News

Ali Asaria risked his financial health when he decided to start his own online health and beauty store, Well.ca, in 2008.

He gave up a lucrative job as a software engineer at Research In Motion (where he was best known for designing the game BrickBreaker for BlackBerrys). He dispensed with his car, with his Toronto home, cut his expenses to zero and moved in with his father in Guelph, Ont.

“It was a huge risk,” the 28-year-old recalls, “because I put all my eggs in this one basket.”

Mr. Asaria had experience building online stores for other companies, including a baby clothing retailer and a manufacturer, but he knew nothing about the health and beauty industry, an extremely competitive retail category.

What became clear to him, however, was that the online category for health and beauty was wide open. “I noticed this open market, this blue ocean, where nobody was touching online.”

Within the health and beauty market, two of Canada's large players, Shoppers Drug Mart and Pharmasave, both have an online presence but without any e-commerce ability. As for the U.S. Web giant Drugstore.com, it doesn't directly ship to Canada, meaning customers who use third-party shipping end up paying a premium for products.

“It's just backwards here [online] and we love that,” Mr. Asaria says.

But what really kick-started Well.ca was its offer of free shipping. “The key was turning on the free shipping. As soon as we did that, you could see a big jump in our growth,” Mr. Asaria says. Customers weren't deciding between different online options, he explains; rather, they were choosing between online and bricks and mortar.

That made Well.ca push hard to excel at service. The company includes handwritten notes with every order and pays for customers to ship back returns.

“The big thought for us was how do we make an experience that's better than walking into a drugstore, despite the fact that we're on the Net?”

Today, the Guelph, Ont., company is doubling sales revenues every four months and has swelled to 17 employees from two. Based on “click-throughs” tracked by third-party companies such as Compete.com, Well.ca is the Canadian online leader in the health and beauty category.

Well.ca doesn't sell pharmaceuticals. Mr. Asaria says people relate to the term “drugstore,” which is why he uses it to describe his business. Prices match bricks-and-mortar drugstores and the site offers everything from vitamins and over-the-counter drugs to skin care products.

Mr. Asaria's links to drugstore retailing go back to his childhood. His father worked as a pharmacist in Guelph for 25 years, so although Mr. Asaria never was employed in the industry, he knew what was going on from dinner table conversations. When he decided in 2005 to leave RIM and strike out on his own, he spent six months researching the market.

Mr. Asaria says he left RIM out of frustration that his work benefited the company, but not necessarily himself. “I got to the point where I just couldn't work for someone else. I think it's great for some people, but it wasn't right for me,” he says. Consulting for other companies, he put together some $10,000 in capital and spent his spare time building his website.

Initially, investors were skeptical about Mr. Asaria's lack of background in the health products area, and early on the young entrepreneur realized he would be the financial backer for his company much longer than he initially anticipated. After he had been running Well.ca for six months, and was able to show the strong revenue growth he had built, Toronto investment firm Maple Leaf Angels came forward with financing.

“He identified an area in Canada that was being significantly underserved to the point of practical non-existence. We thought this was a good opportunity to take advantage of the opening,” says Rob Koturbash, managing director of Maple Leaf Angels. “We thought he had the team, the knowledge and the determination to do it.”

When Well.ca ships orders, they ask for their customers' gender and age. Mr. Asaria says the demographic base of his customers has been a bit surprising: It is mainly women in Toronto, rather than rural areas, who are ordering the toothpaste, makeup and skin creams offered in his online outlet. Clients have said they find online purchases more convenient and that Well.ca stocks more products than most drugstores.

Mr. Asaria's big challenge was figuring out how to supply a myriad of products without building big warehouses to store stock and spending millions on a huge e-commerce infrastructure. He says his U.S. competitor, Drugstore.com, spent tens of millions for its startup.

Instead, Mr. Asaria relies on the ability of his distributors to provide just-in-time shipping. To convince them to provide next-day shipping seven days a week, Well.ca had to show skeptical distributors continuous growth.

Given the economic turbulence, small companies need to figure out and understand their core competencies, Mr. Asaria says. That's why he decided to focus on customer service and strong software for his online store and to offload shipping and distribution to partners.

Mr. Koturbash says Well.ca's business model is considerably different from early Web retailers, such as Amazon.com.

“He has very effectively partnered with people who have that distribution network in place already,” Mr. Koturbash says. “It's a very low footprint in terms of an expensive business model, and that's a key we like to see. We like to see people thinking how can they grow the company as quickly as possible, as efficiently as possible.”

Expert Insight

"Unless you've got a large marketing budget, you have to create a site that has enough attraction in it — and by attraction, I mean those key search words that people use when they go to Google. You've got to own them." On Wednesday, retail and marketing consultant John Torella discusses what it takes to make your website stand out online.

On Wednesday, Click here to read the full interview.

Connect with Ali Asaria

On Friday at 1 p.m. ET, Ali Asaria joins us live to discuss his company's breakthrough.

Click here to submit your questions and comments (you must be logged in) or join us live on Friday.

Send us your breakthrough

Know a business that has experienced a big breakthrough? We want to hear about it.
E-mail nhulsman@globeandmail.com.