A multi-channel retail model in the
party supplies industry with
retail stores, catalog and the Internet
Services
Retail
AMEX: IPT
iParty Corp.
1457 VFW Parkway
West Roxbury, MA 02132
Sal Perisano
Chairman and
Chief Executive Officer
Interview
conducted by:
Walter Banks, Co-Publisher
CEOCFOinterviews.com
February
2001
BIO OF CEO
Mr.
Perisano was the co-founder of The Big Party, a national chain of 51 party
superstores. Mr. Perisano has 25 years of management experience in
merchandising and retailing. In 1981, he co-founded Videosmith, which
became Boston's dominant video retailer. In 1989 Videosmith was sold to a
publicly traded company called Xtra-vision PLC, which owned 250 stores
throughout the U.K. and Ireland. Mr. Perisano stayed on as director and
was later named Chief Executive of the parent company, which was
subsequently acquired by Blockbuster Video. Mr. Perisano holds a B.A. from
Boston College and an M.A. from Harvard University.
About
iParty
IParty Corp.’s Website, iParty.com
From children's birthday parties to weddings, from
Super Bowl parties to Halloween, iParty uses the Internet to make it easy
and convenient for consumers to plan and give fabulous parties. iParty is
the ultimate resource for party givers to exchange ideas about parties,
select themes, make comprehensive plans, and purchase all of the goods and
services for a successful event.
Planning and executing a
successful party requires creativity, organization, time, and travel -
usually multiple trips, first to view goods and services, then to pick-up
orders. iParty's mission is to provide you, the party giver, with a
simple, seamless transaction process so that you can accomplish all of the
following in an easy, uncomplicated manner in one place, 24 hours per day:
- get
advice from experts
- exchange
information with other party givers
- select
an exciting theme
- shop
for all the goods and services you need
- pay
for everything at once at the check-out counter
- return
to check your order status
- obtain
fast, reliable customer service
We
believe that iParty is unique. We know of no other company, on-line or
conventional, that offers the comprehensive array of content, services and
goods that iParty will provide through a single gateway. Even if the
individual elements that comprise iParty were available separately on the
Internet or elsewhere, the party giver would have to visit dozens of sites
and make dozens of phone calls to replicate what can be done at iParty in
one transaction.
CEOCFOinterviews -
Mr.Perisano, please give us a brief history of iParty?
Mr.Perisano:
"The company was incorporated in l998. When I joined it early in
l999, it was already a public entity.
After it was incorporated, a reverse
merger into a public shell was effected and the
company picked up a bulletin board listing. Very soon thereafter, we
proceeded to raise about twenty nine million dollars. At the end of l999,
we applied for a listing on the American Stock Exchange.
We were actually the first company listed on the American
Stock Exchange in the year 2000. In l999, we spent most of our time
building our site, having engaged a company to assist us in that effort.
We opened the site for business in October of l999 and clipped the last
part of the Halloween season. Shortly
thereafter we concluded that we should proceed with, at least, one other
channel - a catalog. We
published our first catalog in April of 2000.
We believed that in this category, if not in all of the commerce,
our company would be better able to proceed if it had some terrestrial
reality that was linked to its virtual business. That opportunity came up in the summer of 2000, when we had a
chance to purchase assets of a retail chain of stores, that I left two
years before. We began a
competitive bid process to acquire the assets of what was then known as
The Big Party, which was founded in l992 by my wife Dorice Dionne and me.
We grew it to 51 stores and in the middle of l998 we made an arrangement
with our board of directors to leave the company. As part of our deal, we
made a “carve out” in our non-compete agreement to be able to pursue
Internet and direct marketing in this industry. This industry, by the way
is a 12 billion a year industry, and 99% of it is retail.
CEOCFOinterviews - Is your future in retail?
Mr.Perisano:
"Yes. The biggest revenue producer this year will be retail."
CEOCFOinterviews –
Will it be the same three years from now?
Mr.Perrisano:
"I think that it will equalize more as we build our direct business.
I believe there is a tremendous potential here in optimizing the direct
business, which is being conducted through the catalog, through telephone
orders and through the Internet. We have not released any numbers, but we
have progressively increased our business every quarter since we started
the company. As a matter of fact all of our numbers indicate very healthy
trends since we launched our Internet and Catalog businesses. Our
challenge is to now leverage the over head of our brick and mortar company
so that we do not experience the traditional “burn” that cripples pure
play dot com companies. We believe we are doing this.
We re-named the 33 stores that we purchased when we acquired the
assets of the Big Party (we took 33 out of 54) to, iParty.
In l999, they had revenues of about 50 million dollars, and we are
fairly confident that we can grow on that base."
CEOCFOinterviews –
Do you plan to make any further acquisitions?
Mr.Perisano:
"Yes, we are always on the lookout for businesses which we think will
enhance our model - a multi-channel retail model in the party supplies
industry with retail stores, catalog and the Internet. If we see any
opportunities in either of those three areas we would be very interested
in pursuing it."
CEOCFOinterviews -
How do you market the iParty name?
