Going virtual: DiscountSpasDirect.com is less than a year old, but its online-only operation already boasts some impressive results - Internet & Technology Report

Welcome to the world of online sales, where companies such as DiscountSpasDirect.com have discovered new ways to sell spas. Since its launch in June 2002, DSD has sold 181 units in cyberspace, a healthy sales figure for many physical stores. Eventually, the company expects to sell $2 million in spas and spa accessories annually.

In the family

The three young entrepreneurs behind DSD--Jolene Dodson, 27, Ian Rakow, 27, and Chris Ormiston, 34--looked at the pool and spa business from a unique perspective when they developed the idea for their Web site. Their point of departure was the intersection of the health-and-fitness boom and the Internet boom.

Dodson, whose parents, Joanne and Jerry Dodson, own Leisure Palace Pool and Spa in Pierre, S.D., was a dietetic consultant. She had often wondered why there was so little attempt on the Internet to play up the health benefits of spa usage. Her friend, Ian Rakow, a computer whiz who started his first company at age 13 and who now also manufactures and sells vitamins on the Internet, agreed.

At the International Pool & Spa Expo in Phoenix last year, Rakow and Dodson talked to manufacturers about their proposed Web site, to be designed by their third partner, Chris Ormiston.

"Educate the consumer about the health benefits of a spa and sell it to them at great discount, direct from the factory" was their mantra.

After forming an agreement with a couple of manufacturers, the baby dot-com opened for business.

On board and online

With two manufacturers on board, the trio was ready to launch the virtual store. Initial front-end costs for the Web site and for down payments on a minimum inventory of spas with each of the two wholesalers came to more than $100,000, says Rakow. The total start-up tab for this kind of Web-based business, says Ormiston, "starts at $250,000 and goes up."

The company owners say their expenses included an infrastructure of servers and computers and software, databases, routers, firewalls, and fiberoptic lines, as well as hiring and office space. Other costs: the ordering management system designed to interface with the Web site.

Once the site was up and running last June, Collins introduced the founders to Patrick Church, a pool and spa professional with 10 years' experience in traditional stores. He became the company's marketing and sales director, bringing needed pool and spa experience to the equation.

By the third quarter of its first year of operation, DSD was three-fourths of the way toward its goal of selling $2 million in spas, covers and accessories in the inaugural year.

On DiscountSpasDirect.com, customers can research information about portable spas, compare prices and features of many models, and read pages and pages of information on everything from choosing a foundation to safety issues.

Everyone who calls the 800 number or e-mails a question will speak with a salesperson on the phone. "We get no less than 12 to 16 inquiries a day," Church relates. "It's Internet marketing with brick-and-mortar sales experience."

He wrote the sales script that he and everyone at DSD use when answering calls. Internet customers tend to be educated and specific about their wants, says Church. "The funny thing is, 99 percent of these people know what they want and won't be swayed."

Because they can get more bang for their buck, e-customers tend to buy larger models than the store customers do, says Church. The average DSD ticket price is $4,500.

Dot-com details

What happens after the sale?

A certain amount of inventory, based on orders, has been set aside at each of the factories owned by the manufacturers partnering with DiscountSpasDirect.com. Currently, Church says DSD is negotiating for bonded warehouses in different locations to "ease our distribution channels." Some spas are pre-ordered by the company to certain specifications and are featured on the "Available Now" section of the Web site, for immediate delivery and at bigger discounts.

All spas are shipped directly from the manufacturer to the customer. DSD coordinates the delivery, which takes up to six week. The customer has plenty of time to read the instruction book, arrange a foundation and hire an electrician before the spa arrives. Once the spa is installed and running, DSD steps out of the picture and the manufacturer handles any warranty problems.

Originally, the DSD Web site was designed to have three separate selling areas for three products: spas, spa covers and chemicals. But that was a mistake, says Ormiston. It forced visitors to navigate the site instead of being able to do all their shopping in one spot. So the site is being consolidated. He notes that this move also will allow DSD to "incorporate new technologies, such as integration between the Web site and the back-end ordering systems, as well as additional search capabilities."

That last point is important because competition for top-of-the-list placement on search engines is keen and requires constant work. "It's something that oscillates. One week you're on top and one week you are not," Ormiston says.