CafePress Tests Wall Street Appetite for One-of-a-Kind Products
Jenn Zieser sold her first custom T- shirt on CafePress Inc. for fun in 2006. She now makes about $25,000 a year from the site, more than at her regular job.
Zieser, a 41-year-old from Cedar Rapids, Iowa, is part of a wave of entrepreneurs selling unique merchandise in online marketplaces. CafePress, Etsy Inc., Zazzle Inc. and Spreadshirt all help users find buyers for one-of-a-kind wares -- everything from shirts to magnets to iPad cozies. Now CafePress’s initial public offering, which may come this year, will test whether Wall Street is ready to embrace the concept.
Web-savvy consumers are increasingly seeking out customized goods, said Frank Piller, a founder of the Massachusetts Institute of Technology’s Smart Customization Group. The challenge facing CafePress and its peers will be moving beyond their status as hobby businesses, expanding sales and withstanding the scrutiny of publicly traded companies.
“Consumers are more educated -- they are really willing to adopt this model,” Piller said. “However, no one has proven that you can bring it up to a large scale.”
CafePress and other would-be IPOs will have to contend with an increasingly skittish market for public offerings. Eleven U.S. IPOs have been withdrawn or postponed since Aug. 7, the most in one week since 2000, according to data compiled by Bloomberg.
Tough Climate
Sluggish consumer spending also could hurt CafePress and similar sites, said Francis Gaskins, the president of IPODesktop.com, which tracks the IPO market. “They’re going into an adverse consumer-spending climate,” he said.
Marc Cowlin, a spokesman for San Mateo, California-based CafePress, declined to comment, citing the company’s quiet period before its IPO.
CafePress, which filed for its IPO in June, shipped 6 million items in 2010, ranging from clothing to drinking glasses to blankets. The company lets customers design and purchase products with their own text and images, or they can purchase predesigned products from stores run by entrepreneurs.
Philip Rooke will be among those closely watching the company’s stock-market debut. Rooke, the CEO of Leipzig, Germany-based Spreadshirt, said he wants to find out how the market will value a company that specializes in customization.
Spreadshirt, like CafePress, lets users design their own T- shirts and other apparel. In contrast to its larger competitor, Spreadshirt gets more than half of its revenue from fulfilling orders made through the websites of other shops. Those customers typically don’t know they’re making purchases using Spreadshirt’s system, Rooke said.
Selling Ideas
“The point of our platform is to bring partners’ ideas and customers’ ideas to life, so the customer ends up with a shirt they like and want to wear every day,” he said.
Etsy, which markets itself as the world’s handmade marketplace, also stands to benefit from consumers buying unique and custom-made items, said Adam Brown, a spokesman for the Brooklyn, New York-based company.
“More people will find Etsy if they want things that can be customized,” he said. “Our vision is to really give people a choice, give people the option to have different ways to buy things that don’t just involve mass production.”
Etsy runs an online marketplace for buyers and sellers of just about everything handmade, from earrings to turtleneck dog sweaters. Unlike CafePress, Etsy doesn’t fill orders or process transactions. Instead, it charges a 20 cent listing fee and 3.5 percent of the price of an item when it’s sold.
Etsy Sales
Etsy’s revenue will reach $105.9 million next year, up from $40 million in 2010, according to an estimate from GreenCrest Capital Management LLC. GreenCrest valued Etsy at about $300 million in the event of an IPO or acquisition -- neither of which are currently planned, according to Brown.
Zazzle, meanwhile, offers customizable products ranging from T-shirts to speakers. It sees itself as a technology company, and is focused on giving customers a highly realistic impression of what their clothing or accessories will look like, said Jason Kang, vice president of marketing at Redwood City, California-based Zazzle.
“While you can’t touch the shirt, we allow you to zoom in and see the fabric and the way the colors are going to look on that fabric,” Kang said. “We’re working toward advancing the realness factor of these products.”
Some of the companies may become takeover targets, rather than IPOs. Spreadshirt’s Rooke said several buyers -- both private-equity firms and clothing companies -- have expressed interest in purchasing his business.
‘Interested Parties’
“We’ve had several interested parties that are currently in discussions with our shareholders,” Rooke said, without naming them. He also declined to provide details on the company’s finances, though he said Spreadshirt is profitable.
At CafePress, merchants set their own prices, and then keep the difference between that number and the amount CafePress charges for supplies. There also are bonuses for shopkeepers who sell more items. CafePress sells products through its own marketplace as well, giving designers a 10 percent commission.
The hurdle for CafePress is making a profit while fulfilling many small orders -- the average order size is about $50. In the first six months of 2011, CafePress swung to a loss of $960,000, from a profit of $140,000 in the year-ago period. Sales rose 46 percent to $69.4 million.
Using the site has been profitable for Zieser. After selling her first shirt before Thanksgiving in 2006 -- it was emblazoned with the word “turkey” -- the monthly checks started growing. So she began spending more time thinking up catchy slogans for her products. Now the revenue exceeds the income from her job tutoring children.
Her best-seller? A design with the slogan “Choose Your Weapon” and an image of cooking utensils.
“It kind of was a hobby that turned into a profitable business,” Zieser said. “It was fun, so I didn’t really think of it as work.”
To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net
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