Paula’s Choice LLC is yet another of those success stories that begins with one person mining a market opportunity through a combination of quality products and a dynamic personality. But, as with so many entrepreneurial ventures, there comes a time when sales growth dictates a new approach to the business.
Launched in 1995, Paula’s Choice is the creation of Paula Begoun, an author and consumer advocate for skin care and beauty products. Her 20 books include Don’t Go to the Cosmetic Counter Without Me and The Original Beauty Bible. Begoun parlayed her success as a media celebrity into a line of specially formulated beauty products, sold over the internet.
In its early days, Paula’s Choice was content to fulfill orders out of a single warehouse at its headquarters near Seattle, Wash. Two things happened to force a reassessment of that plan: rapid sales growth, and the company’s purchase by Bertram Capital in December 2012.
The timing of the latter event was fortuitous. Bertram Capital arrived on the scene with its substantial resources just when John Hughes, director of operations for Paula’s Choice, was laying plans for a second distribution center, this one on the East Coast. The company had built up a substantial number of customers in the eastern half of the U.S., but they were being subjected to delivery times of four to five days, versus the two-day window that Paula’s Choice considered ideal.
Hughes knew the company couldn’t run its own fulfillment operation that far from headquarters. “I didn’t have the resources available to me during the search phase to do that,” he says. In any case, “I’m comfortable with using a third party – letting people with expertise handle stuff like that.”
He had actually begun the search for a new D.C. location more than a year before the Bertram Capital acquisition. He had gone through the usual slew of centrally placed candidates in the Midwest and East – Louisville, Ky.; Indianapolis, Ind.; Memphis, Tenn.; and Columbus, Ohio. But he had also spoken with acquaintances who were familiar with the services of an end-to-end fulfillment services provider called GSI Commerce.
The initials stood for Global Sports Interactive, signifying the vendor’s initial focus on the sporting goods market. But a few years earlier, GSI had purchased Accretive Commerce, whose customer base included such major merchandising names as American Eagle Outfitters, L.L. Bean and Godiva Chocolatier. In the process, it had become a specialist in multiple branches of retail distribution.
Enter eBay Enterprise
Around the time that Paula’s Choice set its sites on GSI, the fulfillment provider was acquired by a company whose name carried a much higher degree of public recognition: eBay. The popular online auction and e-commerce site was looking to broaden its menu to service commercial accounts. In June of 2013, GSI was rebranded as eBay Enterprise.
Hughes was attracted by eBay Enterprise’s distribution facility in Shepherdsville, Ky., which seemed ideally placed to reach key accounts throughout the eastern U.S. “It was a fairly new building,” recalls Hughes. “I liked the idea of growing with it.”
Which isn’t to say that he jumped in quickly. Working through the technical details of the new arrangement and going live in the new facility took about a year. Having racked up considerable experience in the distribution business, Hughes was careful to leave enough time to do the job properly.
He knew that the company’s new fulfillment partner wouldn’t precisely mirror its in-house procedures. “It was definitely a different scenario,” he says. “We wanted to educate internally on the customer-service side.”
Even today, there are some key distinctions between the two locations. For shipping product out of Seattle, Paula’s Choice tends to favor the U.S. Postal Service, while eBay Enterprise in Kentucky relies primarily on UPS. (It helps, perhaps, that Louisville is the big parcel carrier’s worldwide air hub, and is just 21 miles from Shepherdsville.) Some old-time customers were bound to notice the difference in service, “but we were very careful to make it look as seamless as possible.”
In any case, says Hughes, sales growth at Paula’s Choice has taken off so rapidly that many new customers in the eastern U.S. are accustomed only to receiving orders from Kentucky. And they’re mostly getting the two-day service that the company considers vital to its reputation.
“Paula’s Choice is very concerned about the consumer experience for East Coast clients,” says Tom Barone, head of omnichannel operations in North America for eBay Enterprise.
The service provided by eBay Enterprise is strictly direct-to-consumer. It calls on the vendor’s full menu of related tasks, including receiving, storage, pick and pack, and returns. It also manages date codes and monitors expired products.
The Shepherdsville facility, which serves multiple clients, consists of nearly 800,000 square feet of floor and mezzanine space. It uses a combination of pick-to-light, batch and cart picking, depending on the needs of the customer. The location deals with a large number of high-end brands, providing suitable packaging when necessary, Barone says.
Hughes says Paula’s Choice has had no problem achieving visibility of inventory at the two locations, despite their being operated by different entities. Data feeds are being transmitted multiple times a day.
The decision to partner with eBay Enterprise allowed Paula’s Choice to scale up operations while improving customer service, Hughes says. “The biggest thing was knowing someone who has the core competence and ability to ramp up pretty rapidly.”
Hughes retains the ability to swap product between the two fulfillment centers when necessary. The official dividing point is the Mississippi River, but he’ll override that rule in response to shifting demand or seasonal requirements.
Paula’s Choice relies on eBay Enterprise solely for e-commerce orders. Hughes says the company has gradually been increasing its shipments to brick-and-mortar retailers, in addition to collaborating with a handful of resellers, including Beauty.com, SkinDirect.com and Pharmaca.com (the last of which also has physical stores). But all of that business continues to be handled out of the Seattle facility, as does customer service for all regions.
Back in the Seattle area, Paula’s Choice is in the process of moving its warehouse from Renton to Kent, two neighboring communities located just south of the city. The transfer involves an expansion of square footage and the implementation of a new warehouse-management system. While Paula’s Choice will be operating the new facility, it doesn’t own the building, Hughes says.
The two D.C.s are adequate for serving the company’s near-term needs, he says, although the opening of another facility “is something we’re definitely thinking about.” Barone says eBay Enterprise could draw on its fulfillment operation in Mississauga, Ont., if Paula’s Choice wants to expand in Canada.
“We’re going to have to monitor our growth and company goals,” says Hughes. “Get a sense of how that plays out.”
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