Bethesda Entrepreneur Adam Hanin Scoring Big in Fashion E-Commerce

Bethesda’s Adam Hanin is boastful, and with good reason. Skye Associates, an e-commerce shoe, jewelry, and cosmetics company he built from the ground up over the past six years, had a good 2012 and is positioned for an even stronger 2013. “We did a little over $9 million last year,” he says, “and for this year there’s no question we will do a minimum of $15 million.” From his offices in downtown Bethesda, a 15,000-square-foot warehouse in Rockville, and a small facility in Georgia, he oversees 45 employees who manage 38 websites that cater to a shop-happy public across the US and throughout the world.

For two years in a row, Skye has made Inc. magazine’s list of the 5,000 fastest-growing American companies, ranked at 1,507 for 2012. It is one of only 161 Maryland companies to make the list.

Skye’s most recent acquisition was Simply Soles, a DC-based shoe company that had stores in Georgetown and at National Harbor before going strictly online. Other websites in their owned-or-managed portfolio include Pink Mascara, the Hip Chick, Fantasy Jewelry Box, House of Harlow, Yoga-Clothing, Style Tryst, and Metropark.

Hanin, a 38-year-old father of three, grew up in Potomac, Maryland and attended high school at Bullis. He graduated from the University of Maryland with a major in journalism but never worked a day in that profession. Two weeks after graduation he started on the journey that led him to where he is now, a successful Internet entrepreneur with big ambitions. We talked to him today about that journey, his current business practices, and the road ahead.

Why retail fashion?

My first foray into business was in clothing, even though it was uniforms. It is something I was always comfortable with. My family has a long history of being in the garment center in New York. I guess it’s in my genetic code. The balance of our business is made up of the businesses I actually own or retailer websites that we manage for multi-chain stores.

What was your first step out of college?

My first business was a Catholic school uniform company called Campus Outfitters. We had contracts with 400 school across the country. As opposed to the old way of servicing these contracts—sending someone to the schools to measure people—I bought up the inventory and set up stores in the schools where parents could buy the uniforms. In 1998 we launched [the website] Campus Outfitters. We were the first school uniform company to advertise on Google. I started to get leads from schools all over the country, with orders for from 10 to 1,000 kids.

What happened that took you from uniforms to founding Skye?

I sold Campus Outfitters to Varsity Books, a locally based public company that serviced schools across the country. Only online. I had 75 employees, and we were doing about $10 million a year in sales. Varsity was doing about $50 million with 22 employees. That opened my eyes to the scale of the online business, and I knew it was where I wanted to take my career.

How much money did you walk away with?

It was $4 million.

So you had seed money to start a new business?

Absolutely.

And you did what?

There was a five-story national chain called National Jean Company. I bought the rights to their e-commerce and launched their site on January 1, 2007. To get the online license, National Jean required me to open a brick-and-mortar location, which I did in downtown Bethesda, and then another in 2009.

But you didn’t want to be in the brick-and-mortar retail business?

Absolutely not. But in about 2008, when the retail world went to hell, there was a fundamental movement where all the flash sites started, like Gilt Groupe and Rue La La. They had a lot of outside funding, and spent tremendous amounts on marketing and their e-mail list, which they sold. I knew we couldn’t compete, but I saw there was a shift in how individual fashion brands viewed e-commerce. I ultimately looked at the marketplace and said these brands need a place to sell their goods at full price, direct to the consumer. We had a platform running, a warehouse, a customer service center, photography, a call center, in-house technology, and art. We had the infrastructure. I started approaching mid-major brands, who had been used to selling to places like Nordstorm, and I gave them a way to sell directly to consumers.

How did you grow? What were the steps?

Determination, hustle, and basically scratching and doing whatever you need to survive. I determined a few years back that the scalable model for us was to leverage all the processes we had in the back office and offer that to other people. We do services for others at a good cost. We are commission based. I also recognized we needed to have a greater ownership stake in what we’re doing. Only 40 percent of our revenue is being derived from our brand management business, but 60 percent is derived from multi-branded websites that we own. A multi-branded site is an online mall that carries in excess of 200 different brands.

How many new companies came into the fold in 2012?

I launched 14 websites in the past year. Over the last two years we’ve made multiple acquisitions. Of the 38 websites, we own 7. No one brand makes up more than 2 percent of our overall business, so if we lost one it’s not disruptive.

Can a person come to you with an idea and you’ll help them make it into a viable online retail business, or does the branding and financing need to be in place?

Starting a website from scratch can be a difficult endeavor. If you go to Google and look for something that doesn’t exist, you’re behind the eight-ball. Our model is based on people knowing of a product or a group of products, to partner with people who have a breadth and depth of inventory so that we can leverage the eyeballs we’ve acquired over time to move their products.

Who is your ideal business partner or acquisition?

Somebody selling shoes, jewelry, clothing, or cosmetics to our demographic. Anything that represents the core across our network.

Who is your demographic?

There are three types. There’s the shopper looking for a specific product. For example, they want Riva from Tory Burch. We optimize the site to make sure that shows up on Google. The second is the customer who is going to a specific site. They are going to Simply Soles because they love the product. We strategically add 20 to 50 new products to our multi-brand sites every day. We want people to see what’s new. The third is the discount shopper. Love ’em or leave ’em, the discount shopper is important, too. You have to strategically add products for them.

Are you global?

We take in 20 to 30 international orders a day.

What does the customer want from you?

They want to know they are getting exactly what’s displayed. They want it quickly. And [they want] a high level of service. We offer free shipping and free returns.

Do the shopping trends remain constant across generations? Are boomers as adept as their children at shopping online?

There’s no question. Baby boomers react stronger to direct mail than the GenY’ers, but, that being said, 85 percent of their orders are placed online. Interestingly, baby boomers are extremely loyal, more than the younger consumers.

What’s selling best?

We’ve taken a stronger position in shoes and accessories. The production costs are much lower. When you are selling clothing you have to pay for a model and makeup, and push production. With a shoe there’s no model. It’s all done in house. No one can say, “Oh, I don’t like the girl’s face” who is wearing the product. Shoes and accessories move more efficiently from a time and cost perspective.

How much of your business is companies you go after versus companies that come to you?

We have no sales force whatsoever. Every company we work with has been brought to us.

What has been your smartest move?

We closed our retail stores before it was too late. We recognized retail was not a growth channel.

What’s the best advice you’ve been given?

It was from Brian Robinson, who owns a men’s cosmetics line, Zirh. He said be very careful and selective when bringing outside money into your company. We are completely self-funded between my father and myself. We have no outside money and no debt on the business. But we are getting approached by venture capital funds at this point.

What would be your advice to someone wanting to grown an e-commerce business?

Outsource. People think building a website means you just throw something up. That’s like giving the keys to your car to someone who doesn’t know how to drive. We’re professional drivers at this point. Also, understand that e-commerce can be a low margin business with the obvious opportunity to do high volume. The question is: What is the cost to get to the high volume you need?

If you sold your company tomorrow, what would you do?

I don’t know. My personality is such that I would have to be working within two days.