Interview with Rodrigo Sales, CEO of Vendio

Vendio provides software and services to help small businesses develop their presence online. This is everything from web hosting, creating their own store, to helping them sell more effectively on eBay.

Interesting enough, the company started with a completely different business model back in 1999. We set out to build a portal to online auctions. We were targeting to become what CNET was to technology, but for online auctions. Part of that service was to provide a search feature that enabled consumers to search multiple auction sites for the item they were looking for.

As with many companies we saw our market change and evolve. Fortunately we were able to respond to some of those changes. One of the changes we saw was that the auction space became more and more consolidated. eBay’s share of the market grew and many of the smaller sites began to whither away.

As a result there was a much smaller need for a universal search service to search all the auction sites. 90% of the search results were coming back as being on eBay.

One of the ways that we benefited from some of the industry trends was that as the auctions evolved, so did the customers and sellers. It went from being Mom and Pop selling spare goods in their attic to a profitable outlet for small business looking for an online channel. These small businesses needed services to automate the process.

eBay was a very easy platform for someone selling one or two items, but as soon as they began selling hundreds or thousands of items it became complicated.

If you look at the amount of traffic that sites like eBay are able to achieve from a buyer perspective and then look at the pricing model; they are able to charge anywhere between 5 to 10% of the purchase price. Many of these small businesses are looking at eBay as way to market and sell their goods online for a very small fee.

We help companies by saving them time and we enable them to increase their sales. We save them time by automating many of the processes that they would have to do manually. Our service facilitates companies getting their inventory online and providing tools that allow them to do so efficiently.

We also help them in the post-sale process. Once the auction closes we make it very easy for the seller to collect the buyers information, be notified when payment is received, print packing slips, solicit positive feedback from the buyers, etc. We automate every step of the online transaction.

The majority of our customers are companies that tend to have 1-2 people to 20-25 person companies. We don’t target the larger businesses, although we do have a few as customers. We add the most value to businesses that are looking to automate processes to keep them from having additional staff, which is very costly.

We charge subscription fees, listing fees, and success fees. We have created pricing plans that are suitable to distinct business needs. Companies that sell expensive items may not be willing to pay a small percentage of the purchase price. For customers such as this we charge a flat listing fee with a monthly subscription fee.

Interesting enough, our customer base also turns out to be our bets ally when it comes to attracting new customers. This is because many of the services we offer are visible on the auctions themselves. We offer a number of tools that help our clients merchandise their products. These different services all brand Vendio throughout the auction site, wherever our customers are using them.

It is very viral, in the sense that the more customers that use our services the more people see our services and have a potential for becoming a customer themselves.

I do. The reason isn’t dependent upon the auction format; it is really online marketplaces that are growing rapidly. The power of the Internet is connecting individuals, who can be buyers and sellers; they can be individuals looking at business or social networking, or people simply looking for information online. The marketplaces aggregate all of these products, which makes it very easy for buyers to find what they are looking for. As a result it is easy for sellers to get their products in front of the right people.

There are certainly a number of factors that have contributed to their success. The primary factor is that buyers will always want to go where they have the widest selection of goods. In an auction marketplace where the number of buyers visiting a site has a direct correlation with actual price the items sell for; seller will always want to list their products with direct access to the most buyers. You have this network effect where buyers bring sellers, sellers attract more buyers, and it becomes very easy for a leading player in that market to continue to grow at a rate that is much faster than other providers.

We currently have over 50 employees and we expect to be anywhere between 55 and 100 by yearend.

It has really evolved as we have become more mature. The key characteristic that we look for is energy level and drive to succeed. These certainly rank above experience. We want people who are smart and hungry.

There was a time when the Internet was new and many of the things we were doing were new as well and we really focused on finding people from companies who had a least some Internet experience. This was difficult back in 1999 and 2000. As the Internet as evolved, we have realized that is truly just another form of media. Many of the business principles that hold true in the offline world hold true online as well. Today we realize that someone who is a smart marketing person can be successful offline and online. We are no longer looking for people with specific industry experience.

Entrepreneurs need to recognize changes in the industry and respond to those changes. Our business model evolved as the industry evolved, and had we not been able to think quickly and change the business we would never have survived. Another key requirement is to focus on your costs. It is very easy to grow and scale a company if you aren’t focused on the bottom line. Many people fell into this trap in that late 90′s when Venture Capital was being thrown at them. In today’s climate entrepreneurs need to be thrifty and focus on the financials of the operation.