strategic relationships in the digital world:
partner or perish
In the digital
world, it's not a question of whether your business will form partnerships, simply how and
with whom. As Glenda Dorchak, President and COO of Value America puts it, "You'll
have to co-exist to be able to exist on the Internet." At this Morino Institute
Netpreneur Program Coffee & DoughNets meeting, held July 22, 1999, Ms. Dorchak was
joined by womenCONNECT.com Senior Vice President Gary LaFever to discuss many of the
considerations in forming successful alliances between Net-based businesses.
made at Netpreneur events and recorded here reflect solely the views
of the speakers and have not been reviewed or researched for
accuracy or truthfulness. These statements in no way reflect the
opinions or beliefs of the Morino Institute, Netpreneur.org or any
of their affiliates, agents, officers or directors. The transcript
is provided "as is" and your use is at your own risk.
2002 Morino Institute. All rights reserved. Edited for length and
[NOTE: A downloadable RTF file of this transcript and an event
summary are available.]
Good morning. I'm Mary MacPherson with the Morino
Institute's (http://www.morino.org) Netpreneur Program
(http://netpreneur.org). It's the middle of July and
it looks like we have almost outgrown this space!
Thank you all for coming this morning. We've got a great program, and we are very
fortunate to have with us Glenda Dorchak from Value America (http://www.valueamerica.com) and Gary LaFever from
in the discussion to be moderated by someone we all know very well, Esther Smith.
It's my great pleasure to introduce, Esther. She is really one of the
"mothers" of the technology community in this region. Currently, a principal
with the investor relations firm The Poretz Group (http://www.poretz.com),
Esther was the recipient of the prestigious 1999 Earle C. Williams award for leadership in
technology. She also founded the Washington Business Journal (http://www.amcity.com/washington), and was the
publisher of Washington Technology (http://www.washtech.com).
She was a founder of the Northern Virginia Technology Council (http://www.nvtc.org) and a champion for the organization
Women In Technology which has grown to prominence across the country.
One of our favorite of Esther's roles is as advisor to the Netpreneur Program, where
she can always be counted on to ask the hard questions and to offer us solid advice and
esther smith: "favorite aunt,"
I definitely like "older sister" better than
"mother of the technology community," but whatever. I love the Netpreneur
Program as you all know.
It's great to be here today and to have two people on our panel who not only know a lot
about partnerships, but have actually done a partnership with each other. I'm going to
introduce Gary LaFever first. He will make some remarks, and then I'll introduce Glenda
Dorchak who will also speak. After that, we'll open it up for questions.
Gary LaFever is not only a recovering consultant, he is also a recovering lawyer. He
has touched all the bases, including being an entrepreneur in a start up environment, and
he is the co-entrepreneur with Susan DeFife of womenCONNECT.com. Once Susan had gotten
womenCONNECT.com to the point she could see that it was going to become a company, Gary
came in and helped her do it. They have been one of the region's most interesting and
exciting content plays.
Gary wears many hats over at womenCONNECT.com, including a little marketing, a little
deal-making, a little lawyering, a little CFO-ing. I wouldn't say his balance sheets look
so great, howeverI have seen the arrangement. Now that he knows to put the top line
on the top and the bottom line on the bottom, he really has made a lot of progress. That's
Gary's only weakness that I'm aware of.
Gary has a lot of insight into doing partnerships because womenCONNECT.com has built
its whole position on the idea of connections. Here is Gary.
gary lafever: know your metrics
Thank you, Esther. Just so you know, I always figured
that if the numbers are right, the order doesn't matter.
I'd like to start with three quick points. First, I want to thank Mario Morino and the
Netpreneur Program team. The Netpreneur Program has a lot to do with the success of
womenCONNECT.com. We may not be as visible at the meetings as we once were, but that's
because we are implementing all the things we learned at the meetings we went to. If you
can't make it here in another six months because things are cranking so much that you
don't have time, that's okay, just so long as you come back a little later on and give
back to the community. I would like to ask, if you would, to give a round of applause for
an incredible team and a great contribution.
