Lessons Learned: Discount Cleaning Products Really Cleans Up

New Jersey-born Mike Kawula once purchased a franchise which helped him understand how to get a franchise, which led him to make Discount Cleaning Products.

Kawula graduated from Ramapo College in New Jersey with a marketing degree in 1996, working as a wholesaler for AllianceBernstein, an investment company, until 2005, helping financial advisers select appropriate investment capital for their customers.

But he wanted to be his own boss and in early 2005 he purchased a consulting firm for $60,000 that assists others on buying franchises.

He apparently paid attention because in the end of 2005 he purchased The Cleaning Authority franchise for $120,000, which had 190 franchise locations around the U.S.

“I climbed it to 30 employees with earnings of more than $1 million by direct mail marketing and introducing a referral reward program. We procured cleaning contracts for more than 600 homes throughout the summer in the New Jersey shore communities and 450 houses in the non-beach locations,” Kawula stated.

As the economy weakened in 2008, cleaning franchisees started searching for ways to save money on supplies. Kawula attended a trade show and seen manufacturers’ booths to encourage them to sign agreements with his company to market their goods for increased brand exposure and sales. He left the expo with arrangements from some leading wholesalers of vacuums, compounds, rags, dusters, and much more.

Kawula purchased the domain name DiscountCleaningProducts.com. Through this site, his new providers agreed to drop-ship products straight to his commercial clients.

“My business partner Jeff Cannon, who manages the operations and finances, had possessed a cleaning franchise in Georgia. We sold our franchises in 2012 to concentrate on the development of Discount Cleaning Products,” Kawula stated.

Discount Cleaning Products listed $100,000 in sales in 2008 and climbed to $2.8 million at the end of 2012. The business anticipates sales of greater than $3 million for 2013.

Ecommerce Shopping Carts

“We started with a very low-cost, low-features shopping cart from VStore that had free hosting and billed less than $100 for additional features,” Kawula stated.

Launched with less than 500 products in 2008, Discount Cleaning Products enlarged to about 1,000 products once the company started using shopping cart Volusion in the end of 2009.

Kawula stated Volusion enables him upload products quicker. Discount Cleaning Products’ growth has exploded as wholesalers send him content-rich documents with descriptions, weights, and attribute, which boost sales.

“Volusion provides us an all-around website, offering merchandising, marketing, social networking, and more. But it is considerably more expensive with monthly charges of $1,350. Our expenses continue to increase as our traffic increases,” Kawula stated.

“The benefit with Volusion is many applications integrate with it, though support is costly. The majority of our IT and design service we have obtained from individuals overseas in India and Philippines in a fraction of the U.S. cost.”

Website Design

Kawula’s spouse, Cannon, who taught himself HTML, made the first Discount Cleaning Products website. Subsequently Volusion redesigned it on its entry-level package, which costs around $1,250 for a header, logo, left navigation, and home page redesign.

“Since that time, we changed the design many times, using off-shore designers, who are 90 percent cheaper,” Kawula stated.

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In 2012, they started using Spring Metrics to make website”sliders” that provide first-time visitors an offer or voucher.

“We control it based on unique visits, IP addresses, addresses and even more. It’s really great for us and for first-time clients because they save so much money and all office supplies arrive next day — they return,” Kawula stated.

The business is now getting its own header redone by a designer from El Salvador, who Kawula found through a media event and who was subsequently mentioned again on a podcast.

“You can find a full-time designer for $500 a month working 40 hours weekly.”

Credit Card Payments

“We utilize Volusion, and a PayPal account. Volusion’s costs are high at approximately 2.9 percent — on a weighted average with American Express and other cards and we are now exploring other choices.”

Order Management

To make processing quicker, Discount Cleaning Products contracted by a developer in India to facilitate the routing of orders to customers’ closest wholesalers.

“It’s fine, but at our present volume of approximately 50 office-supplies orders per day, it’s more manual than it ought to be. As it grows, we will create a program for this. Our two biggest partners, which account for 70 percent of our business, are entirely automated,” Kawula stated.

Employees

Discount Cleaning Products has two fulltime workers, both of whom work from home. The person who handles finances and upgrades products through file transfers combined in 2009. The other, who manages customer service, combined in 2010.

“Ninety percent of our orders are placed on the internet and go direct to the shipper and monitoring is uploaded each morning, which lessens the need for additional staff,” Kawula stated.

The business attempted warehousing from 2010 to 2011, but it was not sufficiently staffed for somebody to check for damaged inventory.

“We were selling over 50 carpet machines each day. The trucks were delivering them to us each week. We ended up losing a couple of machines every week, costing us from $100 to $1,200 in damage. If we had had a full-time warehouse supervisor he might have checked that the goods were okay. But that was not the company we wanted to operate.”

Search Engine Optimization

Kawula was burnt by SEO companies he caught not functioning, while billing for it.

“I’d shifted the Volusion passwords to all accounts and watched the firm bill me the next month for $1,800 for work which they could not have done,” he said.

“We do SEO logically — after stopping briefly during 2012 — and we are focusing on 2013 on movie content and how-tos with our wholesalers’ content, which will help drive traffic.”

