Ruby Lane: An Antique Business That Isn’t Antique

Partners Tom Johnson and Tim Wilcoxson of San Francisco formed Ruby Lane, an online version of the classic multi-vendor antique mart in 1998.At that time, the terms virtual storefront and online mall, hadn’t been invented yet. eBay was just getting started and people were just beginning to offer previously-owned merchandise online. Security and privacy were big concerns for buyers and sellers alike. Both Tom and Tim have degrees in computer science and both worked for large computer companies before deciding to brainstorm an online business that would allow them to become independent of the corporate world. As collectors, both men were interested in antiques, but their corporate experience showed them they needed a strong business plan if they were going to make it, especially since they wanted to finance it themselves.

In developing a business plan, Tom and Tim set several goals: First, the web site design had to be easy to navigate. Second, the site itself had to convince people that buying and selling was safe and secure – the site had to be its own salesperson, convincing people it was okay to take the risk. Third, they decided that the products offered through the site must be high quality. This would mean price points were higher, but volume might be lower until the idea caught on. Guidelines limiting sales to higher quality antiques rather than flea market items were put into place. Prices would be fixed but negotiable, just the way it is in the real world. This plan differentiated them from other auction type sites that were popping up.

Educating consumers is an expensive proposition, so they planned to keep overhead low by appealing only to those who were already computer savvy. Investigation into what was already offered for sale on the Internet provided them with ready-made customers. As antiques buyers are also antiques collectors, they created a search engine to identify online antique and collectibles sites. Since there were only seven at that time, they contacted each seller and offered to become an additional distribution point for the seller’s site. By providing a clearinghouse of information for others’ sites, not actually selling anything themselves, Tom and Tim were able to ramp up quickly. They also began to offer web hosting of virtual storefronts for those who didn’t want to do the technical end themselves. They created their business plan to work from the distribution standpoint, the web hosting standpoint, or both. Soon, they found that hosting virtual storefronts was the right path and they closed the search engine function.

Now, Ruby Lane employs 10 people from their own homes around the US and UK. To keep in touch, they do a lot of phone conferencing everyday; it’s a requirement to keep abreast of the hundreds of shops (many of whom are listed on Ruby Lane exclusively) which make tens of millions of dollars in sales annually

The Small Business Professors' Words of Wisdom

A strong business plan is always a good foundation, but it is an absolute must for a star-up business that is breaking new ground. A business plan forces you to investigate your competition, allowing you to identify good and bad strategies. It makes you quantify your own assumptions about the marketplace. It also requires you to squarely face the financial realities of starting a new business. Even though Tom and Tim had saved enough to keep the business going, year two was very lean by their own account. By year three, when the business began to flower, Tom and Tim were in the position of fending off people who wanted to invest, merge with another company, or take them public. They resisted the pressure because their experience with their own business plan helped them thoroughly evaluate and see weaknesses in other’s offers. Many of their competitors took these offers and disappeared when the dot com bubble popped. You can look up business plans on-line and follow their formats. It’s a very useful tool even if you’ve been running your own business for years.