Second, I'd like say a personal thank you to Linda Dorchak and her team who woke up at
an awfully early hour to get here from Charlottesville. They are a great team of people
and we have enjoyed working with them. We very much appreciate you contributing to this
event. Third, I want to point out to the members of my team that the old-fashioned
DayTimer can be used for notes for a speech. Can your Palm Pilot do that? I get abused at
work because I haven't surrendered to the Palm Pilots. They keep saying, "You know,
it only costs $499 at Value America."
C'mon In, The Water's Fine
I was a partner at the largest law firm in Washington, DC. How the heck did I join up
with Susan DeFife in the back of her house to work for six months with no pay? I didn't
have the guts to do that in one step. I had an interim opportunity with a company that had
everythingbacked by Kleiner Perkins (http://www.kpcb.com)
and a great management team. I was going in to help take them public, then move into
business development. On my eight-week anniversary, I was told they were moving back to
France. You want to move? No? Well, you don't have a job.
Having made the jump to what appeared to be a safe entrepreneurial environment, I would
not have gone back into the protective womb of a law firm for anything. So the message is,
if you are thinking about jumping into the netpreneur community, you may not be as
fortunate as I was to get pushed into the water, but dive in because it's worth it. It's a
lot of fun. It's a lot of work, but I wouldn't change a thing. If you really are thinking
about doing it, think harder and do it.
I am supposed to speak briefly about who we are and what we do at womenCONNECT.com.
Ironically we are not a technology company. I'd go so far as to say we are not even an
Internet company. We are a demographic company that uses the Internet, because it is the
cheapest means of infrastructure and delivery to our audience and our constituency. This
year you will see us moving into alternate media. We have had magazine partners in the
past, and we are putting in place new magazine partners. We have deals in place with
broadcast partners. We will have our first conference series this fall. What we do, what
we know, is the demographichigh-end women in business, who either own or manage
Yes, I do realize I'm male, but I like to think that, despite the deficiency of my
gender, I can contribute. It's a fascinating company to be with. There are more males than
just me in the organization, but I will say it's certainly still primarily women and that
means I don't get a break. I grew up as the youngest child with three older sisters. I
have a wife and two daughters. The only way I get testosterone in my house is with two
male German Shepherds, and my wife made me get them fixed.
All right, why are partners important to us? Because of what we are. As a demographic
play, we have a huge opportunity, but we don't have the time to develop the infrastructure
we need to execute on our business model. We look for people and companies that have a
like end-game. They either want to sell into our audience, or they want to prove that
their technology infrastructure or business model works with our kind of community. We
cannot suffer the time and expense necessary to build everything that we need, so we look
for partners who have an objective that's very consistent with ours whom we can work with.
One of the beauties of the Net is that it's very collaborative, so that's why we live and
die with partnerships.
Traffic, Revenue, Branding and Effort
I'm going to give you two acronyms. If nothing else, if I lose my place, you can give
me the next acronym letter and I'll know where to pick up. The first acronym is TRBE. I
know this one much better than the second one because I just made it up. The next one is
TRBE. The essential message here is to know your metrics. Don't allow them to be
diluted because you're talking to some gee-whiz, hot shot corporation. Figure out what
will define whether or not a partnership is a success. Come up with something that you can
keep burned in your mind, and any time a partnership opportunity crosses the threshold,
evaluate it on that criteria. For us, that's TRBE: Traffic, Revenue, Branding and Effort.
Depending upon where we are in our business model maturation, certain of those are more
important than others.
Right now, E, Effort, is the big one for us. We have 20 people going flat out. We have
between three and six new partnership opportunities a day coming over the transom. Why?
Because we learned all that great stuff at the Netpreneur Program and we are doing it
right. I don't have enough people to execute on all of these opportunities, so the first
filter I put into place is, "How much of this are you, my potential partner, going to
do and how much am I going to do? How can you make me more successful, at the same time
making yourself successful, and what's the impact on my staffing paradigm?" It's a
good situation to be in, but, as you know, it's tough to get new people. Yes, we are
always hiringyou can see me later.