Mr.Perisano:
"We have a budget that would have us spend a fair amount of money
promoting the retail stores. Currently we promote them through radio and
through newspaper inserts. We plan to publish inserts quite frequently
throughout the year into approximately 18 different major Sunday
newspapers."
CEOCFOinterviews –
What is your advertising strategy?
Mr.Perisano:
"We use the circulars that are inserted into newspapers. We advertise
seasonally attractive product. For instance, Super Bowl parties, followed
quickly by Valentine parties, which would be followed quickly by St.
Patrick's Day parties and so forth. We also solicit names, addresses, and
mail addresses from people in the stores. That is a terrific way to build
up our database, which we then use to re-market to our existing customers.
We also purchase lists for purposes of mailing out our catalogue and other
sales brochures."
CEOCFOinterviews -
Which states are your stores currently located?
MrPerisano:
" We have 30 stores in five New England states, Massachusetts, Maine,
Connecticut, Rhode Island and New Hampshire. There are 3 stores in Tampa
Bay, Florida. They are all company owned.
CEOCFOinterviews -
Do you have any plans for expansion
Mr.Perisano:
"It is quite possible that we will do that. The business currently at
hand for us is to clearly establish a path to profitability, which we
believe we are currently on. We
are also working towards integrating the stores with the catalogue and the
website in such a way as to afford our consumer the opportunity to
conveniently order goods through three channels."
CEOCFOinterview -
Do you have a worldwide market through your catalogue and your website?
Mr.Perisano:
"It is pretty much a national business. We do some business
internationally, but that is minimal. The market that we have comes mostly
from our 48 states."
CEOCFOinterviews –
Are you considering a strategy to reach a worldwide market?
Mr.Perisano:
"Yes, we are considering a strategy to reach a worldwide market, and
we would to like to do it in the future as another avenue of growth. Partnering is something that we would be interested in doing
internationally. We are
experimenting a little bit right now, and do have some interest from
companies in other countries that would like to partner with us.
"
CEOCFOinterviews -
How do you maintain a competitive edge?
Mr.Perisano:
"There is a fashion component to our inventory.
It has to be fresh and it has to be forward looking.
There is also a huge children's component to what we do. Our
typical customer is a woman with two children, between the ages of 25 to
45 years old, usually having several parties to plan each year, whether
for birthdays, graduation, Halloween or some other seasonal occasion. Our
competitive edge is clearly in the product offering and the way in which
it is made available. In each
of our channels, whether the stores, the catalogue or the Internet, we
focus on the classic retailing strategy of suggestive selling, so that we
offer the consumer an idea and a way to expand upon that idea. We clearly
understand that our customer is in a competition with the woman across the
street who had such a creative birthday party for her child. And we also
understand that she is in some competition with herself - to exceed the
effort that she put forward last year for the child.
In understanding this, the competitive edge that we have is to make
it possible for this consumer to feel as creative as she can possibly be,
and as successful as she can possibly be by shopping in our channels.
Therefore, on the Internet we give her lots of information and tips
as to how have the most fun at the party. In the store, through the
adjacencies that we offer in juxtaposing the categories and the product in
each category, we offer her many other possibilities.
There is just so much we can suggest and supply to make any party a
great fun and unique experience."
CEOCFOinterviews -
Do you have the cash and the credit to continue with your growth
strategy?-
Mr.Perisano:
"Absolutely. We recently closed down our operation in New York where
we had started the Internet company. We are leveraging the overhead that
we had in the retail stores headquarters for the purpose of incorporating
all of the channels under one roof. This way we can have one management
team rather than two or three separate management teams. We are also using
the stores to drive a fair amount of business to the Internet, and the
existing technology in the stores and in the stores' headquarters. We are
leveraging that technology to be used on the Internet as well. Two of the
biggest expenses that cause a pure-play Internet company to burn cash, are
marketing and technology. In our case we have arrested both those expenses
on the Internet site. We were able to dodge the dot.com bullet and what is
more, we re-invented the company as a multi-channel retailer. We have
plenty of cash to fund our operation, and beyond that, we secured a line
of credit through Wells-Fargo Bank. This revolving line of credit is
collateralized by the inventory of the stores. Now that we are no longer a
virtual company that type of funding is available to us. The year l999 was
a great year for raising money, and the year 2000 was a great year for
sobriety. The year 2001 is here for us to execute our new model which is a
combination of the old and new economies under one roof, offering
something that is very, very basic, a party-goods product which has been
around since all of us were little kids."
CEOCFOinterviews -
What is your burn rate?
Mr.Perisano:
"At the end of third quarter last year we had 7.5 million in cash and
we were burning about a million dollars a month. We will be burning a
fraction of that this year. With our path that we carved toward
profitability we hope to generate cash in not too distant future."
CEOFCOinterviews -
Is there a thought that would like to leave with potential investors and
your current shareholders?
Mr.Perisano: "My vision of this
company is that we will emerge as the only multi-channel retailer in our
category. A very robust category that is now consolidating after a period
of rapid expansion in the mid nineties.
Reaching this goal would have us as the only party business that is
clicking on three different channels: stores, catalogue and the Internet.
This is an industry, which continues to grow 6-10 % a year, and where the
consumer is just now getting on line.
Therefore, it looks pretty well
for our future" |
