Coming up fast: Consultant strips down for online battle in underwear - The smalls business looms large in e-shopping as City veterans defect to cyberspace and find themselves back on the ground floor - in lingerie. Rhymer Rigby files an undercover report

Coming up fast: Consultant strips down for online battle in underwear - The smalls business looms large in e-shopping as City veterans defect to cyberspace and find themselves back on the ground floor - in lingerie. Rhymer Rigby files an undercover report

by RHYMER RIGBY
Last Updated: 31 Aug 2010

Mike Ross grins. 'How about, 'This man wants to get into your pants'?' We're drinking coffee on the balcony of his London flat while he suggests headlines for this article. Smutty as it may sound, his assertion is true: in a manner of speaking, he does want to get into your pants. He aspires to be Britain's biggest underwear merchant and believes the way to the nation's gusset is through its fingertips. Specifically, he wants his online company, easyshop, to be the UK's largest underwear retailer.

Ross is the recently appointed chief executive and part owner of GDN, easyshop's holding company. He typifies a new trend in e-commerce which has recently crossed the Atlantic - high-flyers from areas such as the City quitting to set up internet businesses. Ross himself left behind a lucrative career as consultant (for the last two years in e-business) at McKinsey - so he's better informed than most about the viability of e-commerce.

In e-commerce terms, his business has been around for some time. Set up in 1995 by a technical whiz called John Gillespie and funded by Daniel Nabarro (from the family behind the London law firm, Nabarro Nathanson) and a cousin of Ross' mother, it initially developed web sites. In late 1997, the company decided that site construction was getting terribly competitive and it redirected its efforts to e-commerce. A year later, in December 1998, easyshop.co.uk opened, selling women's underwear and perfume.

In retrospect the arbitrary decision to sell these products looks inspired.

Underwear is the best-selling item of clothing on the internet, with good reason. Most women know their bra and knicker sizes and which brands they like. In marketing speak, underwear is a 'branded repeat purchase' - perfect for selling over the web. It is also light enough to be posted cheaply.

And as Ross points out, more and more women are coming online. 'Loads of women's portals are launching, and being a site that specialises in stuff for women now looks incredibly prescient,' he says.

Easyshop (not to be confused with EasyJet's easy-everything.co.uk - 'we're not easyeverything but easyeverythingelse') was originally set up as a trial site. 'The guys said: 'Let's start small, do no marketing and understand what it's like to ship one or two orders a day,'' explains Ross. The strategy allowed a company which knew a lot about site design to learn about selling, from credit card fraud to handling back orders. The site was relaunched six months later, last June. Nabarro became chairman and chief executive and the company started spending serious money. Nabarro approached his first cousin once removed again (they had spoken informally earlier in the year) and told him that now would be a good time to join.

Ross had been thinking about leaving McKinsey - more of which later - and he did so, becoming easyshop's chief executive on 1 September. His remit was to build the business and drive it forward. He also bought a stake in the company, the size of which he won't disclose, other than to say it is 'in double figures'.

For an internet entrepreneur, Ross is less enamoured of the web than might be expected. 'Everything is difficult. It's like setting up a business, but more so. It's much faster, it's much bigger and the stakes are much higher.' He is talking from experience, having run a small business prior to McKinsey. 'At the moment it's a land-grab. You've got to get to scale very quickly and that means very rapid growth.' Indeed, the rate of expansion (based on revenue and customer base) is dizzying and can be as high as 20% in a week.

So internet entrepreneurs need to strike the right balance: growing fast, but not growing out of control. 'It's tempting to do lots of deals and spend lots on marketing, but you've got to be disciplined and think about how much growth you can cope with.' Unusually, Ross' team contains 'a lot of grey-haired entrepreneurs' - people with business experience, rather than just web knowledge. He is especially pleased to have Julia Cocking, an underwear buyer who clocked up 13 years with John Lewis, on board.

Finding the right people, he adds, is incredibly difficult: 'We have 20 people doing the work of 40 - I'm just glad we're not one of the internet companies with three people doing the work of 40.'

Great growth then, but what about the 'P' word? 'Absolutely not,' he exclaims. 'I met a competitor the other day who proudly told me he was profitable. I was delighted because anyone who is making money at the moment doesn't understand the economics of the internet.' In fact the old joke about investors running a mile from profitable e-companies has more than a grain of truth in it: companies should be fighting to acquire customers who will supply future revenue streams. Money should be poured back into the company to build it up and increase public awareness - Amazon has famously boasted it loses money on every book it sells. 'At the moment it's acquire, acquire, acquire,' Ross continues. 'We don't expect to make a profit for another two years.' In fact, he will shortly be doing a round of fundraising in the City (investors to date have been private) for between pounds 5 million and pounds 7 million. It is a daunting prospect but doubtless the business language and conventions learned in consultancy will come in handy.

