LD Products’ base in California
The online cartridge retailer and remanufacturer spoke about the challenges of “attaining profitability” and “pursuing profitable growth”.
Internet Retailer interviewed LD’s founder and CEO Aaron Leon as part of a feature on web-only retail, with the “requirement to actually make money” something that “sometimes get lost”, Leon commenting that “I can’t go very long without making money”. The company is ranked 256th in the Internet Retailer 2015 Top 500, and is “one of the 500 largest online retailers in North America”.
Seeing around $100 million (€89 million) in gross annual sales, Leon noted that there have been years during the company’s 16 years in business when “profits were strong, slim or non-existent”, though LD “managed to turn a profit in its first year in business [because] we had to”. Initially supported with a loan of $10,000 (€8,954) from Leon’s parents, LD Products saw a compound annual growth rate (CAGR) over five years through to 2014 of 9.7 percent, faster than Staples with 2.4 percent and Office Depot with 1.2 percent.
Leon noted that LD’s remanufactured cartridges are “the core of the business”, with six million sold a year, and added that “if we were selling only OEMs we would be looking for an exit strategy”. In turn, the company is “positioned […] for sustained profitability” as it channels profits back into itself, so it can make “select investments that increase its customer base and bolster profit”. Such investments have included buying 123inkjets.com and opening its own manufacturing facility.
The facility in turn helped to drive “an even better margin” because the company didn’t have to “shop cartridge-filled cargo containers to and from China at $5,000 (€4,477) a pop”. Other investments have included improving its warehouse’s fulfilment efficiency and a second warehouse “to speed delivery time and cut shipping costs”.
The feature points out that LD Products’ success “illustrates several of the themes profitable and near-profitable web-only e-retailers and investment experts point to as core challenges to making money in e-retailing”. These include “acquiring new customers (and keeping them), and plugging the operational holes so the business works efficiently”.