E is big for us, but T, Traffic, is big as well. Branding is key, not only in how we
get our name out, but who our name is associated with. We have worked very hard to develop
a strong, credible brand in this demographic. The logos I put next to ours are important
because I want to add to, not detract from, what we have worked so hard to develop.
Branding is always key for us, but, at different times, you either look down the food
chain, meaning someone who is a little less mature than you are, because they can get you
on the road and get started earlier, or you look up the food chain at someone who is a
little more established and can give you some extra oomph. You have to know what you are
looking for and why.
So the message is: know your metrics. Come up with something which you can use any time
you are looking at a partnership so you can quickly say, "This works, that
doesn't." Do a weighted average if you want. Maybe I'd have the numbers in the wrong
order, but, since they would add up right, it wouldn't matter.
How Can I Help You?
The next acronym deals with some dos and don'ts from my personal experience, CTYAW:
Competition, Technology, You, Angry, Work it.
The first don't is the biggest, and it's something I used to do myselfC for
Competition. Don't lead with, "If you don't do this deal with me, I'm going to do it
with your competitor." It ticks me off. I used to think it was a great way to drive
someone to closure until it started ticking me off and I realized that it doesn't make any
sense. You want to identify and demonstrate that you know the potential partner and their
competitors, but you do that by showing them how this deal is best for them or most
consistent with their business model, because the other business models are so
diametrically different. That subtle difference shows that you have done your homework,
that you know the competition and that you could do business with them. Don't push for the
close with that. You would be surprised that I hear it more times than not. They say,
"Look, I'm talking to all of your competitors and do you want to do the deal?"
Okay, you just finished the deal. I'm not doing the deal with you.
So don't lead by hitting someone over the head with their competitors. Do show the
other party that you know who their competitors are, that you're savvy enough to know how
they're different and why they're the better pick.
Next is T for Technology. We are not a technology company, so don't sell me on your
technology. We are a demographic community company. Yes, I know I'm saying "we"
and different companies have different focuses, but I'm using these terms loosely. The
point is: know what is important to your prospective partner and speak to it. I must have
six calendar software proposals on my desk and all I hear is, "I have the fastest
this, I have the best that." I don't care. I'm not a tech guy. But if you can tell me
how this is going to help build my community, how it is going to increase my stickiness,
my repeat visitors or my ability to garner a higher advertising rate, now I'll talk to
you. Don't use yourspeak. Figure out what's important to them and put it in their words.
The Y is You. Guess what, I know you think that you are the most important person in
the world, but I happen to have the same opinion, so talk about me, not you. I don't want
to hear about your company's most revolutionary whatever to hit the Web. It's Marketing
101, but you would not believe the number of people who start off with, "We have the
greatest thing ever." You are a lot better off saying, "We think you have done a
great job. We think you are doing all these things right. Here's how we would like to help
you be successful." It's common sense, but it's rarely said that way. Maybe it's
because there is so much activity, so many people getting into business development and
marketing positions who don't necessarily have the formal training, but it's just
interpersonal relationships. Everyone likes to think that they are the most important
person in the world, so let them think it. You know they are wrong and you are the most
important one, but you don't have to let them know that.
Next is A, Angry. I have had so many people get mad at me recently because I told them
I can't look at a deal for three to six months. Why? Even though this is Internet speed
and Internet time, you should simply say, "Look, I understand where you are and how
much you have going on. Do you mind if I keep in touch? I'd like to send you some
materials." Even in the Internet space, relationships are still built one step at a
time. You may get lucky and hit somebody who wants what you're offering at the time you
call, but, if not, don't tick them off. I had a guy actually yelling at me. I have only
done it twice in my life, but I hung up on him because he kept yelling. I can go places
where I get paid to be yelled at, so why am I going do it for free? Don't get upset. Try
to understand. The most effective technique that was used on me, and I try to remember it,
is, "I understand that this doesn't work for you now, can you just help me understand
how I could make you more successful? Let me go back and think that over, and when it does
make sense, I'd like to talk to you." Send the materials. Ask if they would like to
go to lunch sometime or have a drink or a cup of coffee. They probably don't have time,
but it's a nice gesture. This is Human Relations 101. I've been shocked recently at people
getting upset when I tell them that I don't have time to do something right now. It does
not mean I'm not interested.
