Postcards used to be a great British obsession. Pictures of famous landmarks and cheeky seaside funnies were mailed in their millions by people who wanted to keep in touch and maybe share a little joke with friends and family.
Those postcards may seem a little dated now, but people haven’t changed that much, which goes some way towards explaining the success of Moonpig, which allows you to design your own greeting card, no matter how ridiculous.
The company is making some serious money. There are currently 2.6 million active users who brought in sales of £30.6 million last year, generating pre-tax profits of £11.2 million. The fat margin can be attributed to a lean operation, as the company only has 80 staff, with an office in London and a factory in Guernsey.
It’s not been an oversight success. Back in 1998, CEO Nick Jenkins had quit his job as a commodities trader in Russia and returned to England with a hankering to set up his own company. ‘I wasn’t going to start a commodities trading business as that requires too much capital – it had to be something new and the internet had just come along.’
He studied for an MBA at Cranfield University. ‘The course was very useful for me in terms of starting a small business because it does cover every aspect of business,’ says Jenkins in his careful, measured manner. ‘It’s a very broad-brush kind of course but it at least shows you where all the information is and it demystifies quite a lot as well. After doing the course, I wasn’t likely to be taken in by consultants who are full of jargon.’
While on the course, Jenkins devised a business plan for Moonpig and he went about applying the theory the week after completing the MBA. That’s when the real struggle began as attracting people to the site and getting them to grasp the concept of personalised greeting cards was far from easy.
He explains: ‘I didn’t think about quitting but I did worry that it wasn’t going to work. There is always that concern as you wonder if you’re being overly optimistic. We went through some fairly difficult times but the underlying thing was that I could see that sales were rising of their own accord.
‘They were doing that virally. For me it was a question of time. Our losses were decreasing year on year, but could I raise enough money to cover the losses until we actually broke even?’
Jenkins did bring private investors aboard and managed to ride the storm, with momentum starting to gather in the business in 2005. This coincided with the recruitment of former Hallmark man Iain Martin as commercial director, who has been MD at the company for the past three years.
‘The hardest thing about an online business is finding customers,’ comments Jenkins. ‘If you open a shop and you want to expand, then you open another shop. You might not make money on it, but you’ll get more customers and that’s the tried and tested route of expansion through retail. When you’re a website, you only have one shop and there is no such thing as footfall on the internet. You have to pull people in and that’s definitely a challenge.’
Money well spent
Usability and fresh content are the life-blood of any successful website. Jenkins is careful to keep reinvesting back into the business to keep that novelty factor alive for users: ‘We have our own in-house products team and a lot of cards are from our own designs. We are constantly looking at how we can fine tune the website and introduce new bits of technology – you have to keep up to date.
‘When you have customers who have been using you for three years, if they’ve bought all the cards they like from your site and you don’t refresh them, they’re not going to come back. It’s not like you build a website and use it for the next five years. You build it and continually manipulate, squeeze and milk it; that’s where your effort goes.’
The reinvestment and established customer base create a formidable barrier to entry for imitators. ‘The most difficult thing for a similar company is to get critical mass to get it to work and it’s not a cheap thing to execute. You need a design team, a production team to do it properly. To have anything that looks like our cards, you need a big team of people. But then that means you have to start with a big team on day one when you’re selling your first card. It’s quite difficult for anyone to come in and challenge us.’
Jenkins claims that 65 per cent of UK adults are aware of Moonpig. For him, the focus is to turn that awareness into people using the website. ‘It’s a question of time really,’ he says. ‘Every year we have enough cards going out to people who haven’t heard of us or aren’t using us yet. Really, the biggest part of our marketing is the enormous number of cards being sent out. If we carry on doing what we’re doing, we will continue to grow.’
Earlier this year, Moonpig was launched in the US and there is already a site in Australia. Jenkins says he has no desire to open physical stores and won’t make any acquisitions in the UK, but he doesn’t rule out takeovers as part of the company’s plan to expand overseas. Again, he is cautious about rushing things as he waits for that word-of-mouth factor to generate interest.
‘There are a couple of companies abroad that are performing relatively well in their small market but I think our growth is going to be all organic. It might well be at some point that we raise a bit of money to expand in other countries, but in the UK it’ll be all organic,’ he confirms.
A blossoming business
The obvious move is to expand the range of products being sold on the site. ‘I think we can sell a lot more’ he says. ‘Our initial focus has been to be known as a personalised card retailer. Once everybody understands that proposition, our aim is to add other products, such as flowers and so on. We don’t push the flowers outside Moonpig but once you’ve bought a card from us you’ll be offered the opportunity to buy mugs, t-shirts, flowers and so on. A lot of our customers are looking for something to go with a card and it’s great if we can supply that too.’
A number of businesses hit a wall because a CEO doesn’t know how to manage a company’s growth. Jenkins feels he has made the right changes at Moonpig to allow the company to evolve: ‘The difficulty with a business that grows quite fast is changing the attitudes and culture. So you go from being a start up, where you’re losing money and bootstrapping, then you break even and you have to start investing in growth, and then you go from there to being mature and you have to start watching overheads again. You need to find management teams who can deal with the various eras of the business.’
The trick is to have the drive and optimism to make things work and be comfortable with delegating. ‘If you insist on taking all the decisions yourself, you limit the size of the business,’ says Jenkins.
Given the cash generative nature of the company, Jenkins is evidently in a strong position to pick and choose how it should grow. He acknowledges that having private investors is a bonus as there’s no artificial countdown to an exit, and the products’ price and nature shields the company from recessionary forces. ‘In terms of bang for your buck, it’s pretty good value and that’s what people are looking for,’ he says.
Born: May 1967
Place of birth: Droitwich Spa, Worcestershire
Marital status: Single
Last movie: The Hurt Locker
Business hero: Bill Gates