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Business Impact

One Decision

By creating its own customized Internet retailing system, coffee distributor Pura Vida has increased sales from $100,000 in 1999 to a projected $4 million in 2005.

The Decision: Though Pura Vida, a coffee company cofounded six years ago by a former Microsoft product manager, started as a tiny operation, it opted to build its own e-commerce system instead of buying off the shelf.

Pura Vida Coffee

2004 revenues: $2.3 million
Employees: 18
Pounds of coffee sold daily online: 2,000

This story is part of our July 2005 Issue
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Seattle’s Pura Vida is a blend of business and philanthropy, a for-profit firm that gives donations to poor farm families in coffee-growing regions. It operates at breakeven and has funneled $1.2 million to the charities it supports since it began operation in 1999. But despite its benevolent mission, the company competes fiercely with Starbucks, Green Mountain, and other premium-coffee sellers. One weapon that cofounder and CEO John Sage has relied on is a good e-commerce system, which has helped increase sales from $100,000 in 1999 to the nearly $4 million projected for 2005.

From the beginning, Sage and James Ring-Howell, the company’s acting chief technology officer, wanted software that could enter information from a customer’s online order into Pura Vida’s billing, accounting, and distribution systems and into its customer-records database. The two men sketched a system that would use Windows 2000, SQL Server 7.0, Microsoft Commerce Server, Access 2000, and QuickBooks and would require 600 to 700 hours of programmer time to create. Those close to the company questioned Sage about the wisdom of the move; the system was, arguably, too expensive for the nascent company, even considering that much of the programming would be done by volunteers. Ring-Howell estimates the system cost between $25,000 and $50,000 to create (and would have cost between $100,000 and $200,000 were it not for the volunteers), whereas the best off-the-shelf package would have cost between $5,000 and $8,000.

But Sage, a former Microsoft product manager, believed that a custom-built e-commerce system was worth the cost, both for its added efficiency and for the message it would send to prospective customers. Sage wanted the site to have a Fortune 500 look and feel. Bells and whistles, like a “constant cup” coffee subscription that customers could tailor, signaled that while Pura Vida was earnest, it was not amateurish. This kind of touch would have been impossible to add with an off-the-shelf product, according to Ring-Howell. The system also needed to be scalable so Sage could go out and market his products without the fear that success would overrun the software.

The result is an e-commerce system that integrates separate systems within the company. Orders for specialty products made with outside groups, like Bishop’s Blend (sponsored by the Episcopal Relief and Development agency), can be accounted for accurately because they are fed directly into the correct general-ledger accounts. They don’t need to be reentered separately for inventory management and shipping purposes. Every day, customer-service agents receive lists of customers to check in with about their ordering needs.

Integration even reaches across the country to Pura Vida production sites. When coffee orders come in, they influence the amount of coffee that the company roasts on the East and West Coasts, which is determined by the orders’ destinations. Roasting coffee closer to where it will be sent optimizes freshness, improves delivery time, and reduces shipping costs.

Pura Vida’s system does have drawbacks. There is no support line to call when things go awry. There are no user groups or Internet forums that can help solve problems. The company had to create its own training manuals and documentation. And Ring-Howell estimates that a custom e-commerce system can take three to ten times as long to build and implement as an off-the-shelf product does, “so you better really need it,” he says.

Pura Vida felt it had no choice but build its own system six years ago, but a company facing a similar decision today has options. Off-the-shelf e-commerce packages have come a long way in the past five years, says Sage. Products like Microsoft’s Great Plains and Oracle’s hosted NetSuite now offer capabilities like sales-order processing, accounting, and inventory control and features like customer-relations databases. “Today, the off-the-shelf packages offer almost everything we’ve developed in house over the years,” Sage notes.

Sage is glad the company didn’t wait. “I don’t regret our decision,” he says. “Sometimes you just need to invest ahead of the technology curve. We couldn’t have grown our sales 40-fold over the last six years if we hadn’t taken the plunge.” Of course, Sage had a resource most companies don’t have: free labor. Still, it’s common for startup companies to face similar decisions about how to give themselves the technology they need. Pura Vida’s experience suggests that when the choice is between buying poor off-the-shelf technology and building your own, you should, if you can afford it, build your own.

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