Quixtar Shined From The Start

June 30, 2003
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ADA — Quixtar kind of took the Web by storm when it was introduced to the world Sept. 1, 1999.

The company saw sales of more than $250 million in its first 200 days. 

By the end of its first year, Quixtar was generating $448 million in annual revenues and was elevated to the status of top consumer e-commerce sites.

For independent business owners (IBOs) in the United States, Canada and Puerto Rico, quixtar.com has been and continues to be the go-to Web site. 

Quixtar-affiliated IBOs sell Amway health, beauty and nutritional products as well as other products online, register people to be IBOs, members or customers, and earn bonuses on the sales volume they generate.

The site also provides direct links to the company’s online “partner stores” that include KBtoys.com, OfficeMax.com, DisneyStore.com, TrueValue.com, Sony Music and HickoryFarms.com, among others.

From scope to launch, the birth of Quixtar took less than a year, recalled Managing Director Ken McDonald. 

“We pretty much lived it from the scope document through the detailed specifications, through the build to the launch. It was a tremendous achievement — one that we’re not looking to repeat anytime soon because it hurt,” he quipped.

It all happened in an accelerated timeframe under direction of a leadership team that included McDonald, John Parker, vice president of sales and marketing, and Randy Bancino, vice president and chief information officer.

The effort involved assembling a team of engineers, the core of them existing employees of the company’s Internet business group, tapping the resources of a lot of contractors, and forming strategic alliances with companies like Microsoft and IBM for hardware, software or site design assistance, McDonald said.

They didn’t build Quixtar based on any existing dotcom shopping model. Rather, he said, they built it around online shopping strategies that already had proved successful, then tweaked them to enhance the online shopping experience.  

In addition to incorporating what was already working on the Web, the company sought the advice of IBOs, Parker noted. 

“We had a group of IBOs that, I think, saw the vision and were helpful in terms of working with us to provide input on how best to make the site and the business work,” he said.

They built an infrastructure that compared to some of the largest sites on the Web at the time, employing a network of 70 Web, data and application servers. 

But Quixtar officials and the site’s own creators were “blown away” by the reception quixtar.com received upon its debut. It was early in the history of the Internet; it was still a new frontier and penetration levels weren’t that high, Bancino recalled.

Based on rough estimates and comparisons to general demographics, the Quixtar team originally thought maybe 200,000 or 300,000 IBOs and customers might visit the site.

“During the summer we were building the site, you could see a lot of excitement among the IBOs for the new business model that was coming, so we started thinking maybe it would be a little bigger — maybe a half million people,” Bancino said.

“The day we launched it was about 2 million people.”

The company quickly added 20 more servers and did some fast reconfiguration to accommodate the unanticipated level of traffic. 

“Once we saw the size of the load and the patterns of what people were doing, we re-architected behind the scenes some of how it worked and ramped up capacity pretty quickly,” Bancino said.

The company refers to its business model as “I-commerce” — the “I” standing collectively for “the Internet, the individual, the infrastructure of Quixtar, and independent business ownership.”

McDonald believes Quixtar’s success is directly tied to the convergence of those four elements.  

“Our goal then is our goal today — and that’s to make the Quixtar business easy, fun and cool,” he said.

Parker recalled that in the late 1990s, the “craze” was about eliminating people from the process and having consumers connect directly with Web sites. 

“What we saw at that point in time was that the IBOs were our strategic advantage above and beyond anything else we had because they were the ones that could actually bring customers to the Web site and offer a Web-based business opportunity to others, as well.”

Quixtar also is different from many e-commerce businesses in that it doesn’t advertise. Other large e-commerce companies spend hundreds of millions of dollars on advertising and promotions hoping people will use their service, Mc Donald pointed out. 

“What we do is create an opportunity. The independent business owners share that opportunity with clients and members and then we spend our hundreds of millions of dollars in bonuses and incentives to those IBOs.”

The payback to IBOs is a big factor in the company’s success, Parker added, noting that since Quixtar’s inception, IBOs have earned more than $655 million in bonuses and incentives.

The average age of an IBO is 33, and half of all new recruits are under 30, McDonald said.

Everybody at Quixtar learned from the experience.

“We learned that if you have a really good business model and you build it, they will come . . . and a whole lot of them will come,” McDonald said. 

“We learned we had to be very flexible.

“We learned within the first three months that our estimation that there would be no need for print was wrong — that people still like printed materials even though they’re conducting business over the Web.”

Parker underscores the need for flexibility. Quixtar’s business model allows for constant feedback from users, he said, and what the company has tried to do from the beginning is insure that the Web experience fits IBOs needs.  

“The overall lesson that we took away on the Web site itself was simplicity — that less is more. What we learned quickly was that the easier the experience is for the IBO, the fewer clicks they have to go through to get done what they have to get done, the better.”

McDonald said the company also learned over time how crucial it is to keep Web site content fresh. It’s not just about adding new artwork and pictures, it’s about coming up with new features that are tied directly to the users, he explained.

Since launch, the company has added, among other things, weekly site polls, a gift redemption site, an auction site, a shopping list site and downloadable MP3 audio and video.

One of the best examples of a Web site “enhancement,” he said, is Quixtar’s “Ditto Delivery” automatic replenishment program, which authorizes the company to fill orders at specific times based on schedules IBOs, members or customers predetermine.   

“To our knowledge it’s the only online automatic replenishment program for consumable products. That has been a big plus for our business.”

Typically, the company rolls out some new features every week or so, Bancino said. It also continually surveys customers to see what they like and don’t like.

“Now we’re actually planning for next year a fairly major roll out of some new look and feel options, as well.”

Quixtar reported revenues of $901 million for the fiscal year ended Aug. 31, 2002, an increase of $150 million over 2001 year-end revenues. Quixtar IBOs additionally generated $57 million in revenues for the company’s online partner stores.

On April 2 this year, the company broke its previous single-day sales record of $8.3 million, posting $10 million in sales for the day.

What’s next for Quixtar?

More of the same, McDonald said: More innovation, more change, more new ideas, more new products and more bonuses and incentives to IBOs.

“We’ve learned that we thrive on change and innovation and we’ve got to stay focused on that.”

Parker added that Quixtar is currently the leading online health and beauty company and that more concentration on those categories is ahead.

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