His Boston startup, which helps consumers resell their old electronic gadgets after they've upgraded, had grown to about $35 million in sales for 2011. But it was accepting 22 different categories of products for resale, including videogames, GPS devices, and even computer monitors. And it was spending a huge amount of energy working with retail partners like Wal-Mart and Staples to try to persuade consumers to part with their old devices at the moment they bought a new one.
Those partnerships, Ganot now says, "weren't working out the way we envisioned. They required a lot of resources from our side, but where it really failed was their ability to embrace and market the program. It became sort of a 'check the box' sustainability initiative for them."
Last February, Ganot told his staff that Gazelle would no longer market its "re-commerce" service through those retail partners, and that it would radically reduce the range of products it accepted. The company would focus on Apple products, and higher-end mobile phones from brands like Samsung, HTC, and Blackberry. "We went from working with hundreds of thousands of SKUs," Ganot says, referring to individual product models, "to about 1000 SKUs." Roughly $9 million of Gazelle's $35 million in 2011 revenue, he says, came from its retail partnerships and all those products it was no longer accepting.
But the streamlining didn't set Gazelle back. Revenues for 2012 were $58 million, Ganot says, and "we should do over $100 million this year. Our growth isn't slowing." (One thing that will likely help Gazelle in 2013: last month, eBay shut down its own competing service, Instant Sale.) Ganot says that 30 percent of Gazelle's customers have used the service more than once.
Ganot estimates that the re-commerce business will generate $5 billion annually by 2015. "The number one challenge for us is still building awareness for the concept of re-commerce, as opposed to just putting an old phone into a desk drawer and forgetting about it," he says. Another customer concern, he says, is getting rid of the data on the device; Gazelle performs a complete data wipe before re-selling it. About 80 percent of the products it receives are sold to wholesalers, who frequently ship them to foreign countries where they will command higher prices. The rest are resold through eBay and Amazon.com.
Gazelle has 75 employees on Thomson Place in Fort Point Channel. Right now, all of the processing of devices is handled at a facility in Dallas operated by Teleplan. But Gazelle plans to open up its own operations facility in Louisville, Kentucky later this year. (It used to handle incoming products at its old office in Brighton, Mass.)
"The goal of the Louisville facility is three-fold," Ganot explains in an e-mail. "Expand capacity to meet anticipated future volume increases, directly control the customer experience, and reduce
(My last update on the company was in 2011.)
About Scott Kirsner
Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.
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December 9: Web Innovators Group
Demos of new mobile apps and web ventures at the Royal Sonesta Hotel in Cambridge. Free admission; cash bar.
December 10: Fintech Demo Day
Short demos from startups in the financial technology realm.
December 11: Unpitch
Entrepreneurs and investors sit down for lunch, advice, and feedback. Entrepreneurs must apply to participate.