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Building A Better Shopping Site, 1SaleADay - Interview with Ben Federman

Podcast Length: 

Welcome to Zing Talk, where Benzinga brings you the biggest names and brightest minds from Silicon Valley to New York City.

Today our guest is Ben Federman, CEO and founder of

How ya doin' today Ben?

Ben Federman: I'm doing great, thank you.

Can you tell us a little bit about yourself and

Ben Federman: Yes. – we're a day-to-day website. We offer one item in five different categories, and that one item is always offered at a remarkable discounted price, generally anywhere from 80% to 95% off.

I personally specialize in the marketing field and buying, making sure that we always have the right item at the right price. From there we have our loyal following and customer base who pretty much trust that everything we list is going to be a great deal, and they'll be happy with it and they come back everyday. We have about 350,000 daily visitors who come to see the deal we're offering on that particular day.

What sets apart from other deal-a-day discounts?

Ben Federman: We'll start with discounters. They have a wide variety of different categories and items. And the more of one specific item that you're able to sell, the better you can literally buy it. So that's how we were able to undercut the bigger retailers and even the discounters as well, because they're buying 1,000 or 500 of one item in multiple different categories, and we're buying 10,000 piece of one item, or 5,000 depending on what the item is, and we're literally closing out the entire line. With that we're able to offer a much, much more competitive price.

As far as all the other deal-a-day sites, there are many. A few small ones, there are very few that are as large as we are. What sets us apart from all the other sites is that we follow the integrity of the day-to-day deal. We make sure that, even when we have an item that we're able to markup a little bit, we intentionally don't – we stick to our small margins and move more volume than anything, and make sure the customer is satisfied.

We never say, let's take an item today, since we have 350,000 people, and mark it up $5 or $10 – we just don't do that. Everything has to be at the best offered price. So we're essentially pushing the wholesale cost to the customer with a very small markup, and people love it. Some days, we're even willing to lose money to attract people. We see the greater picture and understand what it takes to have the trust of a loyal following.

We make sure that every single item, whether it's a freebie, whether they're getting it just to promote the site, or whether they're actually paying for it, it's the best price they've seen or experienced for that particular item.

Can you tell us how the site got started?

Ben Federman: The site started in a living room, as far as the location is concerned. I was working in web sales and trying to see how you can offer customers electronics and useful gadgets. It was about four years ago. I was a sales rep, I wasn't a buyer. [But] we were able to sell specific items and buy, let's say 50 or a few hundred of one specific item or camcorder or television. But offering hundreds of thousands of different items, you're limited in how many you can buy of one particular item.

At that point I wondered: what if we just offered one specific item? We can come to manufacturers and say, “We're able to move 30 to 40 times what anybody else can move,” they definitely would be more inclined to give us a better deal. From there we launched Initially, I decided I'm not gonna make money in the beginning. I came to terms with that.

I decided that instead of putting all our money into Google (NASDAQ: GOOG) or Yahoo! (NASDAQ: YHOO), we're gonna give that money to customers. So the first six months to possibly a year and a half, we made sure not to make money on an item. So we'd buy an item and sell it below cost so there was no way anyone could beat that price, which is below wholesale price. With that we had the best price out there. We gained our customer following as well.

Once the word spread, and it spread fairly quickly, we were able to start making a small profit on [the site]. And we still make sure we're able to keep those margins very close to bring in more people. You know, you can make 500 sales a day and make $5 or $10 on each. Or you can make 10,000 sales a day and make $0.50 or $1.00 a day and be better off that way.

In what ways has the website grown and evolved since then?

Ben Federman: Since then we've grown as far as trust with manufacturers and suppliers and liquidators, [who] know that if they want to get rid of merchandise, they do it at Once that happens you start getting better deals. You have the power to kind of tell the vendor, “We're not gonna pay more than this price, ‘cause nobody can sell more than we can.” And we pass that discount and saving onto the customer.

How are you able to build up that reputation with vendors? How long did that take? I imagine that for a while you were at their mercy.

Ben Federman: Correct, for a few years. And when I was at their mercy – when the vendor wasn't willing to give us those great prices – we still made sure to give the deal to the customer. In my head that was marketing. It's not even that I want to pay $5 and sell it for $5.99; the vendor is not budging from $6.50. I'll take it for $6.50 and still sell it for $5.99. I'll take the loss.