Which brings us back to McKinsey. Did he leave the company (after five years) because its charms began to pall? 'No, no, McKinsey was fantastic, I loved it.' But he will concede that he is one of a string of recent defectors who have left the company to pan for e-gold: 'It's an interesting time for McKinsey. When I left, a lot of partners said to me that if they were in my position they'd do the same. Consulting in e-business is like reading about sex - it's very frustrating, there's no substitute for practical experience and you just want to get out and do it.'

Indeed, the e-drain of the best and brightest from areas like consultancy and merchant banking to the e-frontier, long a problem in the US, is starting to make itself felt here. It is easy to see why so many consultants want to have a go. Even leaving aside the call to riches, consulting is about long, protracted analysis and justifying the costs. The internet is about 'just doing it' and, if you get things wrong, doing something else. Fast-moving and novel, it will be a while before the e-conomy lends itself to consultancy's dark arts. 'What I said to McKinsey when I left,' Ross continues, 'is that they have to stop thinking about how to keep people there, start thinking that a lot of people will leave and ask how McKinsey can make the most of it.'

Back on the easyshop floor, another of Ross' great challenges is 'fulfilment' - getting the right product to the right people at the right time. Many net shoppers are annoyed by sites which don't deliver what they promise.

'The detail involved in getting zero errors is incredible, says Ross.

But when you mess up, not only do you lose one customer, you lose from the effect of them telling their friends.' As Amazon's Jeff Bezos has opined: 'If someone feels they're being mistreated by us, they won't tell five people, they'll tell 5,000.' Ross has also re-focused the business: 'It was heading towards essentials for men and women - a 'stuff' site. 'Scope creep' is easy to fall into and means you don't have a clear proposition to offer employees, suppliers or, most importantly, investors.'

With his sights set firmly on women's and men's underwear (did you know women buy 65% of men's smalls?), Ross plans to become a 'category killer'.

'Very shortly we will have more sizes than M&S and more styles than Selfridges.

We will be the biggest underwear shop online or offline in the UK and I think that's very powerful.' And his pants will, of course, be cheaper.

Once underwear is cracked he will look at diversification, across both geographical and category boundaries. If he's great at underwear, he might roll out underwear across Europe. If, however, he's a great e-tailer then he might extend the easyshop concept across other products. Or a mixture of both - it's early days and, like many others on the new frontier, Ross is keeping his options open.

He does not doubt the hard work it will take to succeed: 'There's a lot of chirpy 25-year-old consultants who think they'll get rich and, with a few exceptions, there'll be a lot of disappointed people in a few years' time.' Ross, you suspect, will probably be one of the exceptions, for two reasons. The first is his perfectionism and rigorous attention to every detail; the second is a pragmatic outlook in a business where it's very easy to be seduced by the novelty and excitement of it all. 'This is really just mail order on steroids,' he says. l

though in person he is self-deprecating and funny - and candid enough to admit that he is on day '400 and something' of a book he is writing, How to find wife in 365 days, based on his experiences of dating in millennial London.

A DAY IN THE LIFE OF MIKE ROSS

'At the moment, there's no such thing as a typical working day. I'll spend one day with lawyers, the next with investors, the next with the buying team and so on.

My day starts when I wake up at 8am - I'm definitely not a morning person.

I drink a double espresso and either head up to North Finchley or down to Leicester Square, depending on my meeting schedule. I might have a meeting with buyers to find out about sales and stock levels, making sure that all stock gets on site when it's needed. Or I may have a management meeting, to discuss everything from fundraising to stock options.

After that, it's usually half an hour on the phone to journalists and I'll try to find an hour to catch up on the 50 or so e-mails and 30 phone calls that have accumulated. At the moment, there are so many deals to be done, there'll be a whole pile on my desk which I need to go through.

I slip in a sandwich at some point.

I aim to leave work at 6.30pm and get home by 7pm. In the evening I try to go to the gym - it helps keep me sane. I then sit down between 10.30pm and 11pm and spend a couple of hours sending e-mails. I usually get to bed between 12.30am and 1.00am.'

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