• WisBusiness

Sikes: Guild.com Exploring Retail Market, 'Starting to Thrive'
4/14/2004

When Madison's Guild started in 1985, the art marketing company relied on heavy paper catalogs and sourcebooks to market the work of its artists to architects and designers.

Then, in the '90s as personal computers became more widespread, Guild founder Toni Sikes began brainstorming ways to use technology to market art. The Internet boom of the late '90s gave Sikes the perfect vehicle for expansion. Guild.com became one of Madison's dot-com stars, raking in millions in venture capital and garnering national attention.

A brief sale to an auction company and the Internet bust slowed the company's momentum, but Sikes was allowed to buy the company back, including the powerful back-end database, which cost "millions and millions" to develop -- it's so unique Sikes is considering seeking a patent for it. The program allows the company to serve as an almost automatic go-between for artists and art-lovers, letting online transactions begin and end with only minimal human interaction (though Guild also maintains a staff of phone operators for customers who prefer talking to a person).

"I don't think we could today define ourselves as an Internet company," she said. "Five years ago we did define ourselves as a dot-com, but I think everyone has come to understand that the Internet is just a channel."

Guild still ships out the catalog sourcebooks, but even those old-fashioned glue-and-paper constructs draw plenty of mouse-and-monitor transactions from customers.

"We certainly use the Internet to market, but the more important function it serves for us is the back-end function," she said.

After some rough spots, Sikes said the Guild's future prospects look good, with improved growth, increased hiring this year, and the possibility of an expanding retail market, already the fastest growing part of the company.

"We survived and now we're starting to thrive," she said.

WisBusiness Associate Editor Mike Schramm interviewed Sikes on March 23.

Schramm: You started the Guild in 1985?

Sikes: 1985, yes

Schramm: How did you make the decision to turn into an Internet company? How did that happen?

Sikes: My business had been, for 10 to 12 years, modestly profitable, but just grew a little bit every year. I was looking for a way to grow the business faster, make it bigger. And I also was interested in taking my business beyond a B-to-B business.

So you have an idea of where we come from, we publish, still to this day, sourcebooks, where the artist purchases a page in the book -- so this is an advertising vehicle -- then the book is distributed free to architects and designers. We've always marketed the work of artists -- that's why I started the business. And I wanted to take this wonderful work to consumers, but expensive art books were not a great vehicle for doing that.

Since the early 90s I was looking at a number of different ways of doing that. I seriously considered CD-ROMs. I had actually written a business plan. I was reading these technology publications and I started learning about the Internet. And the more I learned about it, the more it seemed like it was made just for us.

Schramm: So that allowed you to expand your markets a lot? How did it work expanding the business? Was it successful?

Sikes: It depends on how you define success. I think it's been very successful, but the definition of success is different for everyone. In my heart of hearts, my real definition of success is 'how many artists am I helping to make a living creating their work? And today the fact is we work with over 1,000 artists and probably a third of those we're their primary source of revenue. We've had a huge impact on the art world and the art field and one of our major constituencies, which is artists. What has not come as quickly, what has been slower in coming, is building this into a profitable business. I'm happy that we've just really turned the corner.

Schramm: You've turned the corner, making a profit now. Would you say you're an Internet company that still does publishing, or a publishing company that uses the Internet? How do you -- on that spectrum of Internet to traditional business -- where do you fit?

Sikes: We call ourselves a marketing company and we use every channel available to market artists' work. We do it through books, we do it through catalogs and we do it through the Internet . Actually catalogs are the driving force behind our growth. Today, when people get our catalogs, 50 to 60 percent of them go to type their orders in online. Internet is certainly integral to the retail side of our business, but I don't think we could today define ourselves as an Internet company. Five years ago we did define ourselves as a dot-com, but I think everyone has come to understand that the Internet is just a channel.

Schramm: So was that a conscious decision, to not define yourself, just as a dot-com? How did that transition happen?