We took it much larger. Sometimes we'd buy a $35 item and sell it for $29 or even $19.

Do you have any new plans going forward for the site?

Ben Federman: We always have great promotions coming up. We don't generally like to reveal promotions before they come up. But we come up with different themes. [We previously had] a Chunk of Junk, where we offer [a chunk of junk] for $5, which is anything from a television to a… It's generally about 20 small items.

The retail price is probably $300 to $400. It creates a lot of Internet hype, and our real dedicated customers who are on there day and night take advantage of this offer. We sold out last time in three minutes. The servers were overloaded and went down temporarily due to everyone trying to order at the same time.

How do you think the recession has affected

Ben Federman: That was initially an issue. I did not have any backing when I started. This was all from my credit cards and talking vendors into giving us a seven-day period to pay them and being very careful and conservative in how I got it and how I sell. But I found a way to make it work. I knew it would be big someday.

Another advantage I had was that if I had a personal line of credit of 10 cards at $100,000, I would be able to continuously use that same money because I only buy merchandise that I sell, or I try to. The items continuously sell out; I'm not stocking it for a year and need a huge line of credit.

Eventually, once we had a history and they were able to see that we were billing tens of millions of dollars a year, that's when they started to realize that this is a company that is able to buy large volumes of goods.

You came to the business in an unusual way. While many startups are born in college classrooms, you joined the military at age 18. How do you think that unique route has shaped your approach to business and entrepreneurship?

Ben Federman: It definitely helped me as an individual. It instilled me with a lot of integrity, a lot of strength. It really put me on a straight path. I learned how to appreciate the small things, and how to work hard for something.

I essentially followed the same line for how I run the company [and] for how I expect people to treat their fellow employees and how I expect them to treat the company, and how we treat them and respect them. It really gave me the ability to see this thing through.

Most people after a year of not making money and losing money would be long gone. But it really gave me the fight to stay and continue. There were hard times. Times when you don't have any backing and you're doing it all on your own. It gets the point when you're like, “Am I out of my mind?” People told me that I was. But it gave me the real fight to continue and do what I thought was right.

I'm sure your customers are happy you stayed.

Ben Federman: Yes, they are, absolutely.

As you mentioned, there are a ton of other deal-a-day sites out there. What advice do you have for those types of websites to help them achieve the kind of success you have?

Ben Federman: [With what we're offering], there really aren't any competitors in this industry. But my advice is that you need to make sure that you answer every e-mail and treat every customer like it's your only customer. And don't be greedy; when you finally get a really good buy, don't mark it up too much, ‘cause eventually [your customers] will realize it and won't trust you.

I'm gonna give you the loudspeaker now, so you can sound off on anything that's going on in the world that you think needs your attention or is not being sufficiently reported, or just sound off on any issue that you really care about.

Ben Federman: Well, we do have 350,000 people that come to 1SaleADay, so clearly people are aware of us. I believe there could be 3.5 million people coming to us in the near future because once the word continues to spread and they learn that they don't have to go to their local store to buy memory cards, MP3 players, at even 20% off retail, they can come here and get it for 90% off retail.

The message really would be to be smart with how you shop, and save money. Because everybody wants little toys and gizmos and gadgets and household items; and those are all the different categories we have on the site. Do some site comparison shopping; go online, look around, get involved. Save a lot of money.

The message I would relay is to take some of that money that you saved and possibly give it to a local charity. You would have been spending that money either way, [so] maybe do something good for somebody else.

Do you think sites like yours threaten traditional brick-and-mortar retailers?

Ben Federman: I do believe so, yes. We don't have the same overhead they have, and we're able to buy better. We're like a brick-and-mortar store that's located all over the Web. So we have storefronts on every main street and we have access to everyone.

What was the best and what was the worst investment decision you've ever made? strong>

Ben Federman: I'm 27 years old right now. I started the company when I was 24, 23, so I haven't made many business investments before. But I would say the best investment that I've ever made was that I've been fortunate enough to be involved with some charity work.

With businesses, you can put money into your business and have a problem later on. But with a charity, it's [money] going somewhere good, and it'll stay there. Nobody can ever take it away. So that's by far the best investment I've ever made.