Shopster.

com
Group 6

Introduction
Samarasekera and Matt Cox
Founded the Shopster.com
Low Risk turnkey-commerce
service
First to market competitive
advantage
Network for drop
shipping supplier
and seller to
connect

Business solution
to start or expand
business online

Zero Inventory for retailer

Retailer are only responsible for
marketing their product and store front

2004
Started
with model

Aug 2005
Beta
testing

Jan 2006
Full
Operation
2007
Growing
100%
month over
month

Vast Product category

Products range from health

beauty to large consumer
appliances

In 2012 shopster had around 1.5

million unique product available
Give access to 85000 product
supplier and retailers
Shopster allows to sell any size
item via drop shipping

22
employe
es, 20
countries

850000
products

Sales
increase
d 1000%
over
previous
yr

Start up fee $99

Monthly fee $29.95
Yearly fee $329.99

2007

Business Model

Shipping
Cost
Transection
cost

Payment
Order

Costs

Payment
Order

Virtual
Retailer
SHOPSTER

Supplie
r
Ship

Revenue:

Start up fee
Subscription
fee
Extra fee
for extra
feature

Custome
r
Ship

Business Model
Online shopper
makes purchase
at Rstore
websites

Shopster submits
PO to supplier

Shopster
informs
owner

product
fulfillment and
customer service
functions at
minimal costs

Supplier ships pdt

direct to shopper

Shopster sends
payment to
supplier

Shopster remits
profit to Rstore
owner.

Rstore
owner
accesses sales
information
from
the
website

Drop shipping- other player

Customer Service Support

Product delivery Particular store
Particular products

Customer/shopper Shopster
customer
service
operation

Expanding
the
Customer
Base

Clients store manager

Affiliate marketing
Existing online retailers
to become Shopster
clients themselves
Manufacturers,
importers and wholesale
distributors
Handy sales outlet for
the large numbers of
small handicraft makers,
specialty artisans,
painters, sculptors and
hobbyists

Drop Shipping

Auction
Site

Client

Shopste
r

UPS, FedEx or DHL to

ship goods

The selection of
carrier
Carrier costs
Time frame

Shipping table

Dispute resolution

Reports and Sales Tracking

Client
The products being sold on the site, the total sales, the product
returns, the profit earned

Start Up & Growth

Sarath
Samarasekera

Matt Cox
Michael
Barrette

Founders

Matt and Michael had put in 18

months of work before they met
Samarasekera.
Initial idea was to assimilate all
parts of an online business and
provide them all together in a
mall format- could not implement
because Yahoo had just started a
similar service.
The final model of shopster was
born
after
discussions
with
Samarasekera.
Shopster would serve as a
connection
between
people
wanting to start an internet retail
store and suppliers interested in
using
the
internet
as
an
additional sales channel.

Initial Funding
Initial personal funding $40,000 2004
Used to develop
software and other
processes

Second
Round
funding $500,000

Investo
r
Funding
$500,00
0 -2005

Beta Testing the System

August 2005
A store was created and
actual order placed.
Purchase was accepted but
product was not shipped
System failed very first test.

The team worked hard to find the breakdown.

In the process therein relationships with suppliers also
improved.

Early Challenges

The primary task was to generate interest among both suppliers and
retailers.
They needed the suppliers and manufacturers to showcase their
merchandise
and the retailers represented the other side of the coin
2005
o Persuading suppliers was a major
challenge
o Lack of sufficient retailers put of
many suppliers.
o Standardization required for Shopster
setup which was an upfront cost
hence several suppliers were
sceptical.

o On the other hand retailers were

sceptical due to lack of suppliers.
o Signing up suppliers was done
through cold calls to generate
interest which in turn caused
overheads.

Full Launch
1

Resumed full
operation after
automating the
inadequate
manual
processes.
Clients gave :
Full margin and
Own shipping
cost
Still strong sales
growth was
experienced

January 2006

Reasons for
collapse

shopping
SeasonShopster
sytem
collapsed
due to high
volume

Christm
as

October
2005

The first day of launch,

Revenues
1stst day $34,
Second day$64
$500, $12000
So on..
.

