Fast50: No.3 reseller is an online retail business built to scale

Megabuy stormed to third position in the CRN Fast50 by nearly tripling its business between the financial years of 2008 and 2009. When you look under the bonnet of this fast growing business, it's easy to see how.

Megabuy is the child of managing director Yury Karpowicz and technical director Nick Shelomanov (pictured), two Russian-Australian process engineers with different yet complementary stories.

Karpowicz, who is in his early 40s, used to run a wholesale surveillance business before working for distributor Altech Computers as a purchasing manager. He brought to Megabuy a strong contact list of distributors and vendors, deep industry knowledge and experience in running a channel business.

Shelomanov, 27, worked for consultancy Accenture in process engineering and IT technology before working as an investment banker for Goldman Sachs.

When the two got together to write Megabuy's business plan, fast growth was a goal from the start.

"When we set out to build this business we specifically decided the initial stage was to grow quite quickly. We feel that in this industry that without volume you don't really get the benefits.

"But in order to be able to move volume you need to have the processes, and the systems to support those processes, in place. And we have been able to put that in and have the technology to support that."

Megabuy is an online-only store and keeps a very low cost base so it can invest more in customer service, says Shelomanov.

Good customer service is very important to establishing trust with an e-tailer, which mainly communicates with customers via a faceless website. Shelomanov says he invested in a phone system that ensures no phone call goes unanswered during business hours.

"A lot of other operators who only compete on price only answer email and they don't always answer [that]. You see that in complaints on forums," says Shelomanov.

Shelomanov and Karpowicz search for recurring problems in their business to see how it can be improved. In one example, potential buyers were calling customer service to find out whether prices advertised included GST.

Even though the site had a banner saying that all prices included the tax, Shemanov added "inc GST" in big letters immediately under every advertised price. Requests about GST dropped off immediately, freeing up customer service to answer other queries.

Megabuy keeps costs low by automating or outsourcing any appropriate task. Russian contract workers adjust prices and carry out software development, as does another software team in India.

Lower cost labour makes it possible to stay competitive, says Shelomanov. And Megabuy is very competitive; its prices compete with discount specialists and are often lower than Officeworks, claims Shelomanov.

The distinguishing emphasis between other e-tailers is customer service. Even when Megabuy works out to be $5 more expensive a customer gets the stuff delivered and he knows he can get in touch with someone, says Shelomanov. Megabuy deals with 25 distributors and is adding more.

This financial year Megabuy is aiming for turnover of $20 million and Shelomanov and Karpowicz are considering taking the business to North America. Despite the saturated market there, Shelomanov isn't afraid of competition.

"We price match down to our cost because we want to do business with you. The marginal overhead of processing the order is relatively low for us because of the systems in place," he says.