Bakery Devises Recipe for an Online Strategy
Kenneth Harris was president and chief executive of the W.R. Grace restaurant group before he went to work for the Kayne Anderson Investment Management group in Los Angeles. So when Kayne Anderson decided to acquire two small but well-established niche bakeries in the mid-’90s, it made sense to put Harris in charge. He has merged their retail operations and product lines and built the resulting concern into a national supplier of high-end corporate gifts. When it came time to establish a major Web presence, Harris used strategic alliances and equity sharing to get the job done. Harris was interviewed by freelance writer Karen E. Klein.
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I knew when I saw the unique products and the customer loyalty that Miss Grace’s Lemon Cakes and Mrs. Beasley’s had achieved that we had something special here, something that could be grown into a real business as opposed to a boutique operating in a cottage industry. We have eight retail locations in Southern California and New York City that offer same-day hand delivery of our mini-muffin gift baskets, lemon cakes, dessert bars and other specialties.
Last year we saw that the Internet had the potential to dramatically alter our business. We put up a modest Web site and spent about $50,000 for a nice-looking Internet presence and the capability to take orders online. It demonstrated the power this new medium had in terms of our reaching a whole new audience.
We looked around and realized that nobody had a Web site that catered to business gift-giving with multiple recipients, so we decided to build a site that would enable a business to go online and send gifts to 300 or 400 people without fear of computer crashes. We built a multiple-recipient module that allows our corporate customers to have their own password-protected accounts that show them whom they gave gifts to last year and let them decide whom they want to send gifts to this year. They can go to their account and edit their lists, change them, save them and come back whenever they’re ready to finalize their orders. This capability has propelled our Internet business very strongly so far.
When we searched for a Web site designer, we knew we wanted more than just a contractor: We wanted a partner who would stick around and help us become an e-commerce Web site. We chose Guidance Solutions in Marina del Rey. They have a unique business model--they’ll build a Web site for a combination of cash plus stock. So we gave them cash and a small piece of the company in return for their building us a $1.5-million Web site. The arrangement has worked out tremendously. They are co-owners of the company, so they aren’t going away. And this was the first time in my business career that I’ve had a computer system come in on time, below budget and working right.
Our idea for taking the retail operation into the Internet was to follow a business model known as bricks-to-clicks. We use our existing retail and mail order channels to migrate customers to the Internet. This marketing system enables us to acquire new customers at much lower-than-normal cost. Our brand was also highly sought after by Web site marketers and designers, who wanted to put our products on their sites. So we decided rapidly that we should piggyback with other major players and leverage their national advertising wherever we could.
We have done strategic alliances and revenue-sharing deals ranging from 10% to 30% with partners like 1-800-Flowers, American Airlines, Yahoo, Excite, Oxygen.com, Greatfood.com, Red Envelope and Blue Mountain Arts.com. For example, if you send a birthday card from Blue Mountain, you have the opportunity to send a Mrs. Beasley’s cake along with it. This approach makes our marketing expenditures variable because we pay only if we get the order. And it’s all part of building the brand-name recognition of our company.
We aim to be that unique Internet company that is profitable, designed to make money and achieve rapid sales growth. Our plans are already working: This Christmas, we’ll make 30 million mini-muffins and ship 30,000 gift packages a day on our busiest weekends.
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If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016 or at kklein6349@aol.com. Include your name, address and telephone number.
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