Moonpig: Nick Jenkins
The founder of fast-growing online greetings card service Moonpig talks death threats, surviving the dotcom crash...and that TV advert
Price has been the primary weapon in the e-retailer's arsenal for the past decade. The availability of high-street items at cut-price rates has proved a winning formula, particularly in sectors such as electronics and computing.
But when Nick Jenkins launched his online personalised greetings card offering Moonpig back in 1999, the idea of competing with the high street on price seemed counterproductive. He wanted to harness the capability of the web to sell something that simply wasn't available in the shops. His instincts have proved fruitful. Turnover more than doubled last year to just under £21m, with a pre-tax profit of £6.7m. And with the greetings card industry worth an estimated £1.5bn, there's still plenty of scope to continue that impressive growth.
The idea for Moonpig stemmed from a process of eliminating various other business models, according to Jenkins. The fact that ecommerce was still in its infancy made an online venture more appealing. “I decided that if I was going to start a business I didn't understand, it might as well be something that no one else understood either,” he says.
A decade later and the company offers a range of more than 10,000 customisable cards. Popular designs found in your local branch of WHSmith can be adapted to include photographs, names and the user's own choice of in-jokes. Daily orders top 21,000 and nearly six million cards were shipped during the last financial year. While Moonpig accounts for 90% of the online card market, its current domination in the sector is the result of brand recognition reaching critical mass and a decade of honing the efficiency of its IT infrastructure.
Although every card is different, they're all identical from a mechanical point of view, and it's taken Jenkins and his team 10 years to refine the process. “When we started, all the envelopes were stuffed by hand. Now every card goes through a complex automated system, which is recorded at every stage,” he explains. “Our IT system is like an iceberg – what you see on the website is a tiny fraction of what's going on underneath.”
Although the administrative staff – about 25 in number – are based in London, the company's production facility recently moved to Guernsey. “We simply ran out of room and the industrial space we have now costs a third of what we were paying in London,” says Jenkins. “Although it's an island, it's really no different from being on the mainland.” With a fully established printing operation, the business is able to run with an appealing positive cashflow cycle. No cards are printed until they're paid for and stock – essentially just paper and ink – accounts for less than half a percentage of turnover. It's a far cry from the company's first year of trading, when overheads of £1m returned a paltry £90,000 of revenue.
Having read Russian Literature at university, Jenkins shipped off to Moscow soon after graduating, where he enjoyed an eight-year career as a commodity trader for a sugar operation. His decision to return to the UK was in no small part influenced by a death threat nailed to his door after a troublesome deal. “As homicidal criminals go, the Russians are quite sensible,” says Jenkins. “If they give you a death threat and you take notice of it, you're not going to get killed.”
The issue with the client was eventually resolved, but, coupled with declining enthusiasm for his line of work and a healthy lump sum gained from a buy-out of the trading firm, Jenkins returned to the UK to do an MBA. “I'd had a very narrow experience of business in commodity trading,” he recalls. “The skills I'd picked up were how to hire and manage people, along with a general sense of commercial acumen, but there were a lot of gaps and I still hadn't come up with the killer business plan.”
Jenkins saw the year spent studying as a way of refining a couple of his business ideas in the hope that, by the end of the course, he'd have something ready to run with. “An MBA is a great environment to bounce ideas off other people,” he says. “You can't come out of it thinking you're a commercial wizard, but it does give you enough to bluff your way through every facet of business. In some respects, it's about lifting the mysticism of business.”
One area Jenkins' MBA demystified was marketing, which is merely “basic common sense disguised by an awful lot of jargon”. Operating with virtually no marketing budget for the first seven years, and having launched before the advent of pay-per-click or affiliate marketing, Moonpig initially survived on a promotional diet of PR and word of mouth. It's a vastly altered landscape now, however, as anyone who's spent more than a couple of hours in front of daytime television will testify.
With its infuriatingly catchy jingle, the Moonpig TV ad is seen as a cheesy classic by some and an irritant by others. It's been aired more than 23,000 times since its first outing in November 2006. It has spawned YouTube spoofs and several Facebook groups, and not all are complimentary, with nearly 700 people joining a hate group against it. But, as Jenkins points out, “cheesy can work”. Those same Facebook users would probably be hard-pushed to think of another greetings card website.
