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Innovation Economy

Web retailer has found success, but now it’s looking for recognition

CSN has a warehouse in Hyde Park and may open another in the Western United States next year. CSN has a warehouse in Hyde Park and may open another in the Western United States next year. (John Tlumacki/ Globe Staff)
By Scott Kirsner
Globe Correspondent / December 5, 2010

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Type “holiday decorations’’ into Google, and you’re likely to wind up at HolidayDecorationsDirect.com, a site that sells a mind-boggling array of artificial Christmas trees, nativity sets, and illuminated rooftop displays from a toy soldier to Santa astride a motorcycle.

The selection is equally deep if you’re shopping for gifts at Luggage.com, BinocularsWorldwide.com, or ToysAndGamesOnline.com.

All of the sites — plus about 200 others — are run by a privately held Boston e-commerce company you’ve probably never heard of, CSN Stores Inc. CSN will chalk up about $350 million in sales this year, according to company officials, and it now employs nearly 700 people. On the most recent list of the top 100 e-commerce sites, compiled by the trade publication Internet Retailer, CSN shows up at number 61, higher than better-known brands like REI, Abercrombie & Fitch, Lowe’s, and Diapers.com, which Amazon.com recently bought for $545 million. And CSN has raised not a dollar of venture capital funding.

CSN and its founders, Steve Conine and Niraj Shah, have built a very big business by understanding how retail is changing in an age when purchase decisions often start with a Google search. And yet a major challenge for the company in its next phase of growth will be creating a brand that consumers actually want to tell their friends about. Think about how positive word-of-mouth helped services like eBay, Zappos, Netflix, or RueLaLa grow.

“We’ve done a terrible job building a great brand, even though we’ve been successful in other respects,’’ admits Shah, CSN’s chief executive. “If you need a rug, we may not be top of mind even though you’ve bought a couch from us in the past and were happy with the experience. And those happy customers may recommend us to their friends who are buying couches, but not for other merchandise we sell.’’ Customers often stumble across CSN’s outposts at the conclusion of an online search, but they haven’t yet been given a reason to begin their shopping at one the company’s sites.

Shah and Conine went to college together and started their first company, a website development firm called Spinners, together. It was acquired by iXL Enterprises Inc. in 1998, for a mix of cash and stock. Since the duo didn’t sell enough stock prior to the dot-com crash, the deal didn’t exactly give either one enough money to retire to a private island, and they were both still in their mid-20s. In 2001, they worked on a start-up concept that would help big companies better manage their employees’ mobile phone accounts, but that business never got off the ground.

They launched CSN Stores in 2002 (the company’s name contains both of their initials). The first website they built was RacksAndStands.com, which sells entertainment centers, stereo cabinets, and CD and DVD racks. Realizing that consumers would usually conduct a Web search if they couldn’t immediately think of a merchant that sold a given product, CSN’s founders purchased ads on search sites like Google. Type in “entertainment center,’’ for instance, and you’ll see an ad touting RacksAndStands.com’s low prices, free shipping, and extensive selection. If you click the link, CSN pays Google about $1, but the odds are high enough that you’ll buy an $899 entertainment center from the company that the advertising investment will pay off.

Many people assumed that the e-commerce revolution was over when sites like Pets.com and Furniture.com imploded. But those sites raised millions and spent wildly to acquire customers. CSN took the opposite approach, spurning outside investment and approaching the business methodically.

“If they could make a little money on their first sale, they realized they would be in good shape as the business scaled,’’ says Mary Cronin, a Boston College professor who has known Conine and Shah for more than a decade. “People were saying, in the wake of all the dot-com failures, that you could never sell furniture online, even though furniture and home goods are categories where people spend a huge amount of money.’’

Today, CSN operates sites that specialize in everything from recliners to sleeper sofas to waterbeds. (The company is among the largest sellers of furniture online, and has been profitable from the start.) CSN’s newest site, launched last month, is called JossAndMain.com. Following the “flash sale’’ model pioneered by sites like Gilt Groupe and RueLaLa, it requires that you first become a member (membership is free, and mine was “approved’’ in less than an hour) before being able to take advantage of deals that last for limited time periods. Last week, the site was offering an array of housewares at a discount, including cutlery from Reed & Barton and glassware from Bormioli Rocco.

Nearly all of the merchandise CSN sells is shipped directly from the manufacturer, so that the company doesn’t need to own much inventory or operate a network of warehouses like Amazon. Their lone warehouse facility, in Hyde Park, handles product returns and also stocks merchandise that sells consistently and can’t be sent directly from the manufacturer in a timely way, like Aeron office chairs from Herman Miller, All-Clad cookware, and Bugaboo brand baby strollers. Shah says the company may open a second warehouse in the Western United States next year, to expedite shipping to that part of the country.

Conine and Shah are both straight-shooters, and they acknowledge that they should have begun investing in building a recognizable brand sooner. (CSN’s closest rival, Nebraska-based Hayneedle Inc., adopted that name last year, discarding the generic-sounding NetShops. It operates a network of about 250 online stores, like Hammocks.com, and has raised more than $35 million in venture capital.) But the pair seem reluctant to hire a chief marketing officer, and instead seem like they plan to manage the branding effort themselves.

Both Shah and Conine studied engineering at Cornell University, and their top marketing executive joined the company just after college. Says Nabeel Hyatt, a longtime friend of both Conine’s and Shah’s, “They are consummate operators, and they’re not about glitz and glam’’ unlike, say, Zappos’s founder Tony Hsieh, who has 1.7 million Twitter followers and recently published a book.

But establishing a brand that sticks in shoppers’ minds is essential to the company’s continued growth. “Converting CSN’s customers from a one-off purchase to a repeat purchase is a huge opportunity for them,’’ says Chip Hazard, a partner at Boston-based Flybridge Capital Partners. “It would fundamentally change the profitability and dynamics of the business.’’

Despite the occasional calls from investment bankers interested in facilitating a sale of CSN Stores to a bigger entity, Shah says he doesn’t let those conversations last very long. “We’re very focused on building it right now,’’ he says. Conine said at a recent conference that the company has “tens of millions’’ of dollars in the bank, and both he and Shah have said their goal is for CSN to be a publicly traded company one day.

“They’re seeing that there’s a next level they can get to,’’ says Cronin, the Boston College professor. “They believe they can be the next Amazon or IKEA.’’

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.