Brave new retailEntrepreneurs move to Internet for growth, success
Sandra Gunthorpe's house is like any other in Cumberland County: Average size, nice yard, two-car garage, a yapping Dachshund puppy running around your feet and jumping up for attention.
But the garage is full of educational toys, two of the upstairs rooms are converted into offices, and the home doubles as one of two nerve centers for three online retail companies.
Gunthorpe is co-president of Star Bright Kids Co., Julabug and Oompa.com, online retailers of imported toys, puzzles, educational building sets and natural clothing lines for parents who want to limit their child’s exposure to the buzzers and blinking lights of conventional toys.
This year, the small business Gunthorpe runs with her long-time friend, Susan Klieman, is expected to have between $2 million and
$5 million in revenue. The partners are part of a trend that has small retailers moving to the Internet for success.
“We really have high-end, educational toys that are from around the world,” Gunthorpe said. “While that might appeal to people around the whole country, it would be difficult to probably sell enough in one very small demographic region.”
Gunthorpe and Klieman, who’s from Chicago, started the business in 2007 as Stelo Corp. but operate online as Star Bright. The friends and parents were concerned with the limited options to buy toys other than the commercial selections in stores, they said.
“(Sandra) had gone through multiple entrepreneurial-type things ... and had always talked about owning her own store,” Klieman said. “So we met in Cleveland and started talking about an online store.”
The first three years saw explosive growth because of the nationwide demand for the toy alternatives but also because of online retail’s expansion.
Online sales could top $327 billion, or about 9 percent of the U.S. retail market by 2016, according to a January study by Massachusetts-based Forrester Research Inc. Online retail grew from $177 billion in 2010 to $202 billion in 2011, a 14 percent gain and 7 percent of the total retail market.
Sales could grow 12 percent to $226 billion this year, according to Forrester. A separate review of online retail trends from the company said a factor affecting the growth is smartphone use, making it easier for consumers to shop online from anywhere.
Online sales are important but still a niche, retail groups said.
“Online retail’s certainly something that’s growing, but I don’t think it will ever get to a point where it represents all retail,” said Kathy Grannis, a spokeswoman for the Washington, D.C.-based National Retail Federation.
Gunthorpe said they soon outgrew Amazon’s services. They wanted their products shipped in their own boxes, Gunthorpe said. It also became obvious Amazon saw the potential of alternative toys and sold direct to customers, cutting into Star Bright’s business, she said.
“Although Amazon is not considered a big-box retailer like a Target or a Wal-Mart or a Sears, they really are a big-box retailer,” Gunthorpe said.
In 2010, Gunthorpe and Klieman launched Julabug to branch into baby toys and clothes and used St. Louis-based United Fulfillment Solutions Inc. for the back-end logistics.
“Fulfillment is a challenge. Clearly — we do a few million dollars a year; I’m not going to be able to fulfill that out of my garage,” Gunthorpe said.
Julabug and Star Bright captured enough market share to expand again, she said. In August, Gunthorpe and Klieman acquired competitor Oompa.com, including its website, customer list and trademark rights, for an undisclosed price.
Klieman worked out of her home until last year, when she opened an office in Chicago with three employees. Gunthorpe also hired an employee to work in her home office.
That’s one of the best parts of being a small online retailer, Gunthorpe said.
“I love the flexibility of a small business, and I’m a little bit of an entrepreneurial junkie, if you will,” Gunthorpe said. “It makes you feel good to be able to do something and give something back and be able to control where the business is going, what it’s offering the people.”