Talk about irony.
Buoyed by success playing online poker, local accountant Jeff Smith quit his day job three years ago to sell poker chips and playing cards for live games. Now he and business partner Knute Lentz are too busy filling orders to deal themselves in.
Once colleagues at national accounting firm BKD LLC, the men, both 33, said they saw the game’s potential long before amateur Chris Moneymaker’s victory in the 2003 World Series of Poker made it a pop-culture phenomenon.
“We saw a huge rise coming and jumped in early,” Smith said. “That enabled us to develop some important relationships. Since then, a thousand other guys have tried to do the same thing. But we were there first.”
And in this case, the early bird is eating well. Sales totaled nearly $800,000 last year, Lentz said, and should reach $1.3 million this year.
Still, it’s taken time to start raking it in. Smith took the plunge first, leaving the suit-and-tie world to form Big Slick LLC in 2003; Lentz, still working at the time, was a silent partner. Their plan was simple: Import chips from China and sell them online to growing legions of poker fans nationwide. But the first shipment took more than six months to arrive, and in the meantime the bottom dropped out of what was becoming an increasingly crowded market. The men regrouped, selling the chips on eBay, through newspaper classifieds and at flea markets. Working independently, they also experimented with other poker products, from instructional videos to high-quality playing cards. In the process, they came up with Plan B. Reincorporated on Jan. 1, 2005, as Brybelly Holdings Inc.-borrowing the names of Smith’s son Bryson and Lentz’ daughter Isabelle (Belly to her family)-the Indianapolis-based e-tailer started fresh with $13,000 in inventory and cash and a new focus: plastic playing cards.
Although plastic cards are more durable than run-of-the-mill paper decks, lasting for about 300 hours of play, customers eventually buy more. Chips, on the other hand, are normally one-time purchases, Lentz said.
Demand also was picking up, as hobbyists tried to step up their home games and casinos invested in their poker rooms to cash in on the craze. Now, Brybelly’s client list includes more than 30 casinos and 250 poker-supply companies, in addition to individual enthusiasts.
One of Smith’s first sales was to Las Vegas-based gambling giant Harrah’s Entertainment, which used the cards in several of its casinos. Harrah’s has since struck a deal with the manufacturer of those cards, Brazilian cardmaker Copag, making them the official cards of the World Series of Poker.
Even so, Brybelly remains one of Copag’s largest U.S. distributors-and is considered more of a partner than a customer, offering advice as Copag works to increase its presence here, for example.
“[Brybelly] is a great company, a great partner and I think we have a great future together,” said Eduardo Soares, vice president of sales and marketing for Copag USA Inc.
Brybelly even helped build a Web site for the cardmaker-essentially creating competition for itself-in preparation for a series of television ads that began appearing this month. But the effort’s not completely altruistic: Wholesale orders will be referred to the distributor closest to the buyer, Soares said, and its central location means Brybelly should be flush with business.
The relationship with Copag has helped fuel the company’s success, but Smith said Brybelly’s business model fanned the flame.
Early on, the partners kept overhead low, storing inventory in their garages and Lentz’s dining room until they ran out of space this February. They didn’t take any salaries in 2005, pouring all the profits back into Brybelly. This year, they’re drawing small salaries and monthly profit distributions, although they’re trying to keep reinvesting in the business.
“Every $1 we take out this year is $2 next year,” Smith said.
The partners know what a difference reinvesting can make.
“We grew our balance sheet 25 percent a month-every month-for the first year,” Smith said.
The strategy was deceptively simple: by operating niche Web sites for each of its products, Brybelly could attract consumers interested in what it was selling.
Someone who types “Copag” into the Google search engine, for example, will find Brybelly’s www.copagcards.comat the top of the “sponsored links” and “natural” nonpaid listings.
By having individual sites, rather than offering everything in a single location, Smith and Lentz hope to cut through Internet clutter and establish each site as a specialist in the product it’s selling.
That’s a good game plan, said Richard Widdows, a professor of consumer economics at Purdue University who has studied ecommerce. Although not familiar with Brybelly, Widdows said the online retailers that have seen the most success have been the first to stake their claim in a specific area.
