Small Gestures Play Out in Big Ways in Market of Toys and Collectibles
When Jason Labowitz, 29, graduated from UC Santa Barbara with a double major in philosophy and pre-law, his parents hoped he would go on quickly to law school. But the San Fernando Valley native had other ideas. He started a computer consulting firm in 1995 and the next year launched an online business selling “Star Wars” action figures. Today his company, Entertainment Earth, not only continues to grow, but is consistently profitable. Labowitz talked to freelance writer Karen E. Klein about how he and his brother, Aaron, turned a childhood hobby into a career.
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I have been collecting all my life, from “Star Wars” in the late ‘70s and early ‘80s, to professional wrestling action figures, and then “Star Trek: The Next Generation” memorabilia throughout college.
In fact, my mother thought I was a little strange, because even when I was 8 years old, I would get the toys and keep the packaging in perfect condition for my collections. My only frustration was not having time to spend hours hunting through stores and tracking down the specific figures I needed to complete my collections.
In 1995, I heard that a new line of “Star Wars” collectibles was being introduced. An Internet newsgroup I was involved in at the time discussed starting a buying club where we could collect money and place our orders as a group. When I learned that the gentleman who offered to organize the effort took $50,000 worth of pre-orders within two weeks, I knew there was potential for this idea to become a real business that would combine two of my strong interests--collecting and computers.
I had a good friend who knew something about Internet technology, so in the summer of 1995 he helped set up the technical aspects of the company and I began to study Web site programming and design. Myself, my brother and a third partner we had at the time each chipped in a little bit of money to buy inventory and have a phone line installed. At the time, I had no industry contacts, and no knowledge of the toy and collectibles market, except what I had learned from a customer’s point of view.
This first became a problem when we placed our order with the manufacturer, but didn’t get delivery for months and months. We could not get a straight answer on the problem and our calls weren’t even being answered.
Finally, I learned that our account rep was leaving and a new person was taking his place, so I figured we should take the opportunity to start a good relationship. I sent him a big box of See’s candy and a thank-you note that was waiting for him on his desk on his first day.
Guess who the first account he called was? Us. That little gesture really helped, and he took the time to teach me a lot about the industry. What we didn’t realize was that the major toy retailers get priority delivery of products. Because I was only ordering a relatively small amount and we weren’t an established company, our order was placed way down on the list.
Our order did eventually get delivered, and our new rep gave us contacts for wholesale distributors where we could order more inventory. Two weeks before we launched in April 1996, we found a distributor that sold us 50 cases of action figures that our customers could not get elsewhere.
These products were very popular at the time and our customers were thrilled. From the first day, we have had positive cash flow and our company has been profitable. They started sending in testimonials and word spread throughout the Internet and the newsgroups without our having to spend money on marketing.
I hadn’t even expected that I would be dealing with people all over the world, but we realized it was nearly impossible for people living in places such as Germany and Japan to get these products, especially at the prices we were offering.
Even though we started very small, we wanted to do everything as professionally and technologically up-to-date as possible. From the beginning, though shopping-cart technology did not exist at the time, our Web site was programmed with an order form that was automated, so it totaled up the orders, added shipping and tax, and could be submitted right from the Web site.
Most of our competition at the time had order forms that were noninteractive--they had to be printed out and faxed to the company. We also got an 800 number, in case people were not comfortable ordering online, and I started taking phone calls and processing orders.
We stored our inventory in an office next door to someone’s garage, then pretty soon we took over our neighbor’s garage too, and about six months after the launch we found office space.
If I didn’t get things I needed right away, I was persistent and I would go up the chain of command to get my questions answered. For instance, toy manufacturers at the time considered action figures solely as toys for kids.
It was an educational process on my part to make them understand that we were selling them as collectibles to adults. We needed the products on time and in complete sets and in mint condition. I was flexible, but I kept telling my story at every chance I got, and eventually that paid off.
We started off with that one line of “Star Wars” collectibles and now we sell 700 items, from Austin Powers to G.I. Joe to rock ‘n’ roll figures like Janis Joplin and the Beatles.
We have three exclusive shared-product deals with toy manufacturers in the works and a joint venture with a magazine publisher to operate the fulfillment for their Web site.
Because we built an Internet business from scratch very early on, and we are in the process of moving into a 17,000-square-foot facility in North Hollywood, we plan to move into doing more e-commerce fulfillment in the future.
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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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At A Glance
Company: Entertainment Earth
Owners: Jason and Aaron Labowitz
Nature of business: Sales of action figures and collectibles
Location: 610 Clybourn Ave., Suite 7, Sun Valley 91352
Founded: 1996
E-mail: cs@entertainment earth.com
Web site: https://www.entertainment earth.com
Employees: 7
Annual revenue: 1.5 million
