Well.ca: A great Domain Name and a Blue Ocean

The Globe and Mail’s Charles Mandel has a great article out today about Ali Asaria, the founder of Waterloo’s Well.ca, and his success in building an online health and beauty store.

What became clear to him, however, was that the online category for health and beauty was wide open. “I noticed this open market, this blue ocean, where nobody was touching online.”

Within the health and beauty market, two of Canada’s large players, Shoppers Drug Mart and Pharmasave, both have an online presence but without any e-commerce ability. As for the U.S. Web giant Drugstore.com, it doesn’t directly ship to Canada, meaning customers who use third-party shipping end up paying a premium for products.

“It’s just backwards here [online] and we love that,” Mr. Asaria says.

While the complete article is worth a read, Mandel’s snapshot summary format makes for some great quick tips for startups:

THE VITALS – Ali Asaria started Well.ca with less than $10,000 while still living in his father’s home. The online retailer of health and beauty products now sells to some 30,000 customers across the country. Well.ca carries about 15,000 products and has annual revenues of between $2-million and $5-million.

THE KEY DECISION – Mr. Asaria says one of the most stressful decisions early on was purchasing the online domain name, Well.ca., from a private individual in Vancouver. The domain name cost $7,000 and Mr. Asaria’s advisers warned him against buying it, saying the name conjured images of a water well. “It was the first executive decision I made where I turned my back on all of my advisers,” he says. “It turned out terrific. It’s been great for us.”

THE INTRIGUING IDEA – Mr. Asaria says he approaches marketing as a technical and analytical problem. He calculates how much to spend on a specific campaign and then calculates the precise returns to the company, how many orders result, what those orders are worth, and how much profit comes from those orders related to a specific spend. “We don’t spend a single penny on marketing that doesn’t bring us positive revenue.”

THE DO-OVER – Early on, he paid a marketing company $50,000 to design an online banner campaign for Well.ca. The money was more than the company could afford at the time and the results were less than impressive. Mr. Asaria said that for every order they received, they’d spent almost $400 in marketing. “The biggest mistake we made was we thought we could do marketing outside the company, but we realized very early on that this is something we have to do internally.”

THE MARKET – Canadians bought $9.9-billion worth of health and beauty products in 2006. According to Nielsen MarketTrack, 7 per cent of those polled had made purchases from online stores, while 32 per cent had shopped at supermarkets and 74 per cent had shopped at drugstores. Price was the biggest influence on Canadians’ choice of products. International consumers are twice as likely to purchase health and beauty products online compared with North Americans, Nielsen says.

THE NEXT STEPS – Well.ca’s expansion has been so rapid, the company is in its fourth office in eight months. “Because we’re growing so fast, it’s a bit stressful to scale the software, scale the shipping systems and hire people quickly enough to meet demand. It’s tough,” Mr. Asaria says. “With the economy the way it is right now, we can’t spend early on, so we’re trying to hire people as we need them.”