Lastly, the W, Work it. What that means is, notwithstanding all the adrenaline and the
excitement and the staying up late to put out a proposal, the work doesn't start until
after you issue the press release. Mary McGann, our Senior VP of Sales, has taught me this
in spades. I get all pumped because we close a deal, then she says, "Okay, Gary, what
do you say we put together a content person, a sales person, a tech person and go up and
meet with the partner and see if we can really make this work?" It's key, but, in
Internet speed, people move so quickly that it's easy to miss that. It's only when you
have the partnership done that you sit down and actually work it. That's when you can
realize its true potential. Look at your team, assess the strengths of the people involved
and field a SWAT team to go up and work it.
We sent a team to Lycos (http://www.lycos.com) to
find out how we could help them get a higher CPM ("Cost-Per-Thousand," the rate
an advertiser pays per thousand audience members. M is the Roman numeral for 1,000). We
went to teach them about the uniqueness of our demographic. Do you know who buys most of
the ads on our content on Lycos? iVillage (http://www.ivillage.com)
and Women.com (http://www.ivillage.com), two of our
competitors. We'd prefer them to cut checks to us directly. They don't do that, yet they
are advertising on our content. Are our advertisers going to bid up the CPM on our
content? No. If Lycos wants to start reaching out to the higher end corporationsthe
automobile manufacturers, computer manufacturers, golf equipment manufacturers,
whateverthat want to sell into our audience, that can drive up the CPM. By sending a
team to Lycos and explaining how our female demographic is not the one with the picket
fence, it's the one driving the Porsche Carrera and using the Palm Pilot, and, if they
appeal to that market, we can increase Lycos' CPM. If we coordinate our editorial
calendars, we can help Lycos sell sponsorships in advance.
What's the underlying current here? Our content is so good that we can help you be more
successful. We are not saying that blatantly, but we are trying to make them successful.
Immediately after that meeting, the relationship blossomed and we are getting a lot more
traffic from Lycos. It's just compounding, so for every deal that we sign we are going to
send a SWAT team out. You work so hard to get the deal, but afterwards is when the work
What Makes Success?
Very briefly I want to talk about some of our partners, as well as what works, what
doesn't and why.
Our first big partnership was with IBM which, depending upon your perspective, was
either a big success or a failure. We struck a deal with IBM (http://www.ibm.com)
for a co-branded ISP service. We have boxes of womenCONNECT.com/IBM sign-up disks still in
the garage, if you're interested. They say, "womenCONNECT.com, the first stop for
women on the Internet." You slide it in. You boot it up. It defaults to our home
page. Is that a cool business model? The problem is, all of the other ISPs went to fixed
pricing and our arrangement with IBM was based on payment for usage. Ah ha! No market for
that. Even though the program never really had a chance to take off, the press, the
credibility we got from that partnership and the relationships we made within IBM put us
on a trajectory that we have never turned away from. You must understand what you mean by
success. It was still of great value to us. We are now implementing a new program with IBM
that we hope will be a big success.
Another partnership that, depending upon your perspective, might be considered a huge
failure or a huge success was with MacDonald Communications, publishers of Working Woman (http://www.workingwoman.com) and Working Mother (http://www.workingmother.com) magazines. We had a
deal with them for a year in which we provided their Web presence without charge in
exchange for visibility in their magazines and integration of their content in our site.
They have since gotten Internet fever and have decided to try it on their own, but we also
bought a one year head start in the Internet space.
I'd like to quickly identify some netpreneur companies that have been incredibly
important to us. CareerBuilder (http://www.careerbuilder.com)
has been a long-standing partner of ours and is our biggest revenue producer. Great people
there. We have been working with them from the beginning, and it was the Netpreneur
Program that made it possible. Proxicom (http://www.proxicom.com),
as well, from the very early stages, helped us very much with establishing the community
aspect of what we are doing. Interestingly enough, Proxicom has actually weaned itself out
of that area of business. They used to sell bulletin board and chat products. We were the
only one using their chat product at one time and kept asking for enhancements. Finally,
we had this great meeting where they basically said, "Look, we love you guys to
death, but we're not going to do this anymore. Can you buy someone else's product?"
