Face off: The home-grown business taking on a global cosmetics empire

James Patten had an inkling online shopping was about to take off in Australia when he partnered with IT guru Brad Carr in 2007 to begin building RY.com.au, the local answer to international discount beauty empire strawberrynet.com.

As the owner of a hair salon, Patten had noted a shift by local consumers away from international cosmetic sites that sold products with ingredients of questionable quality. No one had brought a credible alternative to market though, so he and Carr joined forces to fill the niche, and the entrepreneurial pair haven’t looked back since.

Just two years after launch, RY.com.au has grown to become the country’s largest online hair care, skin care and beauty store, attracting over 150,000 local customers with its competitive prices, speedy delivery options and excellent customer service. Consumers in the Asia-Pacific have also begun to turn their backs on strawberrynet.com to shop with RY, choosing instead to buy from an Australian company thanks to this country’s stringent cosmetic standards and regulations.

It hasn’t been an easy road though. Here, Patten discusses the challenges the business has faced in becoming the market leader and reveals three things every online business needs to succeed.

What’s the biggest challenge you’ve faced since launching the business?

When we launched, Australia was a little bit behind when it came to online retailing. A lot of the big brands had been burned by the internet creeping up on them in other territories, which meant they’d cracked down making their products available to independent retailers here. So for us, getting access to products to bring them to market in Australia was a challenge.

Traditionally, a few big players, like Myer, David Jones and Terry White Chemists, have dominated the cosmetics market so it’s been hard to convince some of the big brands to allow us to sell their products. Mostly because to these big brands we just look like two guys with a bright idea – many of them just haven’t been ready to make the shift.

We had to take it one step at a time, be patient and persevere – we really lived by the old saying ‘the squeaky wheel gets the oil.’ We found they might say no to us in January but say yes in June, so by not going away, approaching them in a professional manner and building relationships with key decision makers we were able to show them we were serious.

What aspect of the RY.com.au business are you most proud of?

I’m proud of the fact that we’ve never gone backwards, from month one. We’ve never had a bad month, despite falling retail sales and brands saying the market is slow. We’ve continued to grow, and I’m really proud of the fact that we’re doing so well in a fragile market.

Mining executives might go on and on about the growth their businesses see, but they’re in a booming market so what do you expect? We’re not, so to see continued revenue and customer growth each month, as well as increasing customer loyalty, is something to be proud of. We’re obviously doing something right!

What three things do you think a successful online business must have?

Customer service is the first thing. You need to run it like a dedicated business, with dedicated online support. Too many businesses see online as an add-on; as just another channel to generate a few extra sales, so customer service isn’t a focus.

Secondly, you need a great product. You can’t decide to sell six-finger gloves online, even if they’re the best six-finger gloves in the world, because there isn’t a market for them. So you need to sell something that people want; do some market research, find out what people are searching for online and choose the best product accordingly.

Finally, you need to use the most up-to-date technology. People are pretty savvy now, they want to see shopping guides, videos and security and they want to be able to check out without leaving their details. As people become more fussy, you need to be ahead of the technology game. You invest in your online store in the same way a bricks and mortar retailer does in a new shop fit every four to five years – you need to do an overhaul and make sure you’re using the best tools.

Looking back, is there anything you know about running an online business that you wish you’d know when you launched RY.com.au?

It would have been nice to have launched with the help of venture capital, because it probably slowed our growth a little bit to have funded the business with our own money. Had I been a little bit more experienced in business back then, I probably would have put the idea together and gone and pitched it to some VCs.

The benefit of not having done this though is that we’ve held onto control of the business and been able to make quick decisions, which is so important in an online business. Once you secure and investor and become a bit more corporate, you lose the ability to move quickly.

We will be looking to land an investor in the next year or so, because we need to make sure we’re at the forefront of the online market so we can continue to lead in Australia.

How do you and Brad manage your partnership? Are there any secrets you can share?

It works really well for Brad and I, but that’s not to say it works for everyone else. Brad and I weren’t friends before we went into business together, whereas a lot of people do go down that route with their friends and family. The benefit of us not being friends meant that everything was set up with the correct documentation when we launched the business, so we both knew exactly where we stood right from the get-go.

You have a responsibility not just to yourself, but also to the business to have partnership agreements drawn up. We have 25 staff, so if Brad and I were to fall out over something, all of their jobs are in our hands.

There’s always going to be disagreements about the way you want to do things, but after you’ve been in business together for as long as Brad and I have, you do realise that your partner must be making more good decisions then bad. We do have a policy though that if we both don’t agree on something, it might not actually be a good idea.

Do you have any words of wisdom for other entrepreneurs?

I have two pieces of advice. This first: You’re going to be told ‘no’ more often than you’ll be told ‘yes’, so you need to be persistent. If you believe in something, work at it.

And second, you don’t need millions of dollars in venture capital to launch. You can dip your toes in and test whether you’ve got a viable business by spending a little bit of your own cash to get your idea off the ground.

What’s next for the RY.com.au business?

This year, we’re focusing on doubling our range. Traditionally, we’ve sold professional products and we’d like to move into the luxury market and stock brands sold by the big department stores. We want to be the number one choice for customers who are looking for cosmetics online.

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