"Anything you can think of is already being sold online,” says Jim McCarthy, CEO of Goldstar.com. But that didn’t stop him and his partners, Robert Graff and Rich Webster, from launching the online discount site for event tickets in 2002. What’s the secret to profitability in a vast world of discount online dealers?
“You have to make sure you understand that what you’re bringing to the marketplace is special,” McCarthy says. “And you should never underestimate the difficulty of everything you’re doing as an entrepreneur,” he adds, noting that he and his partners burned lots of shoe leather visiting the human resources departments of large corporations, asking them to send mass e-mails to employees offering half-price event tickets to concerts, comedy clubs, cultural performances and more. Doing so sometimes earned the fledgling company 1,000 new customers a day.
Today Goldstar.com has 2 million members. McCarthy thinks the company owes that success in large part to the fact that they stuck it out. “If you just keep at it, you’ll win out over all the people who don’t,” he says.
Planning and testing go a long way, too, especially when it comes to the highly competitive world of e-commerce. McCarthy says it’s critical to make sure your concept works before you invest loads of cash in it. For Goldstar.com, that meant the three partners did most of the work themselves the first years they were in business. (They started out with only $1,000 in cash.) And they garnered help from friends with the realistic approach of “Hey, this might not work out, but if it does, we’ll share the benefits.”
McCarthy says to be careful of spending loads of money on marketing or hiring employees until you really can afford it. And realize that even if it’s an online business, you may still have to hit the streets to get the word out, targeting corporations that might benefit from your offerings.
And while Goldstar.com predates the concept of the “daily deal” site, McCarthy realizes it’s easy to get thrown on that heap as a discount retailer. As a result, Goldstar.com has distinguished itself not just as a site where members can buy half-price event tickets but as a genuine source of finding something to do. He also says it’s important when running an online business to make the experience hassle-free, to provide superior customer support (and that means responding to customer inquiries in a matter of minutes, not days), and making sure you deliver your product promptly.
Goldstar.com CEO Jim McCarthy’s Tips for Daily Dealing
Think promotion, not profit. The reality is you’re using the daily deal site for the sake of promotion, not to make money, because you’ll have to offer your product or service at a deeply discounted rate. The question you must ask yourself is, Will that promotion garner you enough new business to pay for the money you lose offering the daily deal?
Control the number of products you offer and the timing of the sales. McCarthy says it’s critical to offer as few products as possible. If you can promote your business selling 400 watches at discount instead of 2,000, then do it. And if you can make the sales during your business’s slow season, do that, too.
Negotiate revenue share. Despite what you might have heard about daily deal sites requiring 50 percent revenue share, McCarthy says, “It’s really hard to make a case for 50 percent these days.” He advises negotiating that rate down to 20 percent if you can.