They have been incredibly supportive, though, and have helped us learn. Now they have
taken that expertise in community and they are bringing it into corporate intranets and
other venues that they are building out. They have taken that expertise and gone one way
with it; we have taken it and gone another. It has been a very, very successful
partnership. I'd also like to mention the Sapphire Group (http://www.sapphiregroup.com) from Manassas,
Virginia. Although we have a vendor/vendee relationship, they have been a big part of what
we have been doing and building out the site. Those are just three companies in the region
that have been instrumental in what we have accomplished, and it's why I mean it when I
say that the Netpreneur Program has been a big part of our success.
Some of the big deals we have signed recently that will have a lot to do with where we
are going forward include Lycos, which is a huge one. If you go to Lycos and you key in
"women" or "business" or "career," guess who comes up first?
Thank you very much. A year ago, iVillage paid millions of dollars for that relationship.
They are paying us now, so timing is another issue. The value of content is now being
recognized and we have great content, whereas iVillage was just pumping stuff up there. I
don't know where they got it or why they got it, but that's what they were doing. CNNfn (http://www.cnnfn.com) owns 10% of our company and it is a
barter relationship. You have to think outside the box. They get an equity stake in the
company for their use of content online and we have live feeds going in both directions.
In addition, we are working with them for promotion on their sites and in the broadcast
Our deal with CompuServe (http://www.compuserve.com)
has had a soft launch. I can say this even though we haven't had a press release yet
because it was mentioned in an article about us in Forbes ASAP (http://www.forbes.com/asap) with their permission.
We are very excited about CompuServe. It is our market. Their users are business owners
and professionals. CompuServe is the result of probably eight months of working with our
America Online (http://www.aol.com) contacts. We hope
that it's just the beginning for relationships we can form with America Online properties.
Lastly, we have a relationship with Value America. The neat thing about Value America
is that we are constantly looking for ways to extend the relationship and capitalize on
the power of what we bring to the table. Sometimes the relationship you close today may
not be the one you'd ultimately love or aspire to, but get it done and get it moving.
smith: big sister
I think Gary hit on some great things, practical as well
as strategic. I want to emphasize his points about timing and working the relationship.
It's amazing how many companies have a good fit, but the time just isn't right. One of the
parties lets it go and, all of a sudden, someone else pops up just when the other party is
ready to make a deal. The opportunity goes away for the group who probably should have
gotten it and which may have been a better partner. But, hey, that's life.
Glenda Dorchak is one of the most high-profile women executives in the country because
she has done such a great job bringing Value America from nowhere up to star status. It's
become a tremendously recognized brand in a very short period of time, but it's not
surprising that Glenda was able to achieve that. She has had a career with IBM, she has
been an entrepreneur within IBM and she has been highly successful in the marketing arena.
Now she has a chance to make a mark on this company.
Glenda is a former Canadian who actually was transplanted to Cary, North Carolina, I
believe, with IBM. She now lives just down the road in Charlottesville, so she is a part
of the Virginia technology community, if not quite our region. We are very, very pleased
to welcome her today.
Thank you very much, Esther, and I thank Gary for his
kind words. Thank you all for coming today. Being a part of both the Virginia technology
community and the E-commerce community has been a very pleasant by-product of what has
been one of the most exciting, life-changing and career-changing events I have
It was about a year and a half ago that I first met Craig Wynn, the founder of Value
America. In the course of a discussion in which he was pitching IBM on why we should
authorize him to carry the IBM-branded product line, we were having an engaging discussion
on the topic of direct marketing and why it is a good model, when he turned to me in front
of the worldwide executive that I reported to and said, "You know, you really should
be working for Value America and not for IBM. You would do a lot better for us selling IBM
product than you would if you stayed with IBM." So, I now work for Value America and
it tells you something about where you find your partners as you go forward.
