Corrections or additions?
This article by Barbara Fox was published in U.S. 1 Newspaper on
August 25, 1999. All rights reserved.
For this Online Retailer, Follow the Bouncing Balls
Since last year JustBalls! Inc. has gone through the
cute newborn baby stage and the faltering toddler stage and is getting
ready for first grade. The world’s only website devoted to selling
balls — all kinds of balls — has gotten national recognition
and has been proclaimed one of the top retailers online.
Kingston-based Justballs! (JB!) targets both ends of the market —
colleges and consumers (U.S. 1, August 12, 1998). It started with
five full-time employees, all veterans, now has 10, and plans to
to 20 by the end of the year. It has sold to every state in the union
and to 30 countries. The company came out a winner at the New Jersey
Venture Fair and at a regional fair, Early Stage East. The company’s
CEO, Jim Medalia, is one of two E-commerce CEOs to speak at U.S. 1’s
Technology Expo on Thursday, September 2, at 4 p.m. at the Doral
See page 4 for registration information for this free seminar.
"In one year," says Medalia, "we took seed money, built
a management team, built relationships with more than 50 vendors,
put our warehouse together, integrated our website to the warehouse’s
legacy system which generated all the pick/pack and order entry,
and built the site, put it up, tested it, and are about ready to close
on the second round of funding."
As good as all that sounds, Medalia has few illusions about how far
he has to go. The balls market is worth $2.3 billion in the United
States alone ($5 to $6 billion worldwide), but so far his company
is selling only in the six figures. "Who should be nervous about
us?" he asks rhetorically. "Us."
A big chunk of his second round of private funding must go to
expenses. "It should come as no surprise to anybody that the name
of the game is marketing-marketing-marketing, and after that is
or where you spend your marketing dollars," says Medalia.
That Internet companies are spending big money on marketing —
as high as 50 percent of revenues — has been documented by the
Wall Street Journal (August 19) and Business Week (May 31). Compare
this high percent ratio of advertising to revenue with the traditional
"bricks and mortar" stores’ percentage of 5 to 11 percent.
But bricks and mortar retailers have other expenses (such as
the storefront) that can count as marketing. And, as Medalia points
out, the pace of acquiring market share is much faster on the
"You are raising money against the future value of your
The successful companies are not shy about spending this marketing
money. Business Week figured out that Amazon.com generates more than
$4.50 in revenues for every marketing dollar it spends, and America
Online has nearly $7 in revenue per marketing dollar. Other companies
that get a lot of bang for their buck are E*Trade ($3.44), Ebay
and CDNow ($1.27).
Medalia explains how this works: "If it costs me $50, for
to acquire a customer, and if I can prove that the customer purchases
three times a year for two years, and that the amount he spends is
$50, i.e. a total of $300, and my margin is 50 percent or $150 profit
— that means I make three times what I spend," says Medalia.
"As long as that is a positive number I will spend any penny I
can beg, borrow, or steal, because in a new industry I need to get
"The key is, we are on our business plan," says Medalia.
biggest competition is, in fact, bricks and mortar. Part of our
is to let people know that they can get all those products online
much more conveniently."
The convenience factor works both ways. "Cyber retailers have
to work harder at retaining that customer, because they know that
the other purchase is just another click away," says Medalia.
Aiming for customer loyalty, the site combines a jaunty ambience with
nuts-and-bolts useful information, all overlaid by a cunning
Few retail sporting goods stores stock a good inventory of balls
are low margin items) and the big-store retail clerks can’t be counted
on to give expert advice, says Medalia. In contrast, Justballs!
the customer through the selection. "At the core of our website
are product search and user-profiling features that behave like a
knowledgeable coach and seasoned sales pro rolled into one," says
Medalia, "matching the right products to the customers’ needs,
24 hours a day, seven days a week. The search function is the
of our store. Click on any one of them and you get a full-color
image, a description, the price, and the ability to buy it."
In contrast to the dotcom companies started by 20 somethings, the
JustBalls team has a few collective gray hairs. CEO and president
Medalia, the son of a Boston research chemist and an educator, majored
in film at the University of Cincinnati, and worked in Manhattan for
20 years, most recently building Internet sites. He and his wife,
Hong-Kong born E-Ping, have started several businesses together, and
they have a school-age daughter. She is trained as both an attorney
and an electrical lighting designer, and for JB! she is director of
technology and web development.
