A Brief History of the Paintball Command Dot.com E-commerce Business

1. A Brief History of the Paintball Command Dot.com E-commerce Business By Richard L. Routh, Ph.D. Director, The Institute for CIO Excellence President, The GINESYS Corporation Faculty, USC Upstate

2. Paintball Command: A Subsidiary of The GINESYS Corporation • A profitable dot.com business • Sold for a profit prior to the dot.com bust of 2001 • Was once the largest paintball retailer in U.S.A. (maybe in the world) • Never had a store front (always existed only on a server—a true pure dot.com e-commerce business)

3. KnowledgeWave • By 1995, had evolved to rapidly create sophisticated full-featured Web-based business solutions • GINESYS used KnowledgeWave to create and operate sophisticated e-commerce business solutions for a variety of business sectors • By 1997, we were asking, “Why don’t we do this for ourselves?”

4. Which Market? • We weren’t particular about which market we chose to demonstrate our ability to create a successful dot.com business • We were looking for the right relationship with a wholesaler who would drop-ship product for us and allow to focus on the sales and marketing end of the business.

5. We Chose …National Paintball Supply, Inc. • Largest paintball wholesaler in the country • Served about 2000 paintball retailers across North America • Maintained a large inventory of paintball guns and supplies • Operating their own shipping and receiving department • Was willing to drop-ship for us

6. The Basic Business Deal • We (GINESYS) would own and operate a Web-based paintball retail store on the Web • We would own the business, the customer lists, the trademark (PaintballCommand), the domain name, etc. • We would sell product to consumers • NPS would drop-ship our orders and pay us 7.5% of gross sales (and we would not need to keep any inventory!)

7. 8 Months to Number 1 • We started building the Web-site/store in September 1997 • We were taking orders on a reduced inventory by October 1997 (with KnowledgeWave, it took longer to build the database of products than it did to build the Web-site) • By June 1998 (8 months after start-up) we were the largest single store retailer of paintball stuff on the country.

8. Success! • Within 15 months, we hit a $2 million/year run-rate (based on fourth quarter 1998 sales) • We then began looking for someone to buy the Paintball Command business (we were not paintball fans, we just did to to prove we could do it)

9. Summary: The 7 Principles for Successful Retail E-commerce • You must have a compelling value proposition (i.e.: You must be the BEST in Price or Service or Quality) • Use technology that allows you to rapidly develop and customize all the services you will require: retail store, customer accessible databases, integration with third party databases, email robots, and customizable detailed reporting that is updated daily or more frequently. • Realize that you are not in the inventory management business. Arrange a contract with someone else who is to do your drop shipping and return service.

10. 7 Principles of Success (cont.’) 4. Maximize the use of Web-based and Internet services such as search engines, pop-up ads, email, etc. to do your advertising for you. Also, realize that it is much more difficult in today’s cyberspace marketplace to get instant top search engine position. This doesn’t obviate the principle espoused here, it just makes it a little trickier and maybe a little more expensive to implement. 5. Develop detailed daily reports that measure all significant facets of your sales. Ensure that these reports are in the form to be quickly digested by senior management. Also, ensure that you use a reporting tool that can quickly and easily modify these executive reports. A good data mining system is not a bad technology to consider.

11. 7 Principles of Success (cont.’) 6. Keep focused on constantly and rapidly measuring the effectiveness of your marketing campaigns. Make it your goal to shrink the entire implementation and evaluation cycle for a marketing campaign to something on the order of a day or less. 7. Rely on quality Web-based automated customer support technologies and not on humans for customer support.

12. Discussion about what Made us Successful • With the exception of one monthly paintball trade magazine ad (created, placed and paid for by NPS), all of our advertising was done for free by third–party commercial search engines (such as AltaVista, Yahoo!, HotBot, Lycos, Excite, etc.—Google didn’t exist back then). We learned how to be very good at placing Paintball Command listings on the first page of the major search engines. This took a significant amount of study, experimenting, time, and monitoring. But this was our primary marketing mechanism (along with some very significant word-of-mouth referrals later on), so a lot of time and attention to this was appropriate. Almost all of our new business (which was about 90% of our business in the first year or so) came from the search engines. It was a key tenant of our business strategy to gain and hold dominant first page position in the major search engines. Once we got good at doing this, the cost of our entire marketing effort was only time—no dollars were spent.

13. We Shrunk Marketing Cycle • We developed detailed daily reports that measured all significant facets of our sales (and a lot of insignificant ones). These reports, combined with our ability to quickly (within minutes) register new or changed search engine entries high on the first page of some major search engines, gave us an incredible competitive advantage. For example, we got so good at this that we could decide on a new marketing campaign in the morning, build the supporting Web-pages for it on our Web-site by 1:00 p.m., get it advertised on the first page of AltaVista (then the most popular search engine) by 2:00 p.m. that afternoon, and begin monitoring the impact of the new marketing campaign prior to going home that evening. By the next morning, a full report was automatically generated that showed the differentials in sales due to the new marketing campaign.