Exceed Your Own Capabilities
I want to cover a couple of things on the subject of partnerships from a different
perspective than Gary did. He did an excellent job of talking about how you should engage
prospective partners as you are representing your company to them. I have spent much of my
career as an executive who chose partners relative to what I'll call, for lack of a better
word, "outsourcing." In my IBM experience, when I did move down to the United
States, I actually resigned from IBM to co-found an IBM project they called Ambra. It was
an independent company that was designed to create built-to-order PC products for the
heat-seeking PC buyer, a la Gateway (http://www.gateway.com).
In the course of 18 months, we built a very powerful brand and a very powerful company.
The thing that was notable about it at the time, 1993-94, is that it was a virtual
company. There was an excellent article about us in Business Week (http://www.businessweek.com) which asked: Can this
really be done? Can a company really be a company if it doesn't have its own assembly
line, its own sales reps, or its own service and support center? Can you have a company
that's built up of core competencies that are brought together by a variety of companies
and manage them centrally in an outsource model?
The answer was yes, and we built a fabric using what seemed like roaring technology
then, electronic data interchange (EDI) as a means to communicate orders and set up a
business. In fact, we did not own our own manufacturing plant; we outsourced that to a
company called SCI (http://www.sci.com). We didn't use
our own sales reps; we outsourced that to a company called Insight (http://www.insight.com). We didn't own our own service
people; we outsourced that to a company called IBM.
IBM subsequently integrated that brand and repatriated the company into its main PC
business in 1995, but what I learned from that experience was the very important aspects
of how you create a substantial company around the model of not having to keep 100% of
your business in your own house. In fact, there were substantial advantages to partnering
and outsourcing for building a world-class company. There are two particular advantages,
but the first and foremost is the ability to create or gather skills that you can use to
exceed your own capabilities.
In the Ambra days, as a brand new startup company with five executives and perhaps 50
employees in the first year, we didn't have the capability of creating a large
build-to-order assembly plant like SCI. I keep telling them that we put them in business.
Today, they are one of the largest build-to-order assembly outsourcers in the world. That
was a core competency we didn't have. As you build a business, the first choice you often
make as an entrepreneur is, "Do I buy it or do I build it?" I would advise
anyone making those choices to look closely at whether it's a core competency that you
have within your grasp. The flip side that is so important is the financial side. There is
no question that anything can be built. The question is whether it can be built for the
price that's going to make you competitive in your marketplace.
It's a very important set of decisions that you have to make as you are building a
company, so, when I had the opportunity to come to Value America, I appreciated their
model. There was an understanding that Value America wasn't going to build everything. The
foremost thing that appealed to me, given what I believe about the future of retail, is
that Value America made a critical decision early on not to carry inventory. By
definition, if we were going to be the world's largest online retailer, we had to have
partnerships with all the people who manufacture and distribute product. It was a critical
business decision that Craig Wynn made in the early days of the business plan, one that
let me know that it had the possibility of being something substantial, and that it was
not just another online company selling out of their own warehouse.
For those of you who don't know, Value America's fundamental premise is that we are a
company that brings together and provides for what customers want and what brands want by
disintermediating the channel that stands between them. Our goal is to effectively create
a venue online for those two parties to come together and get what they need in a safe and
secure environment that is customer service-oriented.
Now combine that background with the coming arrival of "convergence."
Everybody talks about technical convergence, and, yes, we are all going to have an
instrument in our kitchen pretty soon that will tell the time of day and what the weather
is. It's going show us what's on CNN, and it's going to allow to us buy our groceries.
That convergence in technology is coming, as we all understand.
There is also convergence in how you operate a business. What Value America is premised
upon is the convergence of online information distribution with telephone-based support
using human contact. It's very, very important. The next time you buy from an online
provider and something goes wrong, try to find somebody to talk to, voice-to-voice, to fix
that problem. It's what distinguishes the great telemarketing companies and the great
If you go through the process of bringing brands and people together, making sure to do
it in a way that provides for the needs of the customer, then you have this convergence
model. With video coming in the future, we believe that we are pioneering, not E-commerce,
but see-commerce, which is the multimedia distribution of information to people.
