The Art of Reinvention: One Internet Pioneer's Comeback from the Dot-Com Bust
November 24, 2014 | Focus on Women
By Lisa Wirthman
As one of the first women entrepreneurs to lead an Internet company, Julie Wainwright helped pioneer e-commerce. She helmed two e-commerce companies before the dot-com bust and spent the next decade sharing her expertise with multiple technology companies and consultancies.
Today, Wainwright is using her lessons learned to forge her own successful path with TheRealReal—an online reseller of authenticated, pre-owned luxury goods, on track to reach sales of $100 million in its third year.
Look for Precedents
Wainwright’s first experience with online shopping was buying a book from Amazon in 1997. One business lesson she always follows is to look for precedents.
In the case of e-commerce, she saw the booming direct-mail catalog business as a sign that people were willing to shop outside of brick-and-mortar stores. “The Internet was the best, most amazing direct-mail catalog ever,” Wainwright said.
Compete with Yourself
That same year, Wainwright was hired as CEO of Reel.com. The first company to sell VHS videotapes and DVDs online, the company’s long-term focus was on streaming video on demand. But when Reel.com was sold to Hollywood Entertainment Corp. in 1998, the new owner saw online video sales as competitors to its physical stores—and eventually shut the company down. “They killed it out of a lack of vision,” Wainwright said.
Hollywood Entertainment was unable to compete as the market evolved and eventually went out of business. “If you don’t compete with yourself and reinvent yourself, someone else will challenge you,” Wainwright said.
Have a Sound Business Plan
Hoping for a different outcome, Wainwright took over as CEO of Pets.com in 1999. She staked a long-term claim on the online pet category with a major investment in branding: Pets.com’s infamous sock puppet even had a place in the Macy’s Thanksgiving Day Parade.
Wainwright also kept the competition close at hand, insisting that Amazon become a strategic investor before taking the job. But the cost of acquiring new customers was too high. Pet food was heavy to ship, had low profit margins, and was convenient to pick up at physical stores. “The infrastructure cost of building a website in the Internet’s early days was also high,” Wainwright said.
When the dot-com bubble burst in 2000, she shut the struggling company down and returned funds to shareholders.
Putting It All Together
For the next decade, Wainwright worked at a number of technology companies and consultancies, but in 2011 she struck out on her own for the first time with The RealReal, which resells pre-owned designer goods, including clothing, jewelry and art, that are authenticated by in-house specialists. Consignors get up to 70 percent of the selling price and are offered free pick-ups or free packing and shipping at any FedEx office.
Wainwright is now bringing all of her e-commerce experience to bear on her new business:
1. Look for signs of success. The market for luxury goods is hot: The number of luxury shoppers worldwide has tripled over the past 20 years and is expected to grow to 400 million by 2020, according to a recent study by Bain & Company. In addition, the explosion of a sharing economy that promotes collaborative consumption is taking the stigma out of second-hand.
2. Offer unique value. Wainwright also competes with herself and constantly looks for ways to offer value to customers. “E-commerce giants such as Amazon and eBay would have to change their business models to provide the same service of collecting and authenticating goods,” said Wainwright, while auction houses such as Sotheby’s and Christie’s typically offer higher-end products.
“There’s a huge opportunity below $100,000 in luxury goods,” she said. “I want to take the top off eBay and the bottom off Sotheby’s and Christie’s.”
3. Have the right business model. To stay competitive, Wainwright also developed a business model in which the cost of acquiring customers is more efficient, thanks to a high repeat rate for buyers and sellers. About 60 percent of customers and 65 percent of consignors—ranging from professionals to socialites to celebrities—buy or sell goods every three months. “We don’t have a one-and-done situation,” Wainwright said. “We have personal relationships with our sellers.”
One challenge will be a recently announced partnership between eBay and Sotheby’s enabling the auction house to extend its reach into the same middle market targeted by The RealReal. Christie’s is also targeting the online luxury business with a $50 million investment in more Internet auctions, the New York Times reported.
With 3 million members buying and more than 500,000 luxury items sold to date, it’s clear Wainwright has a more viable business model this time around. As e-commerce continues to evolve, her next challenge will be continuing to leverage her lessons learned to stay ahead of the pack as the market continues to evolve.
Lisa Wirthman writes about business, sustainability, public policy, and women’s issues. Her work has been published in The Atlantic.com, USA Today, U.S. News & World Report, Fast Company, Investor’s Business Daily, the Denver Post and the Denver Business Journal.
Originally published on Northwestern MutualVoice on Forbes.com.