14. In this way, we could quickly create, implement and measure new sales strategies and marketing campaigns—and then modify them and go through the entire cycle multiple times per week. This allowed to quickly modify and hone our marketing campaigns to optimal effectiveness over the course of a few days. It takes months or years for this to be done with traditional marketing methods and tools, and is usually not done to completeness because it is so time consuming and expensive with traditional means. This was a competitive advantage that I believe we uniquely held for a long time and it was obviously a key factor in our competitive success.

15. E-commerce Customer Service? • We kept our customer service expense to a minimum through the use of email robots, an on-line order status database, and F.A.Q. pages. This was not something we did right from the start. We grew into this one. Initially, when sales were fairly small, customer service could be (and was) handled by telephone and human response to customer emails. To man our customer-support telephone-service, we hired a high-school kid who knew more about paintball than we did. (We really weren’t paintball fans even though we ran the largest paintball store in the country! I personally have never played an organized game of paintball!) As our sales grew, the customer service overhead grew proportionately. The telephone and email customer service grew from a couple hours per day, to a couple people full-time and they still couldn’t keep up. This precipitated a minor crisis in an ever-expanding overhead burden.

16. The Customer Service Solution • The GINESYS corporate vice president began to try to persuade me that we needed to scale back our human customer support in favor of automated customer service in the form of: • Email robots • On-line order status database • F.A.Q. • A way to talk to humans if you’re desperate

17. Email Robots • These are email messages that are automatically generated in response to certain key words in the subject or body of the customer’s email. For example, if an email contained the word “warranty” or the word “broken,” the robot would assume this was in reference to a product that might need warranty repair. An email would be automatically generated explaining our policy and procedure for returning an item for warranty repair and instruct them in how to ship it to NPS for this service.

18. On-Line Order Status Database • A large percentage of our telephone calls and emails were asking questions like, “When will my order get here?” and “Has my order shipped yet?” We implemented an on-line Web-based and customer accessible database that contained the current status of all orders. This was partially automated to include the UPS tracking numbers of all orders as they shipped from the NPS warehouse. So when a customer placed his or her order, an order number was provided with instructions as to how to access our order status database. Then the customer could view the database which marked an order as either “received,” “processing through shipping,” “on back-order,” or “shipped” with the corresponding UPS number. If the customer provided us with an email at the time of order, we also automatically sent an email when the product shipped with the UPS tracking number and a link to the UPS tracking Web site. This ended up being a great success and very popular with our customers.

19. F.A.Q. • A Frequently Asked Questions section (F.A.Q.) that was kept up to date with the latest customer concerns and Paintball Command policies.

20. Human CSR Service if Desperate • At the end of each email sent by our email robot system, we included instructions for how to get through to a human. It was a simple procedure. We instructed the customer that if our automated customer support features did not satisfy the need, then they could send an email with a special key word in the message subject. All emails with that key word in the message subject were routed to the human customer service rep for personal response. • We also continued to maintain a minimal telephone support staff, but it was reduced to one person for three hours per day (and was almost always busy, so it was not really very accessible).

21. Convincing the Boss… • This plan to reduce human customer support in favor of the automated system described above was not something I initially favored. I thought it would significantly reduce customer satisfaction and we were finally getting to the point where word-of-mouth referrals were becoming significant for us. The argument was stated forcefully as, “If we are going to be a Web-based business, then we are going to have to figure out how to operate as a Web-based business and that must include all customer-facing aspects of the business. We cannot afford to do otherwise in terms of either economics or conceptual business model.” So I agreed to implement the plan as outlined above, and I held my breath (so to speak). In the end, although we got an occasional irate email swearing to never do business with us again, we measured no significant decrease in sales growth.

22. Summary: The 7 Principles for Successful Retail E-commerce • You must have a compelling value proposition (i.e.: You must be the BEST in Price or Service or Quality) • Use technology that allows you to rapidly develop and customize all the services you will require: retail store, customer accessible databases, integration with third party databases, email robots, and customizable detailed reporting that is updated daily or more frequently. • Realize that you are not in the inventory management business. Arrange a contract with someone else who is to do your drop shipping and return service.

23. 7 Principles of Success (cont.’) 4. Maximize the use of Web-based and Internet services such as search engines, pop-up ads, email, etc. to do your advertising for you. Also, realize that it is much more difficult in today’s cyberspace marketplace to get instant top search engine position. This doesn’t obviate the principle espoused here, it just makes it a little trickier and maybe a little more expensive to implement. 5. Develop detailed daily reports that measure all significant facets of your sales. Ensure that these reports are in the form to be quickly digested by senior management. Also, ensure that you use a reporting tool that can quickly and easily modify these executive reports. A good data mining system is not a bad technology to consider.

24. 7 Principles of Success (cont.’) 6. Keep focused on constantly and rapidly measuring the effectiveness of your marketing campaigns. Make it your goal to shrink the entire implementation and evaluation cycle for a marketing campaign to something on the order of a day or less. 7. Rely on quality Web-based automated customer support technologies and not on humans for customer support.

25. Epitaph Paintball Command was sold in 1999. Under new management, it failed to thrive and grow and, when last I checked, was no longer in operation.