Shipping

Shipping remains a concern for Kawula.

Discount Cleaning Products drop-ships from the producers. Customers who purchase products which aren’t from the same wholesaler’s warehouse require multiple shipments, which increase shipping costs and reduce profits.

“Normally we break-even, but Volusion checkout does not have the logic to charge more for goods coming from different warehouses, and even if it did, clients do not need to pay that much to ship,” Kawula stated.

“We would rather do what is appropriate for the customer since they’ll return to shop over and over so we only charge based on total weight. This saves the consumer money but does hurt our business.”

The business has agreements with other wholesalers to ship orders complete, though that adopts earnings — and cleaning products are a really thin margin business.

Kawula needs a shopping cart which allows for more contingencies.

“For example, sending a machine into a house can cost $100 more than to an office as you will need a lift gate for heavier machines. We sell a good deal of carpet cleaners that weigh over 200 pounds; they should be on a truck.”

The business utilizes UPS and FedEx, but allows the vendors use their own shipping supplier if it is cheaper, although Kawula admits that can create tracking problems.

Product Sourcing

Kawula stated he entered the market at the ideal time because producers were trying to increase sales in a bad economy.

“Now the market has improved and our volumes are higher, a number of our wholesalers wish to keep on doing business with us.”

Discount Cleaning Products offers product instruction through its website, manuals, customer support, and even helps clients get in touch with the wholesalers if needed.

“For example, we had a huge hotel that needed someone to provide carpet cleaning units to a number of unique locations. Since purchasing online was easier for them, we advocated the perfect unit and got the manufacturer to perform the demonstration and we managed the sales process.”

Inventory Management

Discount Cleaning Products has over 100,000 products. It manually uploads inventory photographs, descriptions, and prices out of its larger partners each week, but this will be automatic in 2014.

“For now, we can use simple file transfers. We do not charge our clients’ credit cards until we have confirmation that the order is in stock to send. Since we currently can meet near 100 percent, the daily program has not been needed so far.”

Social Media

Discount Cleaning Products has about 500 Fans on Facebook and 1,300 Twitter followers. Kawula said social media is a place yet to be fully utilized.

Expense Control

“Our average order value is now $180 and we review any order greater than this to see if we could source elsewhere or decrease shipping costs, particularly for machines and bigger office supply orders,” Kawula stated.

“We also manually examine orders over $180, comparing the billing and shipping addresses to fight online fraud. Despite the fact that we have a fraud rating program, many undergo.”

Aside from shipping, the business’s biggest cost is advertising, spending over $100,000 annually on pay-per-click advertisements and shopping website ventures.

While Kawula nor Cannon had expertise in PPC advertising, after doing it in-house, they discovered companies in Florida and Illinois could not convert better than the group were doing with limited understanding.

“We’ve decreased our PPC spending levels, but Google Shopping, which was free, charges on a percentage or a PPC version, of which we do both,” Kawula stated.

“When Google started charging for its shopping platform, it decreased the amount of listings. We benefitted from this, but it hurt our bottom line.”

Customer Service

Discount Cleaning Products provides customer service through the telephone, email, and chat.

“We call our commercial clients on a weekly basis and we have an automatic email to examine satisfaction with each purchase. We have tried hiring overseas workers to make outbound calls. However, I’ve not been fulfilled. We will have interns do so more frequently from the second quarter of 2013.”

Biggest Mistakes

Kawula cites three memorable mistakes.

The first involved double charging for stock. Discount Cleaning Products’ wholesalers were granted authority to charge the provider’s credit card for every order they drop-shipped. But Kawula and Cannon had not yet put up an effective system to cross-check charges. They endured over-charging from wholesalers that had swiped their credit card twice for the exact same order.

“When we obtained monthly credit card bills over $200,000 from double-swipes. We suffered some significant losses,” Kawula stated.

Another error was using shopping comparison sites, based on Kawula.

“We were using PriceGrabber, Shopping.com, Nextag and lots of others.”

“In December 2010 we had been so busy that we did not observe the comparison websites had older product files. We tried canceling because the goods clearly could not convert to sales. But the click-through charges — comparison sites charge by the click — climbed to $40,000. Canceling our credit card was the only thing we can do to stop more fees.”

Kawula and Cannon have since stopped all shopping comparison websites as the provider’s core clients are commercially-based, they’ve received better answers through pay-per-click advertisements and direct mail postcards to cleaning companies and resorts.

Warehousing was the third error, though it procured them better pricing from wholesalers.

“We received many damaged things because of poor handling by the delivery company. Many drivers did not use the forklift truck right and a few really drove pallets,” Kawula stated.

Furthermore, they had no method of checking stock, costing them over $50,000.

“New businesses make mistakes, but we were making money. So we did not notice everything initially.”

Biggest Successes

Kawula is proud that Discount Cleaning Products made the Inc. 500 list in 2012, as it was rated the 144th fastest growing and number 8 in its own industry.

The business is also growing strongly in the janitorial cleaning marketplace.

“Thanks to the bad economy, many budgets are cut and when facilities, schools, and hospitals have only $10,000 left in their budget but need to purchase $15,000 worth, they look around and find us.”