Ebay's "Little Monster"

Gulf Coast Business Review
August 22-28, 2008
ENTREPRENEURS by Mark Gordon, Managing Editor

Jim Moore grew his startup tire and wheel business over the last decade into a $26 million market leader by harnessing the power of the Internet. But get this: Moore's company, Sarasota-based O.E. Wheel Distributors, doesn't even have its own Web site.

Instead, the company sells its products solely over ebay, the popular Internet auction site where entrepreneurial dreams are cyber-made.

While an EBay spokeswoman declined to say how large Moore's company is in comparison to the 10 million-plus other worldwide eBay sellers, she did say it's big enough to be one of the few sellers that has an entire team of eBay personnel devoted to its account. They built a great business plan and have marketed it real well. Says Dora Fang, who works in eBay's parts and accessories department. They have taken a niche and grown it.

Or, there's how O.E. Wheel sales manager Shawn Durrant puts it: We've created a little monster on eBay.

So monstrous that O.E. Wheel Distributors - the O.E. stands for Original Equipment - has to be considered something of an anomaly in the Internet era, where Web sites, even many decent ones, could be developed and hosted for as little as a few thousand dollars a year.

We are still in the dark ages, in some respects, admits Moore.

But not dark enough to keep the company from shining a bright light on sales. Indeed, the company's $26 million annual revenue figure has grown about 10% to 15% a year each of the last five years, says Moore, who runs his 20-employee eBay empire out of four Sarasota warehouses totaling more than 55,000 square feet of storage space.

Many of the products the company sells, such as its variety of car and truck tires, are bought wholesale and resold to consumers. It also runs its own manufacturing line for a series of chrome wheels, through a partner in China.

Despite the success, O.E. Wheels is on the verge of launching are structuring effort, both to guard against complacency and protect itself if the economy were to grow even worse. This is the first year we might see a slow down, says Moore, Now we are looking at markets we have never looked at before.

What's more, the transformation is eventually scheduled to include a new company-run Web site. (The company does own the domain name for oewheels.net, which it uses for e-mail). (Side Note: OE Wheels has a website now at www.OEWheelsLLC.com)

Passionate Consumers

O.E. Wheel's warehouse operation and distribution system is fittingly simple for a company without its own Web site. Moore himself will sometime don a backwards baseball cap and get in a crane to help move crates around.

On any given day, the series of buildings, in an industrial park on the Sarasota side of the Sarasota-Manatee County line, are comprised of dozens of stacks upon stacks of white boxes, each containing a set of hubcaps or tires. The products are used in cars from Volkswagen Rabbits to Mercedes Benz convertibles.

And of course, the company sells plenty of top-line chrome wheels for fancy cars such as Corvettes and Camaros. Base prices for all of its products range from $19 for a package of lugnuts that can be used for Hondas or Mitsubishis to as high as $1,089 for a set of four Ford Mustang wheels and tires. On eBay's system, a potential customer can bid on a product and wait it out until the auction ends, or in many cases, buy the product outright by meeting the seller's buy it now price.

Passionate end users such as Corvette owners go a long way toward explaining just how Moore has been able to grow a company into $25 million annual sales territory without his own dot.com to pad the cash registers. People are in love with their vehicles, Moore says. They want to dress them up and make them look more powerful.

And it's an appetite that appears to be waning only slightly, even in the midst of the economic downturn that has crippled auto sales nationwide. It helps that Moore is selling accessories for a variety of high-end cars that are already purchased.

High fees

Moore says he realizes the Web site boat left the dock a long time ago, but he's hoping his patience will pay off when he finally does decide to launch one. He has no intention of totally giving up the company's eBay presence, but, says Moore, We've pretty much expanded [on eBay] as far as we can go.

Not only that, but the more O.E. Wheel's grows its sales presence on eBay, the more it pays out in auction hosting fees, which vary in price depending on it an item is sold and for how much. For example, Moore says O.E. Wheels paid San Jose, Calif.-based eBay $66,000 in auction fees in July and will be on the hook or another $87,000 in August.

Costs like that go against Moore's philosophy of keeping expenses low and limiting long-term debt, two aspects of running a business he says should top every entrepreneur's to-do list. Infact, using eBay as far back as the late 1990s to serve as the company's sales hub was initially an inexpensive venture.

Moore's low debt mantra is especially carried out in inventory. O.E. Wheel's stock of $5 million worth of tires and wheels is already paid for, for instance.

Keeping ahead of inventory like that is an expensive but worthwhile move, says Moore. For starters, a paid-for inventory allows Moore to keep his prices competitive.

What's more, an all paid for inventory serves as a good checks and balance system on his expenses and debt. Says Moore: It tells me I'm never in trouble.

Moore is hoping the company's recent contract with Infopia, a Salt Lake City e-commerce software and consulting firm, will keep him out of even more trouble. The company specializes in developing Internet business models for small and midsize business - especially ones that have grown through eBay.

Growth spurts

All this Internet chatter is a long way from Moore's humble beginnings in the aftermarket auto accessories industry. Says Moore, I started out with absolutely nothing.

That was is the 1980s, when he sold used hubcaps out of a garage in Clearwater. He made $68 his first week.

Moore eventually moved to Sarasota, where first he worked out of his parent's house. Back then, in the early 1990s, he would buy up old hubcaps for pennies, rebuild them and sell the new products to body shops for a sizeable profit.

The business grew in spurts.After the slow beginning, he realized he found a niche in selling wheels over eBay. He was even making enough money to rent a small office, on Sawyer Road in Sarasota.

That's when business took off, to the point where Moore had to buy 16 shipping containers to store all the wheels and tires he was selling.

And when the business grew even more earlier this decade, Moore discovered that it was getting harder to please all the customers, all the time, without any sort of new products.

So in 2004 he began scouting for partners in China.

Through a business acquaintance and one time O.E. Wheels customer, Moore met an English speaking Chinese businessman who served as a go-between for Moore to find a factory that could meet the company's manufacturing specifications. A key was that Moore had to make sure the Chinese were going to stick precisely to the wheel and hubcap molds Moore designed, as the competitive market is ripe with counterfeits.

Moore took several trips to China in 2004 to find the right factory partner. Even though he had a guide to help him navigate the process, he still feels like he didn't know enough in the beginning and probably overpaid by about $15 a wheel - big bucks when spread out over thousands of wheels a year.

There is a big learning curve to it, Moore says of working in China. I paid too much money in the beginning because I was so green.

After getting that business line going, Moore turned his attention toward expanding O.E. Wheel's warehouse space in the Greater Sarasota area. He ultimately bought four buildings in the industrial park, the last of which was a 27,500 square-foot facility in a deal that closed earlier this year for $2.18 million.

Moore looks at the new building purchases as the biggest step he has made to remain competitive. And by utilizing the new software company, he hopes to grow even more, especially when the economy begins turning around. Says Moore: We haven't even touched the market yet.