Tim Harris is co-owner of LaTienda.com, the largest online Spanish-food retailer in the United States. In this edition of the "Thought Leadership Project," Tim talks about what makes LaTienda.com unique, the company's supply chain, the challenges of growing, and the nuances involved in managing the online food business. About Tim Harris
Prior to joining LaTienda.com in 2001, he co-founded Teetimes.com, an online booking engine for the golf industry. Since he joined LaTienda.com, they have grown from 1 employee to over 20 and revenues have increased thirty-fold.
Tim graduated from William and Mary in 1991, with a major in Latin American Studies. He lives in Williamsburg with his wife Amy (WM Class of 1991) and two sons. In December 2009, Tim and his family moved to southern Spain for 6 months where he will oversee the launch of the European arm of Tienda.com, which ships products throughout Europe.
This is a condensed version of Prof. Ram Ganeshan’s (RG) interview with Tim Harris (TH).
RG: What makes LaTienda.com unique? Why can’t somebody setup a website and sell Spanish food? What are the barriers of entry?
TH: I think that one of the secrets to our success was that we started in 1996, early in the life of the Internet. Since we’re a web based business we rely a lot on either paid search traffic, referred traffic or organic traffic and there’s really no shortcut with Google to get a high ranking. If you do a search on search terms related to Spanish food we are ranked very high.
Over the years, we have developed relationships with over 400 affiliate sites that now link to us. We get almost 30% of our traffic organically or free.
So the barriers to entry now are fairly significant on that side -- you’d have to spend a lot of money to try and get pay per click traffic to attract as many customers as we do.
RG: What about your products? Is there something unique about your products that your competitors don’t have?
TH: Most of our product relationships are exclusive. We work with dozens of artisan producers in Spain and with a few exceptions we’re working with all of the top companies in Spain on an exclusive basis. So that’s a barrier to entry.
RG: How do you develop these relationships with your suppliers? If they’re unique why would they want to sign up with you?
TH: I think that now that we are established, it’s a lot easier. In fact many of the prospective suppliers come to us now. I think they are originally attracted to us because of the lure of the American market. But because we are not a large distributor, we’re able to work with small companies. We buy pallets not containers like large distributors. We can work with a small-scale producer and give them a lot of personal attention.
RG: How do you manage the logistics on the Spanish side? You have to obtain pallets from these suppliers and knit them together somewhere, fill a container. Do you have an operation for that?
TH: We contract out with a consolidating company, a freight forwarder based in Valencia, a relationship that goes back 8 years. We also have our own buying office in San Sebastian, with a veteran manager with decades of experience. From a supplier perspective, we take out a lot of the barriers to entry into the US market. We take care of all the paperwork, transportation, and the logistics so they can concentrate on making a good product. Red tape is terrifying to many of these small producers and they are unable to navigate the rules. We do it for them.
RG: What can you say about your typical customer?
TH: I would say a majority of our customers are food lovers with a very high level of education and an average household income of $110,000. They’ll buy an $1800 ham if it’s the best ham in the world. They’ll spend twice as much on saffron if our saffron is the best saffron you can buy. If there is one thing we have seen in this recession it is that people will continue to pay for quality.
We see ourselves as the bridge between the American public and Spain and we can translate the culture and the food tradition in terms that resonate with the American buyer. It’s been the American buyer in that upper demographic who is very interested in getting back to basics as far as food and understanding who is making it and what the traditions are behind it. There is a big movement towards supporting the small, family run producers and free-range, sustainably produced, high-quality food is gaining in popularity. It just so happens that much of Spain missed out on the industrial revolution, and their food producers are still using traditional methods that go back hundreds or even thousands of years.
RG: You have been growing quite substantially the last two, three years. What’s contributing to this growth? Are you upping your marketing efforts?
TH: Referrals are a very big part of our growth, so there is a bit of a snowball effect. We have also upped our marketing. We put a very high premium on service. So in general we don’t compete on price, we compete on quality and then consumer experience. As it turns out, these are the fundamentals that have helped companies like ours grow in this economy. Quality, service and great selection are our bedrock.
RG: And what are the challenges of growing? What sorts of issues are coming up if you have to double your sales in 3 years?
TH: We have some very practical challenges in the warehouse as far as scale. Our slowest month is now what we used to sell in our peak month three years ago. On some of our peak days in December, we’re doing as much in a day as we did in a month five years ago.
One of the hard things about our business is that it is fairly seasonal and we’ll do about 30% of our business between Thanksgiving and Christmas which is typical for a food business.
So you have to be geared up for those 4 or 5 weeks of peak production – capacity which remains unused the rest of the year. We use a lot of temporary labor which is always a challenge.
We are trying to boost business in the summer through some sort of ancillary line - that’s been difficult to find. We’ve been trying to promote paella, a typical summer dish, and that’s been fairly successful.
As far as new marketing goes, we did our first television advertising last year which we deemed a success. (RG’s note: The PBS show “Made in Spain” by Chef Jose Andres)
RG: Yes but you have your catalogs too.
TH: Yes and the mailing catalog was something that about five years ago we decided to really get into. We will print a million catalogs this year whereas five years ago I think we printed maybe 20,000 and 7 years ago we didn’t have a catalog.
RG: You also have a call center?
TH: 15% of our orders are called in. We have an onsite customer service office and an offsite call center for peak periods and after hours.
RG: What are your issues with supply and demand? Do you run out of stuff or do you have stuff left over?
TH: Yes we do, we work with a perishable product and we face long lead times from Spain.
What’s nice is that Spain has a long tradition of what we call “castle” food. So they have foods that were made to store for long periods of time at ambient temperatures. They have a wonderful 1000-year old tradition of salting and curing, whether it’s cheeses or meats or seafood. That cuisine is already setup for a longer shelf life. Contrast that with Central America where a lot of the best foods down there are the fresh fruits and fresh fish, which you can’t economically import and deliver in good condition.
RG: The lead times must be quite a lot to get your products, is it not?
TH: Yes it’s at least 6 weeks more often 10 – 12 weeks. If we run out of something from Spain -- unless we want to fly it over -- it’s going to take that long. Of course if we run out of a product that’s only produced once a year, we have to wait until the next harvest.
RG: Is a growth area expanding to related food, related like Latin American?
TH: We’ve launched a Latin American corner of our website selling some things from Latin America because there is a crossover. Many of Spain’s iconic products (pimenton, gazpacho) are made up of products that were discovered in Latin America. We have seen over a 150% increase in sales in this category this holiday season.
Most Latin American families have a connection to Spain, whether it is emotional or familial. With the demographic shift in the United States, Hispanics are the largest minority and growing fast. They are also adopting the Internet at a much faster rate than almost any other demographic group in the USA. We think we have a pretty good next 20 – 30 years in this market.
The interest in food from Spain and Latin America will increase and we see a fusion of the two. Eventually, in a generation or two, Spanish food will be as mainstream as Italian food now is in the US. We think Spanish food is going to grow and grow. The challenge will be to remain competitive as it becomes more available at Trader Joe’s or Whole Foods. We think we can do that by concentrating on small, boutique producers in Spain. Small family companies that simply could never and would never produce enough to supply a large national chain in the USA.
LaTienda.com is the largest Spanish online retailer of gourmet food in the United States. They stock over 800 premium products from Spain and provide the broadest selection of quality Spanish food and related products available anywhere. Learn more at LaTienda.com