“You establish your name among people who consume that product,” he said. “You want to be the site they automatically go to the next time they need something. … If you can get in that position, you’ll be pretty hard to shake from that time on.”
But Brybelly itself is a bit of a chameleon, keeping its corporate name out of the spotlight in favor of the individual Web site monikers. Even the sign outside its 2,600-square-foot office/warehouse promotes an alias: Poker Supplies Co.
The owners chose the more descriptive moniker when it came time to order a sign, on the off chance they might pick up some walk-in business. Still, Lentz and Smith don’t have any immediate plans to open a bricks-and-mortar retail outlet.
“Our customers can be anywhere from Indiana to New Zealand; we’re not limited by geography,” Lentz said. And there are other advantages, too: “The great thing about e-commerce is it’s always working, even when we’re not here.”
Although the niche Web site strategy appears to be working, Smith said he has started looking for ways to develop sales leads more proactively, rather than “just sitting out there” on the Internet. To that end, Brybelly has a salesman making the rounds of casinos and card rooms in California, and the owners keep working the phones from Indiana.
Hold ’em or fold ’em?
Even so, Lentz and Smith know all good things must come to an end. While poker is still red hot-and is likely to remain so “until amateurs stop winning the World Series,” as Brownsburg poker table manufacturer Tony Lehn predicts-Brybelly nonetheless has an ace up its sleeve: diversification.
Earlier this year, the company added to its offerings when it won permission to sell the Thomas the Tank Engine product line. It’s a respected brand, the owners said, with more than 250 individual items that are a hit with kids-what more could an Internet retailer want?
Ultimately, another three or four similar endeavors, Lentz said.
“I could see us in five or six different industries,” he said. “We talk about [possibilities] all the time. What we do is simply a function of time and money.”
“As soon as we get money built up, we start thinking about something to do with it, whether it’s a product expansion or a new industry,” Smith concurred.
That’s also smart thinking, said Widdows, the Purdue professor.
“You’ve got to diversify, float other product lines, line up other business without taking too much away from what you’re doing now,” he advised. “The card part will decline. It’s inevitable. You’ve got to be ready to move on to something else.”
On the poker side of the equation, Brybelly is in the process of fleshing out its own line of so-called “card covers,” the coinsized keepsakes some Texas Hold-em players use to protect their hole cards.
The company commissioned an artist to come up with original designs and had the first one manufactured overseas. The first design features a donkey’s head and the self-deprecating phrase “I’m a Donk!”- poker-speak for a particularly bad player. It sells for $12.99 on (you guessed it) www.imadonk.com. Up next: “I’m a luck sack!”
Success hasn’t gone to the Brybelly owners’ heads. The self-described bean counters are celebrating by taking a step back and figuring out how to improve results even more. Their goal-which they’ve met so far-is a 100-percent return on their investment. Getting there may mean re-evaluating some product offerings to focus on ones they can move quickly.
Inventory sitting on a shelf is “just cash sitting idle,” Lentz said.
There’s not much else idle at Brybelly’s East 33rd Street warehouse. Two employees work 30 hours a week to keep up with shipping, and Lentz’ wife, Tricia, spends about 10 hours a week returning e-mails. Two Web designers work on a contract basis.
The owners put in considerably more time-in and out of the office. They were in Las Vegas last week for a trade show leading up to the World Series’ main event and spend many hours at their computers or on the phone keeping up on things.
“It’s addictive,” Lentz said. “I’ll be off for two or three days on vacation and by Sunday I’ll be bouncing up and down, ready to get back in. … It’s a great feeling.”
So it’s little surprise that the pair have no plans to fold their hands and move on to less invigorating work.
“I don’t see myself ever going back to another job,” Smith said.
“Never,” Lentz concurred.
Not even if poker goes the way of the pet rock.
“Millions of people played poker before it got so popular, and millions will play once it’s over,” Smith said. “These things fall off eventually. It’ll be rough, but we’ll be one of the last guys standing.”