The Value Premise
I want to cite three partnerships that are important examples of what we have done over
the last year. The first includes partnerships with manufacturers. Since we were not going
to buy product and put it in a warehouse, we were asking manufacturers to allow us to
carry their products which they would have to ship to our customers in single-unit
quantities from their own back docks. That's a fairly sizable undertaking because, in the
early days of Value America, we weren't selling anything in quantities that would take the
attention of an IBM or an Amana or a Whirlpool.
The fact is, we now have direct relationships with well over 1,000 manufacturers.
That's been done by going and talking, just as Gary described, one-by-one to the companies
that we wanted to do business with. Explaining and clarifying the value you bring is very
important when pitching a company, especially when you need something from them more than
they need something from you. It's absolutely critical. Their time is as valuable as
yours, and you have to make sure you create that value.
I'll cite the IBM partnership as a great manufacturing example. What we were able to
take forward to IBM was that, despite the fact that they have hundreds of thousands of
resellers, we would let them have access to their customers. We weren't going to sell
their products on their behalf and have that contentious relationship that often exists
between PC manufacturers and the PC resellers. We were going to rep IBM's products on our
Internet site in a way that was even better than the way they could do it themselves. We
can talk about an IBM-manufactured product in a way that's far more grand than IBM can
without sounding arrogant. We talked about what we could do and how we could share
information. It was appealing to them. It created a value premise that has sustained us,
and it's been a wonderful, wonderful relationship.
The next example is with a small company based out of Memphis, Tennessee, that happens
to be in the business of distributing things. It's also the fourth largest airline in the
world. We had the good fortune of having contact with Fred Smith of Federal Express (http://www.fedex.com) in the late fall of last year. We
realized that, although we would bring together online manufacturers or brands and
customers, at the end of the day, no matter how satisfying the online experience was,
something had to get the product from point A to point B. Until a PC can distribute
product through the screen, you need a way to distribute it. Again, in that relationship
we sat down and clarified what it was that we needed. They clarified what they could
provide, and we were able to form a partnership based on a mutual business need. One of
their challenges is how to create high-density consumer distribution.
Distribution companies like Federal Express make lots of money when they are delivering
things to Park Avenue locations, but it's very challenging trying to deliver a little box
of health and beauty products to my small community in Charlottesville. It's not
economical for them, so that's a challenge they have. We represented the ability for them
to create density in distribution to the consumer market. It's been a wonderful
partnership which we announced publicly in an initial press release two weeks ago, one
that also announced we are cooperating on something we call "Net Returns."
Federal Express will collaborate with us so that, heaven forbid, if a manufacturer
produces something that doesn't work, somebody comes up to your house, takes away the
broken product and brings a replacement. It's a two-step exchange. They will go to the
manufacturer and get the product, then bring it to you and switch it, so you don't have to
box it up and return it. Convenience is critical to the online buyer, and efficiency in
that is an important part of the partnership.
The third example is our E-commerce partnerships and our decision to make a commitment
to go into affiliate marketing. Jennifer Johnson is our director of affiliate marketing
and all credit goes to her. She pioneered two things. One is that she came to me and said,
"We have to put affiliate marketing in place. It's the new way of the Web. It's a way
for us to partner with people and create value for both companies." She did an
excellent job of explaining it as a business proposition to me. Secondly, she introduced
me to the great team at womenCONNECT.com. In that partnership we saw a mutual value that
each could bringValue America with a very, very powerful E-commerce engine and brand
relationships, womenCONNECT.com with a fundamental understanding of critical marketplace.
For those of you who haven't had the pleasure of hearing Susan DeFife, President and CEO
of womenCONNECT.com, expound on the power of the women's buying segment, it's truly
stunning. I get lots of play with male executives that I work with when I tell them that
80% of the business or purchase decisions in this country are made by women. It's great. I
love to tell that story.
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