, the cheap get things," says Bramante, who fondly recalls his own first exposure to "auction fever," at an open-air affair in 1970. "A stuffed moose head came up for bid," he says. "It started at $20, and no one bid. The auctioneer lowered it to $10, and still no one bid. The auctioneer pleaded with the crowd to offer anything. I bid $1. He immediately said, 'Sold, and don't bring it back!' I was enthralled."
LEIGH BUCHANAN is an editor at large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan