Executive Briefings

When a Backyard Business Blossoms, a Global Problem Solver is Needed

E-tailer Smartphone Experts started out distributing its accessories from the home of its senior vice president. Then sales took off-and the supply chain got more complex.

It began with a storage shed in Diana Kingree's backyard in Inverness, Fla. - hardly the trappings of a complex supply chain. But Smartphone Experts quickly outgrew those modest quarters, taking its logistics provider along for the ride.

Smartphone started up business in 2002, as an online retailer of screen protectors and other items for mobile phones. A year later, it latched onto the then-new Treo phone and began selling a variety of accessories, including chargers and headsets for that popular model. Today, Smartphone sells nearly 5,000 individual SKUs for Treos, iPhones and BlackBerrys, ships an average of 5,000 packages each week out of two warehouses and books revenue of $1.6m a month, including 1,000 units to Canada, Europe and Australia.

But before all that happened, there was the business of the shed. It was a response to Smartphone's initial reliance on an independent fulfillment company based in Ohio. The immediate success of the Treo accessories was causing customer service problems for Smartphone founder and chief executive officer Marcus Adolfsson. That's when he hired Kingree as his senior vice president, and sought her advice on a solution.

"We wanted 100-percent customer satisfaction and that company wasn't giving it to us," recalls Kingree. "I said, 'I can do this in my backyard.'" She offered up her shed for the storage and staging of inventory.

The timing of the move turned out to be fortuitous. Two months later, the fulfillment company went out of business and left its remaining clients in the lurch. By that time, Smartphone was off and running. Things were moving so quickly, in fact, that the company caught the attention of Rich Strittmatter, its local UPS driver.

When the operation grew to three sheds, taking up Kingree's entire yard, Strittmatter hooked Smartphone up with UPS account manager Rob Fleischer. That began a business relationship that deepened as the company's sales soared.

At the outset, Fleischer wasn't entirely sold on the customer's prospects. "We were told it was going to be a really big account," he says. "In my almost 30 years [in the business], you hear that story a lot. Smartphone is the only one that actually outdid that statement."

Kingree has similar memories of the initial encounter. "UPS officials came out to see us," she says. "When Marcus and I sat down with them and told them our goals, they said, 'Sure, we'll work with you. But we don't think you'll be doing much business.'

"We were giving them this lofty goal where we were going to be at a certain point," she admits. When product began spilling into Kingree's garage and house, UPS realized that Smartphone wasn't just dreaming about its market potential.

Nevertheless, UPS took a chance on Smartphone from the start, offering special rates, early-morning delivery of inbound product via a dedicated trailer, and the staging of a pup trailer at the customer's premises for outbound shipments. The latter is dropped in the morning and retrieved by UPS that evening. Early delivery of inbound allows Smartphone to get a head start on processing the day's orders, and the on-site trailer helped to speed up the loading process. Such perks proved essential to Smartphone's keeping a promise of 24-hour delivery for virtually every order within the U.S.

Out of the Sheds

Smartphone outgrew Kingree's backyard after about a year in the sheds. Once again, Strittmatter stepped up. Servicing his usual route, he noticed a vacancy in a large office building, deeming it ideal for Smartphone's needs. Within a week of Kingree's visit to the property, the company had moved in.

"It's not unusual for a driver to talk to the customer and ask about its business," says Charlie Covert, UPS's vice president of customer solutions for the high-tech sector. "The better we understand our customer's business strategy, the more effectively we can help it to execute that strategy."

For smaller companies without internal resources or the desire to invest heavily in that end of the supply chain, "we can basically be a logistics department," Covert says.

UPS devised numerous ways for Smartphone to cut costs, providing the right boxes for outbound shipments, and attending to the inbound as well. The company manufactures much of its product in China, where UPS offered to set up accounts with vendors, some of which were using other delivery services. "That was more beneficial for us because they were shipping on our account," says Kingree. "It means we get better rates." All of Smartphone's inbound business is handled by UPS today, she adds.

The company ties its own systems to UPS's WorldShip software, allowing for the simultaneous processing of orders, invoices and shipment information. The shipping label and invoice are printed on one page at the time an order is processed. "You don't have to print invoices and labels separately and then fear that you've mixed them up," Kingree says. "With a business that moves as quickly as ours does, anywhere you can make things more efficient is critical."

Using UPS OnLine tools that are integrated directly into Smartphone's website, customers can choose the type of delivery that suits them best. Options range from next-day air to standard UPS Ground. Even so, a large percentage of Smartphone's tech-savvy customer base want their accessories as quickly as possible. Fast, reliable delivery is especially crucial following the release of a new model of mobile phone, says Kingree.

Smartphone also needs a way to track shipments. Status information is provided by UPS's standard tracking system and available to customers on Smartphone's own website. Constant updates allow it to advise of shipment delays due to weather or other conditions, by way of exception reporting. If an item is out of stock, Smartphone can provide an estimated time of arrival on its website. The company also relays information by phone upon customer request.

Most shipments arrive at destination as promised. According to Kingree, UPS has helped Smartphone to achieve an on-time record of between 98.9 and 99.5 percent. The carrier issues periodic report cards on its own performance.

UPS also helps Smartphone with its returns program, a particularly crucial aspect of customer service for online retailers. UPS cites a recent poll by Newgistics and Harris Interactive, who found that 69 percent of online or catalog shoppers are unlikely to use a retailer again if they find its returns process to be inconvenient. For its part, in the event of a return or exchange, Smartphone e-mails the customer a UPS return label which can be printed out and attached to the envelope or box. UPS tracks the shipment all the way back to the seller.

How to Keep a Customer

Smartphone's tight control over returns has contributed to the retention of at least one major customer. Several years back, a government agency wanted to exchange a large order. Its needs were met quickly and without incident. Says Kingree: "Just knowing that it's easy to return something if they want to makes customers feel good about ordering from us."

Covert says Smartphone needs a shipping program that can adjust to changes in volume throughout the year. Things get especially lively following the release of a new model of cell phone, causing shipments to peak over a period of four to six weeks. According to Covert, consumers purchase an average of 1.7 accessories per phone, with much of that business generated soon after they acquire the model. The back-to-school period is another time of heightened activity.

Smartphone's business model has grown significantly more complex over the past seven years. Today, it offers product in three channels: directly on its own website, through private-label online stores for which it performs fulfillment, and through a Web store that is accessed through other sellers' sites. Some of the stores feature user forums and blogs for shoppers, while others are essentially depots devoted to particular products.

Smartphone also maintains its own "experts store" where the consumer can research and select a device. All sales come with a 30-day money-back guarantee.

One thing Smartphone doesn't do is sell its wares in brick-and-mortar retail outlets. Kingree says the company has learned from the experience of big-box retailers, who suffer from excessive overhead, stolen product and high employee turnover.

Smartphone's sales continue to grow, even in a dismal retail economy. Speaking in late January, Kingree was looking forward to a slew of new-product announcements by phone sellers at the annual Consumer Electronics Show in Las Vegas. The company's recent performance can be tied to the release of a new line of BlackBerrys, which Smartphone began supporting last year. The constant flow of new devices from multiple manufacturers has propelled Smartphone onto the Inc. 500 list of fastest-growing private companies in the U.S.

"Our business isn't based on a particular product," Kingree says. "It's based on the issuing of phones." She sees no slackening of that activity in the coming months.

Looking ahead, Smartphone is considering the launch of a wholesale operation and a possible expansion into other regions of the U.S. and world. It is thinking about creating online stores in Australia and Canada, the latter of which is already supported by UPS. Kingree says the company hopes to include UPS in any international expansion plans.

Fleischer says UPS will continue to keep pace with Smartphone's growth. The account has already been moved up to the manager level and could be elevated even higher. In addition, UPS might increase the size of the trailer that it provides the company for outbound orders, and expand its tracking and shipment-management software to cover more Smartphone employees. "The way it looks," Fleischer says, "they're going to continue to grow about 20 percent [per year]."

It's a situation that UPS didn't exactly foresee, back in the days of the shed. "We never dreamed that they would get that big," says Fleischer. "They're breaking records every week."

RESOURCE LINK:
UPS, www.ups.com

It began with a storage shed in Diana Kingree's backyard in Inverness, Fla. - hardly the trappings of a complex supply chain. But Smartphone Experts quickly outgrew those modest quarters, taking its logistics provider along for the ride.

Smartphone started up business in 2002, as an online retailer of screen protectors and other items for mobile phones. A year later, it latched onto the then-new Treo phone and began selling a variety of accessories, including chargers and headsets for that popular model. Today, Smartphone sells nearly 5,000 individual SKUs for Treos, iPhones and BlackBerrys, ships an average of 5,000 packages each week out of two warehouses and books revenue of $1.6m a month, including 1,000 units to Canada, Europe and Australia.

But before all that happened, there was the business of the shed. It was a response to Smartphone's initial reliance on an independent fulfillment company based in Ohio. The immediate success of the Treo accessories was causing customer service problems for Smartphone founder and chief executive officer Marcus Adolfsson. That's when he hired Kingree as his senior vice president, and sought her advice on a solution.

"We wanted 100-percent customer satisfaction and that company wasn't giving it to us," recalls Kingree. "I said, 'I can do this in my backyard.'" She offered up her shed for the storage and staging of inventory.

The timing of the move turned out to be fortuitous. Two months later, the fulfillment company went out of business and left its remaining clients in the lurch. By that time, Smartphone was off and running. Things were moving so quickly, in fact, that the company caught the attention of Rich Strittmatter, its local UPS driver.

When the operation grew to three sheds, taking up Kingree's entire yard, Strittmatter hooked Smartphone up with UPS account manager Rob Fleischer. That began a business relationship that deepened as the company's sales soared.

At the outset, Fleischer wasn't entirely sold on the customer's prospects. "We were told it was going to be a really big account," he says. "In my almost 30 years [in the business], you hear that story a lot. Smartphone is the only one that actually outdid that statement."

Kingree has similar memories of the initial encounter. "UPS officials came out to see us," she says. "When Marcus and I sat down with them and told them our goals, they said, 'Sure, we'll work with you. But we don't think you'll be doing much business.'

"We were giving them this lofty goal where we were going to be at a certain point," she admits. When product began spilling into Kingree's garage and house, UPS realized that Smartphone wasn't just dreaming about its market potential.

Nevertheless, UPS took a chance on Smartphone from the start, offering special rates, early-morning delivery of inbound product via a dedicated trailer, and the staging of a pup trailer at the customer's premises for outbound shipments. The latter is dropped in the morning and retrieved by UPS that evening. Early delivery of inbound allows Smartphone to get a head start on processing the day's orders, and the on-site trailer helped to speed up the loading process. Such perks proved essential to Smartphone's keeping a promise of 24-hour delivery for virtually every order within the U.S.

Out of the Sheds

Smartphone outgrew Kingree's backyard after about a year in the sheds. Once again, Strittmatter stepped up. Servicing his usual route, he noticed a vacancy in a large office building, deeming it ideal for Smartphone's needs. Within a week of Kingree's visit to the property, the company had moved in.

"It's not unusual for a driver to talk to the customer and ask about its business," says Charlie Covert, UPS's vice president of customer solutions for the high-tech sector. "The better we understand our customer's business strategy, the more effectively we can help it to execute that strategy."

For smaller companies without internal resources or the desire to invest heavily in that end of the supply chain, "we can basically be a logistics department," Covert says.

UPS devised numerous ways for Smartphone to cut costs, providing the right boxes for outbound shipments, and attending to the inbound as well. The company manufactures much of its product in China, where UPS offered to set up accounts with vendors, some of which were using other delivery services. "That was more beneficial for us because they were shipping on our account," says Kingree. "It means we get better rates." All of Smartphone's inbound business is handled by UPS today, she adds.

The company ties its own systems to UPS's WorldShip software, allowing for the simultaneous processing of orders, invoices and shipment information. The shipping label and invoice are printed on one page at the time an order is processed. "You don't have to print invoices and labels separately and then fear that you've mixed them up," Kingree says. "With a business that moves as quickly as ours does, anywhere you can make things more efficient is critical."