Weak
Weak Order
Order
HandlingHandling- a
a no.
no. of
of
logistical
processes
logistical processes
being
being handled
handled
manually.
manually.

Maximum
Maximum Load
Load that
that
could
be
handled
could be handled was
was
only
only 50
50 items
items per
per
day
day

Subsidizing
Subsidizing salessalesShopster
Shopster Paid
Paid for
for
shipping
shipping unlike
unlike
amazon
amazon

No
No Credit
Credit charges
charges or
or
transaction
transaction feefeeWhole
Whole sale
sale price
price
from
suppliers
from suppliers
passed
passed directly
directly to
to
retailers
retailers

Enabled
Enabled shopster
shopster to
to
offer
lowest
offer lowest prices
prices

Would
Would merchandise
merchandise
still
still seel
seel if
if products
products
were
sold
were sold at
at full
full
margin?
margin?

MANAGEMENT
Michael Barrette:
Co-creator of a successful local film
Left the company in December 2006
Matt Cox:
Six years as a programmer analyst
Bachelor of science program
Little knowledge about business plan
Quit his job

Founder 2004

Matt Cox
President of
Technology

Sarath
Samarasekera
CEO

Michael Barrette
President of Marketing
Strategy

Sarath Samarasekera:
Experience in management
University of Calgary
President of student union
Universitys budget and finance committee
Technology consulting startup: part of management team
(project management, technology strategy, infrastructure & implementa
After London School of Economics: Consultant for Startups

COMPETITION
No full-service competitors
Only for different parts
Websites providing access to range of wholesalers
Building of internet websites and no full level of integration
Closest competitor: GetEstore
First-mover advantage
Switching Costs for Shopster Customers
Large community of retailers & suppliers (network effect)
Takes long for comptetitor to imitate

SHOPSTER ADVANTAGE
Provided e-commerce, product fulfilment and customer service
functions at minimal cost
Average annual cost of running an online business on ones own
was >$13,000; while through Shopster it was only $329.99
Retailers dint have the burden of tie up cash, inventory
management, returns or deal directly with customers (No
operational responsibility)
Clients website was optimized for search engine visibility
Retailers received the full credit for the sales as Shopster did
not use cookies

TECHNOLOGY
Relied heavily on communication systems that linked Shopster
to computers of retailers, wholesalers and shipping company
99.8% uptime for its servers with multiple power source
backups and advanced security monitoring
All transactions were made through in-house payment system,
Secure2u which used encryption technique to ensure privacy
Continuous investment in technology which led to reduced
checkout process time, higher efficiency of internal operations
and faster communication among stakeholders

CURRENT CHALLENGES
Complex revenue model involving transaction charges, credit
card costs, subscription fees, promotional costs
Operate frugally due to limited financial resources
Supply chain management, integration of backend infrastructure
and systems
Other challenges were recruiting new retailers, branding
expenses and lack of retail management expertise
Handling retailers request related to web enhancements and
offerings

Recommendation

Increase the no. of listed merchants by giving them 30 days free

trial (so they could be able to decide the membership

Shipping cost should be handled by shopster because they could

enjoy mass distribution and economies of scale in distribution and
would be charged less by shipping companies

Different level of membership- Supplier listing more no. of product

or expanding their business could be charged more and small
suppliers listing few product could be charged less

Fully customizable stores for a unique and relevant shopping

experience

Search engine friendly stores allow consumers to find you quickly

and easily

A fast, easy and secure shopping experience

Recommendation

Most of the sales happens at the time of Christmas: Extra

temporary resources could be hired to handle the festival
season

Special membership program for best retailer and help them

to reach more customer by marketing their Rshop

Helping manufacturer and wholesaler to predict the future

sales by supplying them data of sales of different product
categories

Each retailer can have a e-wallet associated with their

account and immediate payment can be done in their
wallet. They can redeem the money after a particular level
is achieved of use to pay the subscription fee or buy product
on shopster stores (right now they have monhly payment)