Not to mention the fact that employees need to be extra careful about storing salacious materials. When this writer visited the company's new facilities just north of Pittsburgh, an open box in a well-traveled hallway revealed a provocative promotional flyer for some of the product -- much to the embarrassment of staffers who had intended to present a more family-friendly face. Still, Home Theater Magazine's Chiarella asserts that selling prurient material doesn't have to be a black mark for the company. "As long as they police it fastidiously and make sure kids aren't getting it, then people really have no right to complain," he says.
Of far greater concern to Rix and Ross is their remaining competition, some of it ailing (Express.com and Buy .com) and some seemingly stronger than ever (Amazon.com). Ross sees no reason why the DVD market can't support more than one E-tailer. "Everybody seems to be forecasting against capitalism, saying it can only be a monopoly," he says. "But I don't really think you can squash every competitor, and I don't think you have to."
Christopher Caggiano is executive editor of Inc. Technology.
Ones to Watch
The Inc. Technology staff considered quite a few companies for our "realbusiness.com" package. Most of the candidates ended up on the cutting-room floor. Some hadn't been around long enough; others had great concepts that were yet to be proven. But a few companies (all founded in 1999) are starting with the right foundations in place. Here are some that we'll be keeping an eye on.
eKnitting.com, Berkeley, Calif.
What it does: Sells yarn and knitting supplies to consumers.
Founder: First-time entrepreneur Sarah Veit, a 28-year-old Stanford M.B.A. and inveterate knitter.
How it makes money: Veit sells only the good stuff, from high-quality wools and cottons to more exotic silks and alpacas. "I have no desire to go head-to-head with Wal-Mart," she says.
What makes it "real": A targeted niche market and tightly controlled finances. Veit conserved her precious marketing resources by attending the few trade shows that knitters flock to and advertising in the magazines she knew they read.
Investment: A $150,000 SBA loan plus $350,000 in personal, family, and angel funding.
Revenues: Projecting $500,000 for the fiscal year ending June 30, 2001.
Profitability ETA: Profitable as of December 2000.
Number of employees: 3.
Why the jury's still out: The company sells high-end products in a targeted niche. But it's simply too soon to tell whether eKnitting has its market sewn up.
Tutor.com, New York City
What it does: Helps students find online or in-person tutoring in 400 subjects.
Founder: CEO George Cigale, previously vice-president of the Princeton Review.
How it makes money: Independent tutors charge students fees averaging $30 an hour; the company takes 10% of each transaction plus $1.
What makes it "real": The company struck partnerships with brands like the Princeton Review and Scholastic Inc. to attract students and tutors. By early 2001, with no advertising, Tutor.com had registered 25,000 tutors and averaged 20,000 tutoring transactions a month. The company plans to expand its reach by offering real-time homework help, services for adult learners, and licensing deals for school districts.
Investment: $16 million in venture capital in 1999 and 2000; projecting another $15-million round late in 2001.
Revenues: Less than $100,000 for 2000; shooting for $5 million in 2001 as new partnerships and expanded services take effect.
Profitability ETA: Fourth quarter of 2001.
Number of employees: 30.
Why the jury's still out: No serious revenues for 2000.
MrSwap.com, San Francisco
What it does: Gives consumers a forum for swapping used CDs, DVDs, and video games.
Founders: Patrick Ford, a marketing veteran who worked at Microsoft and several Internet companies; Robert Kohler, a lawyer and veteran company founder.
How it makes money: By charging swap recipients a "shipping and handling" fee for each transaction ($2.99 per CD, $4.99 per DVD, and so forth). The company also sells new merchandise for swappers who can't find the used items they're looking for.
What makes it "real": Among numerous Web-based swapping sites, MrSwap has a model that works. Its customers earn "SwapPoints" for the items they list, which they in turn use to "buy" the items they desire. Ford and Kohler have outsourced almost everything, including the fulfillment of the shipping and postage materials customers use to send items to one another.
Investment: $750,000 in seed financing; $3.4 million in venture capital.
Revenues: Under $1 million in 2000.
Profitability ETA: November 2001.
Number of employees: 15.
Why the jury's still out: The swap concept has a catch-22: In order for the swapping mechanism to work, the company has to attract a critical mass of users. But to attract those users, it needs to have sufficient swappable merchandise.
With no fanfare and little venture money, the companies profiled here are delivering real stuff to paying customers and making a buck in the process. There may not be any "new rules," but there are rules, and we suspect every one of them will look familiar.
DVD Empire: The Bootstrapper
SitStay.com: The Mom-and-Pop
Shoebuy.com: The Scorekeepers
Accuship.com: The Traditionalist
Fashionmall.com: The Conservative
Healthcommunities.com: The Underwriter
Commentary
E-tailing
Intermediaries
The Markets
Please e-mail your comments to editors@inc.com.