While many companies have seen cheaper advertising costs negatively offset by their customers' lower propensity to buy, birthdays and anniversaries still come round once a year, allowing Moonpig to continue trading at pre-recession tempo. The real growth of the business, however, has been viral. As Jenkins illustrates: “If it was as simple as spending lots of money on TV ads, then everyone would be doing it. What's really made it work is that customers spread word about the product themselves. If you buy a card and take it to a party, it gets passed around.”
The reliance on word-of-mouth promotion above all is also at the heart of the company's name. Jenkins wanted a moniker that was easy to remember and fun enough that customers would want to tell their friends about it.
“I was looking for a two syllable domain, but I couldn't find the right combination available and I didn't want to buy one from someone else,” he says. Moonpig – Jenkins' school nickname – worked. At the time, if you entered the word into Google, nothing came up, and there was the added advantage that it leant itself well to a logo – a pig in a space helmet is easy enough to remember.
“In hindsight, if you look at the business now it seems like a really obvious and outrageous success, but back when we started it wasn't that apparent at all,” says Jenkins. “I really struggled to raise money for the first five years.”
Although he had an unwavering belief that the company would grow organically through word of mouth, it took a while to convince investors. However, Duncan Spence, who featured on the 2008 Sunday Times Rich List and was an investor in greetings card firm Carte Blanche Greetings, saw potential in the venture. “There are only a tiny handful of companies that have ever made money in the greetings cards sector, and Duncan has invested in two of them,” says Jenkins. “That's no coincidence, and he brought a lot more to the business than money.”
Having gone through six funding rounds over Moonpig's decade of trading, Jenkins has retained a 34% stake, with a collection of private investors holding the remaining shares. “We're very fortunate to be entirely privately owned,” he says. “As we have neither raised vast amounts of money, nor had pressure to grow from venture capitalists, we were able to expand at the rate that people wanted change.”
The temptation to grow too quickly was the downfall of many businesses that imploded when the dotcom bubble burst, according to Jenkins. “For a few years after the crash I would look around and think: ‘When's it my turn?' But I could see why a lot of them went under,” he says. “Many of them tried to develop too quickly when the online appetite just wasn't there. You can offer a fantastic new solution, but it takes time for people to come round – they want to see others using it first.”
Slowly proving the concept's viability was also key to signing up the card companies. Securing the rights to the designs in exchange for a percentage of revenue seems like an attractive proposition for publishers, considering the sheer volume of sales Moonpig now enjoys, but back when it was X% of nothing, it was a far harder sell. But, as with the investors, Jenkins was gradually able to win them over.
And he believes it's the unrivalled content variety and relationships with so many publishers that makes the business so resilient against competitors today. “It's a growing market and there's plenty of room for other players, but it takes a very long time to develop the body of content we have,” he says. Likewise, the publishers know they're guaranteed a high level of sales if they license their content to Moonpig.
Having outlived so many of the web giants that dwarfed it before the bubble burst, the Moonpig story is the very definition of a slow burning web success. But having finally gained significant traction in the market, Jenkins has maintained his patient attitude to growth. With no obvious equivalent across the pond, the temptation could have been to head Stateside. Instead, Australia was chosen for the first international outing. Moonpig now has staff and an outsourced printing operation in Sydney.
“Culturally and in terms of sense of humour, Australia is more similar to us,” Jenkins says. “At some point we'll look at the US, but we wanted to learn how to operate in another country first, and Australia has worked well.”
The high street still accounts for 98% of the market, so Jenkins' confidence that there's plenty more room for growth is justified. “The high street will always have a role, but in the future we'll have 10-15% instead of 2%,” he says. “We're raising the standard for greetings cards, and more and more people will see you get a better product by doing it this way.”
As homicidal criminals go, the Russians are quite sensible. If they give you a death threat and you take notice of it, you're not going to get killed.
MOONPIG BY NUMBERS
- 2.57 million ? the number of customers as of July 2009
- 60% ? the level of brand recognition in the UK
- 5.8 million ? the number of cards shipped in 2008/9
- 21,000 ? the average amount of orders per day
- 99,000 ? the highest number of cards shipped in a single day
- 20 million ? the amount of visits to the website in 2008/9