You may laugh when you see them on late-night TV, but infomercials for grills, cleaning supplies, jewelry and other consumer products still represent a very big business in the U.S. In fact, some estimates put the infomercial, or direct response market, at $300 billion annually.
That’s a lot of coin. But Ranjit Mulgaonkar thinks many of the makers of these consumer products are leaving money on the table by using outdated e-commerce technologies.
“The infrastructure they use today is ancient,” said Mulgaonkar, who left his job as director of business development at Amazon Merchant Services earlier this month to start DNA Response.
“There is no one-stop solution,” he adds.
The six-person company just scored $575,000 in financing from Benaroya Capital and Seattle angel investors, cash that the startup will use to ramp up sales and marketing efforts. Though it is less than two weeks old, the company has already signed on four customers with another 12 in the pipeline.
Mulgaonkar, and his wife Dana, said that they’ve been overwhelmed with interest since soft launching the concept with makers of consumer products. Among the customers are Nutra Luxe, a skin cleansing device manufacturer, and Comodynes, a maker of self-tanning towelettes. Those sites will be coming online in the coming days.
By riding on the back of Amazon.com’s checkout and fulfillment offerings, Mulgaonkar believes that DNA Response can offer consumer product companies a more efficient way of serving customers online and via 1-800 numbers.
Customers pay a $15,000 set-up fee, and then agree to share a portion of their online and phone order sales with DNA Response.
Mulgaonkar, who previously worked at Avalara, Adobe, Network Commerce and iCat, said that consumer-product companies typically pay up to eight vendors to get the services provided by DNA Response.
“It is a nightmare,” said Mulgaonkar, adding that many of the companies don’t even offer real-time credit card processing.
That causes a host of problems, since he said as many as 20 percent of orders are rejected because of improper spelling of names or outdated cards. Furthermore, he said the fulfillment of orders can take as long as two weeks to process because of the antiquated systems.
“People today are used to buying stuff on Amazon. You order, and two days later it shows up,” said the 53-year-old entrepreneur.
By introducing real-time credit card processing, SEO enhancements, new fulfillment technologies and more, Mulgaonkar believes he can boost revenue for consumer product companies by as much as 30 percent.
“The opportunity is huge,” he says. “Our pitch is: lower cost of operations, incremental revenue. Tastes great, less filling.”
Part of the offering also includes real-time reporting of results, so customers can shift marketing spend on the fly. Using the online dashboard, a customer, for example, could drop the price of the product if it is not selling well.
To some degree, DNA Response will compete against Home Shopping Network and QVC. Those companies source products and promote them on their TV channels, and once the flash sales are over they get added into the company’s online marketplace.
That causes a bit a problem for the consumer product companies which need to wait 3, 6 or 9 months for the next TV campaign to get a big boost.
DNA Response plans to promote products in its network through short 30, 60 or 90-second Google TV ads. Mulgaonkar also believes the company can do a better job of driving online customers directly to the Web sites of the specific consumer product, providing a more steady revenue stream than the peaks and valleys associated with the home shopping services.
Based on Bainbridge Island, Mulgaonkar is looking for office space in downtown Seattle. The company was co-founded by Josh Nelson who previously worked on strategic alliances and business development at Amazon.com. Its CTO is Tom Eager, who previously worked at Aldus, Adobe and Apple.
“Everybody on my team is a veteran. This is not our first gig,” said Mulgaonkar. ”We’ve done it for many other companies. The difference is, we are doing it for ourselves right now.”