Also on the founding team are Joshua Worby (vice president of
formerly licensing manager of NBA Properties), Steven J. Gerke (vice
president of merchandising, on the team that started the Lady
stores), and Joe Ruggear (vice president of logistics, former director
of inventory control at Tiffany and Co.) Incidentally, Medalia found
Ruggear through his job-wanted ad in U.S. 1.
The Jay Group is doing the fulfillment (storing and shipping the
through its warehouse in Lancaster, Pennsylvania. John B. Evans
and chairman of http://www.biztravel.com and Daryl Peck (founder/CEO
Cyberian Outpost) are on the advisory board.
Medalia has been interviewed by Business Week and the Wall Street
Journal, and JB! has achieved the distinction of having one of the
top 10 sites in the industry, according to the trade publication SGB
Medalia also points to a 4.5 rating (out of five) from an independent
firm that rated more than 700 E-commerce sites; fewer than 50 earned
the 4.5 stars overall, and only two other sites — REI and Chipshot
— sell sporting goods. The company planned and designed its
but hired InfoMech, based in Alexandria, Virginia, to integrate
with the website architecture. Freelancers in Arizona and New York
City did the design and the copywriting. The site does not have
pages for quantity customers but does have buttons on every item
coaches to call for quantity pricing. The high-traffic hosting
is Exodus in Virginia.
The firm has negotiated online contracts and deals with such companies
as Lycos (majority owned by one of Medalia’s major investors), USA
Today, and GoTo, and has done a number of radio campaigns, including
a very successful Mark McGwire souvenir baseballs. "The key thing
was not that we sold a lot of baseballs but that we sold a lot of
product into the St. Louis area, and continued to sell from that time
into the Superbowl," says Medalia.
Medalia is looking for mind share. "In building our company, when
we do our PR we have to think about appealing to the financial
the sporting goods industry, and then to the end consumer. Our
is also to get institutional sales." He points to a recent
with Rider University to provide all balls on the campus, not just
for varsity but also for intramurals and physical education, right
down to the ping pong balls for the student center.
Don’t save your pennies to invest in a JustBalls! IPO, because that
may not happen any time soon, if at all. Medalia’s investors are,
he says, "very patient, very deep-pocketed." They are not
worried about cash flow problems and, in fact, they might prefer a
cash cow — a company that consistently has good income — to
a quick sell.
The lead investor, David S. Wetherell, is chairman and CEO of
CMGI Inc. Services. He has been called a genius because he picked
such Internet investments as Lycos and GeoCities. Together, his firms
exceed all but Microsoft and America Online in Internet traffic. CMGI
is a public company but its investors also have privately-owned
capital funds, and in a Wall Street Journal article on August 18,
in which Wetherell was criticized for his level of compensation for
CMGI, it was clear that his net worth is in eight or nine figures.
At the September 2 seminar don’t expect Medalia to answer questions
about an IPO. "We are here to create as much value as we can,
and that may or may not mean an IPO. Executing our business plan is
our focus," he says. "If you care about and look after the
downside, the upside will take care of itself."
Medalia has the successful entrepreneur’s philosophy: "If there
is an obstacle big enough, we put time and energy into overcoming
it, or we step aside and put time and energy somewhere else. You can’t
be daunted by bad news or surprises because you are running a
and the mines are going to go off."
08528. Jim Medalia, president and CEO. 609-497-2400; fax,
Home page: http://www.justballs.com.
— Barbara Fox
People will pay to get the sporting goods they want,
says Richard Lipsey, who sponsored a Harris Poll on this topic. The
consumer’s insistence on quality over price, says Lipsey, "is
so different from what the industry expected."
Last year Lipsey, a 1952 graduate of Wharton with a University of
Chicago MBA, opened a fee-based Internet site to sell market research
and industry news on sports (U.S. 1, August 12, 1998). He licenses
the research from the National Sporting Goods Association, archives
12 trade magazines and newsletters, and adds federal commerce data.
Libraries, manufacturers, and service agencies by the service for
$250 per quarter or $750 per year.
To the current website service he will add the current hot technique
of the day, push technology. Specify Nike or any other topic and he
will send a Topic Alert that the database has a new item about the
company. "It is a reason for people to stay with it," says
Lipsey. He is approaching annual gross sales of six figures.
Lawrenceville 08648. Richard A. Lipsey, president. 609-896-1996; fax,
609-896-1903. Home page: http://www.sbrnet.com.
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