Video Thrills The Virtual Stars

Belfast may seem an unlikely launching pad for one of Ireland’s most promising Internet retail companies: the virtual video store blackstar.co.uk.

Darryl Collins seems an unlikely frontiersman of the information age. His soft insistent northern accent and unassuming appearance belie an evangelical zeal for the subject of Internet trading.

And it’s not all talk – after a year spent playing with electronic commerce business ideas, Collins, an independent film producer, and partners Tony Bowden (Northern Ireland’s first web designer) and Jeremy Glover (a former ad agency creative director) set up Ireland’s first virtual video store, blackstar.co.uk, within just 9 days in January 1998.

Their-original deadline – for setting up the licensing, site design, programming, launch, banking, credit card processing, suppliers, distribution, – was a mere seven days, but was foiled by Bowden’s impromptu two day hospitalisation.

That’s typical of the energy and speed of reaction that has infused Belfast-based blackstar.co.uk from the outset. ‘We used those early days, when traffic to the site was low, to take on customer advice’ explains Collins. ‘The early customers were really knocked out by the concept we were able to respond to their suggestions for change or requests for additions in real time. It was a great learning opportunity.’

By July of last year, blackstar.co.uk was trading books and CDs alongside video and DVD, and had completely revamped the site design and navigation systems in line with shopper feedback. The company’s current incarnation was born: imagine a more dynamic, colourful and interactive version of amazon.com, with most of the big site benefits, but more personality.

The painstaking site development also paid off in terms of customer retention. While Collins doesn’t regard ‘hits’ as the most valid measurement of success, BlackStar does track its 35,000 registered customers – and knows that 30% of first time shoppers will return to the BlackStar site for more spending within a month.

By last Christmas the BlackStar site was literally swamped with shoppers – a trend echoed on all major ‘gift’ websites – and the 15 strong BlackStar team was almost snowed under trying to supply the demand. ‘We’d joke that we spent 80% of our time servicing 20% of our sales,’ recalls Collins. ‘In reality, our success had outstripped our resources. We realised we couldn’t be excellent at all three retailing areas, so we decided to concentrate on just one.’

Conscious, too, of the rapid growth of Internet superbrands Amazon.com and the US based CD.now, BlackStar shifted their focus back to video.

“The writing was on the wall – the big competition is coming from US Internet retailers, whose economies of scale allow intense price competition,’ outlines Collins. ‘Our clearest advantage lay in the video market, specifically in the PAL format video, which accounts for two- thirds of the world market – UK, Europe and South East Asia. It’s an area that’s off limits to American virtual video stores, who cannot operate beyond the regionally encoded NTSE domestic market”

What’s remarkable about BlackStar’s customer base is that is grown organically – almost entirely through direct links and word of mouth. Last autumn’s video launch of Titanic – the spectacular disaster epic with origins in the Belfast shipyards – proved to be an important milestone for the city’s first Internet retailer. BlackStar matched the lowest price on the high street and launched a low budget but precisely targeted UK marketing campaign – which doubled their customer base. ‘The £9.99 Titanic offer was a loss leader.’ Collins explains. ‘But the amount of add-on purchases generated were excellent – 50% of those who bought Titanic bought other titles – that’s what we were really after.’

As with most Internet start-ups, development and capital costs are high, profits are low, (annualised turnover for 1998/99 is projected at £3m) but the promise of future profits is irresistible. Particularly when the learning curve has been scaled with only minor casualties. ‘It might be only 15 months since we set up’ says Darryl, ‘but Internet years are like doggie years – we feel we have a decade of experience under our belts!’

That’s certainly reflected in the confidence of new investors – and underpinned by the support of Paul White, Managing Partner in A&L Goodbody, London, and the newly appointed chairman, James R Osborne, another former Goodbody partner.

As for the David and Goliath style competition with the Internet giants, the BlackStar trio seems unfazed. ‘Large companies moving from real world operations into Internet retailing tend to overcook the formula’ is how Collins puts it. ‘They also use the technology to automate, removing the human element. Our approach is to make the site more personal to the user – to create closer customer relationships, not more distant ones.

In fact, BlackStar.co.uk thrives on the challenge. When amazon.com came knocking on BlackStar’s door last year, with a view to acquiring partial elements of the company, the reaction was one of flattery, tinged with a touch of defiance: ‘We told them – in not so many words – to get lost.’

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