Part 1: Pack light with ebags and the "sky's the limit"

Hi Jon. First, can you give us a secret bag packing tip?
Ok, if you pack a nice shirt, keep it in its plastic bag from the cleaners when you pack it. It reduces all the friction in the clothing and then it doesn't wrinkle it too much. But I'm not a good packer, I would prefer to just take a backpack and fit it all in there. That's what I learned in Europe.

Now tell us why ebags is still here, and what makes it different from pets.com or etoys.com?
One of the big reasons that we're around is that we never got into heavy inventory positions and we never filled warehouses. When we planned our business, we always planned it to be as frictionless as possible, and that's what they talked about in the first books - describing the theory of the way the Internet and the Web were supposed to interact with commerce.

What happened is companies like etoys and pets.com started building warehouses and filling them with tons of inventory and creating all kinds of exposure to assets that didn't turn over. From day one we never wanted to do that.

We intended to operate frictionless. One of the reasons we can do that, is because when people buy products like luggage they only want one at a time. And a lot of time stores only want one at a time, so the whole operation that backs up our industry is meant to ship that way. And we grew up in our industry.

I'm hoping we're going to be the only one left that begins with an e - outside of etrade, I'm pulling for them.

But I think it's foolish to drop the dot com. It's just operating like a yo-yo, whatever whim Wall Street wants or the public seems to be reacting to. Whoever is the stepchild at that moment seems to be cast out.

I think there are going to be some very proud dot com companies that emerge as being profitable. Businesses that really thrive on that frictionless commerce that Bill Gates talked about. And we plan to be one.

You took your knowledge of offline selling and instead of following the "make money" mania, relied on your offline experience to make your way?
Yes, that's true. When I decided to launch ebags, the people that came with me, we all had such deep knowledge of the industry, because that's all the contacts we had from our history. So we didn't have to relearn an industry or meet people or make contacts with brands. All we had to do was adapt an industry that we knew very well (selling luggage) to a new distribution channel.

So is the key to not "throw out the old bathwater," and stay with what you know?
I think that's been a huge advantage to us. Look at any retailer having success online like Victoria's Secret or Crate and Barrel, that's what they're doing. They are just adapting to a different distribution channel.

And who do you think will continue to be successful?
Well, I think that ninety-five percent of the dot coms will be gone. But I think that most of the big brick and mortars that came online will still be there. The weight of their brand names is enormous. But I also really believe that there is room for great new brands. I think should be a really giant force and brand, if they can get their finances together.

Amazon's partnership with Toys R Us didn't have as much as of an impact as they thought it would, but your business partners really do have an impact. You're already in partnership with Northwest and United - do you think the "sky's the limit" in increasing those types of partnerships?
Yes! I really do think the "sky's the limit." My guess is Northwest has over 20 million and so when they tap their customer base and talk to them about our business and we give them a percentage of our business, I don't think there's anything that can stop us.

They're trying to provide a service to their frequent fliers and we're trying to do the same thing, and they need us to do that partnership. We're lucky because our business really lends itself to those partnerships.

And was it hard to get those airlines on board?
In the beginning, in the first nine or ten months, I'd say we couldn't even get an airline to return a phone call. But we kept being persistent and we would just call and call.

And how did you finally get them?
We wrote a software package that was called an aggregation tool and United Airlines got very interested in that. Within days we were in discussion about that. And then, as they learned more about our company and the bag business, it turned into a pretty well rounded relationship. Northwest was the same story. They identified us as the best bag supplier for them and it went from there.

What we're lucky with too is that there isn't a brick and mortar in the offline world for bags that you can identify, like a Toys R Us, or a Starbucks or some big national brand. There really isn't a giant identified player.

Continued...