Using UPS OnLine tools that are integrated directly into Smartphone's website, customers can choose the type of delivery that suits them best. Options range from next-day air to standard UPS Ground. Even so, a large percentage of Smartphone's tech-savvy customer base want their accessories as quickly as possible. Fast, reliable delivery is especially crucial following the release of a new model of mobile phone, says Kingree.

Smartphone also needs a way to track shipments. Status information is provided by UPS's standard tracking system and available to customers on Smartphone's own website. Constant updates allow it to advise of shipment delays due to weather or other conditions, by way of exception reporting. If an item is out of stock, Smartphone can provide an estimated time of arrival on its website. The company also relays information by phone upon customer request.

Most shipments arrive at destination as promised. According to Kingree, UPS has helped Smartphone to achieve an on-time record of between 98.9 and 99.5 percent. The carrier issues periodic report cards on its own performance.

UPS also helps Smartphone with its returns program, a particularly crucial aspect of customer service for online retailers. UPS cites a recent poll by Newgistics and Harris Interactive, who found that 69 percent of online or catalog shoppers are unlikely to use a retailer again if they find its returns process to be inconvenient. For its part, in the event of a return or exchange, Smartphone e-mails the customer a UPS return label which can be printed out and attached to the envelope or box. UPS tracks the shipment all the way back to the seller.

How to Keep a Customer

Smartphone's tight control over returns has contributed to the retention of at least one major customer. Several years back, a government agency wanted to exchange a large order. Its needs were met quickly and without incident. Says Kingree: "Just knowing that it's easy to return something if they want to makes customers feel good about ordering from us."

Covert says Smartphone needs a shipping program that can adjust to changes in volume throughout the year. Things get especially lively following the release of a new model of cell phone, causing shipments to peak over a period of four to six weeks. According to Covert, consumers purchase an average of 1.7 accessories per phone, with much of that business generated soon after they acquire the model. The back-to-school period is another time of heightened activity.

Smartphone's business model has grown significantly more complex over the past seven years. Today, it offers product in three channels: directly on its own website, through private-label online stores for which it performs fulfillment, and through a Web store that is accessed through other sellers' sites. Some of the stores feature user forums and blogs for shoppers, while others are essentially depots devoted to particular products.

Smartphone also maintains its own "experts store" where the consumer can research and select a device. All sales come with a 30-day money-back guarantee.

One thing Smartphone doesn't do is sell its wares in brick-and-mortar retail outlets. Kingree says the company has learned from the experience of big-box retailers, who suffer from excessive overhead, stolen product and high employee turnover.

Smartphone's sales continue to grow, even in a dismal retail economy. Speaking in late January, Kingree was looking forward to a slew of new-product announcements by phone sellers at the annual Consumer Electronics Show in Las Vegas. The company's recent performance can be tied to the release of a new line of BlackBerrys, which Smartphone began supporting last year. The constant flow of new devices from multiple manufacturers has propelled Smartphone onto the Inc. 500 list of fastest-growing private companies in the U.S.

"Our business isn't based on a particular product," Kingree says. "It's based on the issuing of phones." She sees no slackening of that activity in the coming months.

Looking ahead, Smartphone is considering the launch of a wholesale operation and a possible expansion into other regions of the U.S. and world. It is thinking about creating online stores in Australia and Canada, the latter of which is already supported by UPS. Kingree says the company hopes to include UPS in any international expansion plans.

Fleischer says UPS will continue to keep pace with Smartphone's growth. The account has already been moved up to the manager level and could be elevated even higher. In addition, UPS might increase the size of the trailer that it provides the company for outbound orders, and expand its tracking and shipment-management software to cover more Smartphone employees. "The way it looks," Fleischer says, "they're going to continue to grow about 20 percent [per year]."

It's a situation that UPS didn't exactly foresee, back in the days of the shed. "We never dreamed that they would get that big," says Fleischer. "They're breaking records every week."

RESOURCE LINK:
UPS, www.ups.com