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Small Firms Find Success Online, Too
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Jewell and Martin, both 28, maxed out their credit cards to get the company off the ground and have never received venture capital funding. The two say privately held Gratis, which has 30 employees, is profitable and generated $20.1 million in revenue last year.
There are few reliable statistics about how many Internet retailers exist, but most experts say there are hundreds of thousands, if not millions, of businesses on the Web. In 2004, U.S. e-commerce revenue totaled $117.7 billion, up from $94 billion in 2003, according to research firm eMarketer Inc.
But Patti Freeman Evans, an analyst who covers online retail for Jupiter Research, said that just as in the traditional retail world, 80 percent of the market is controlled by 20 percent of the companies.
The small companies that remain competitive, Freeman Evans said, either had realistic business models or "the flexibility to adjust their business plan once they figured out their original plan wasn't going to work."
That was the case for Varsity Group, a District company that started out trying to revolutionize the college textbook industry by selling titles through the Internet. That plan turned out to be much too costly, so the company refined its vision and now acts as an online bookstore for private high schools -- a market that requires less advertising and a less comprehensive inventory.
"The fact that we were able to move on a dime, make bold decisions quickly and were able to be very flexible is the reason we survived and are growing," said Eric J. Kuhn, Varsity Group's chief executive.
The company -- which lost money in its first four years of existence and was temporarily delisted from the Nasdaq Stock Market in 2001 -- earned $6.9 million on $37.7 million in revenue last year.
Ross of BooksFree.com says he expects 2005 to be his company's first year of real profit. Some credit for the firm's success, he said, goes to the popularity of romance novels, which make up the meat and potatoes of BooksFree.com's business.
Holding the top spot: "Black Rose," by Nora Roberts.