Sikes: To a certain extent it was and the reason is when I got the company back from Ashford, if you went out raising money for a dot-com, people went running the other direction as fast as they could. Part of it was just the reality of fund raising, but behind that was the truth: that we were marketing work in a variety of different ways and our revenue comes in a variety of different ways.

Schramm: Why don't we talk about that a little bit -- you sold to an auction company then you purchased it back? Can you kind of take me through a time line of how that worked and how that happened?

Sikes: During the dot-com bonanza years, we raised $40 million. Then when the bottom fell out in spring of 2000 we had to start thinking about what we could do. My investors were interested in what we could do to recoup some of the money they had invested in us and the best way to do that was for us to sell to a public company. Ashford was a public company. It was an all-stock transaction, so my investors got stock for their investment, which they could then take and resell on the public market and recoup some of their investment. So that was really a lot of what was behind the sale.

But I think that everyone went into that sale with the best of intentions, really trying to make it work. It became pretty obvious to me within a couple of months -- I was on the executive committee of that company and spent a lot of time in Houston -- as I learned about the company I could see that it was not going to make it.

Schramm: The company itself?

Sikes: It was not going to make it, and if it went down the drain, we would go down the drain. I went to the CEO and talked to him about essentially letting us go. We sold the company in January of 2001 and we bought it back in July of 2001 and started Guild, LLC, a brand-new, totally new legal entity in August 2001.

Schramm: So that's where you are today?

Sikes: Mm-hmm. But we were really lucky -- we got all of our assets back, our Web site, our technology, all of our intellectual property, the programs we had spent so much money developing, which includes the catalog program. All of that came to us, so even though we were a brand-new company and didn't have much money, we had these enormous assets that had been developed over the last few years.

Schramm: And you had the brand name.

Sikes: And the brand name, which we had spent millions on. Millions and millions

Schramm: And that whole time you stayed in Madison, even when you sold to Ashford? You kept offices here?

Sikes: We did keep offices here. Our staff went from 98 down to 29 people, greatly contracted. We used to have four spaces in this building, now we have one. We used to be the biggest tenant in this building, but we always stayed here.

Schramm: Why was that? What about Madison?

Sikes: I couldn't talk any of my staff into moving to Houston. We actually did have a couple of key executives who did move to Houston. Three of them, they've all moved back. One of them still works here, in our company. I don't know. No one wanted to go to Houston. They all wanted to stay here.

Schramm: As far as tech companies go in Madison, it's pretty much you, Berbee and Sonic Foundry that are still here...have you lost a lot of your networking around Madison?

Sikes: Actually no. There is a lot of exciting stuff going on in Madison in the technology area. I'm on the board of Accelerate Madison. I mean, I consider WisPolitics and WisBusiness to be an Internet company, a technology company. There's actually quite a bit going on here. I think Guild and Sonic Foundry have gotten the most press because we raised so much venture capital during that time. There's a lot of exciting stuff going on in Madison. There's networking and finding colleagues. Mike Baum, our president, is today at a meeting with executives from Pleasant Company and Lands' End. Also, putting our other hat on, the retail, Wisconsin is rich in successful companies in that area, that have combined catalogs and the Internet to build successful companies.

Schramm: What about an Internet sales tax. Would that affect your business?

Sikes: It would affect our business. It would have an impact in that most of what we sell -- our sales take place to people from all over the country. I have a feeling that it's not going to change buying behavior. Huge percentages of our customers are from the East and West Coasts, from New York and California and that's where so many of the big retail companies are located and they're used to paying sales tax on so many things.

Schramm: There are a lot of people who say this could hurt Internet sales. You don't see that?

Sikes: The way it would hurt us is -- I don't think it would have a big impact on buyer behavior. Until there is a simple way -- we are still a small company... We only have three people in our finance department, so until there is a simple way to administer it, we if we had to add a half-time person to administer it, that would hurt us, because we are very lean here. I think the administration of it, because every state has a different sales tax, it's all done differently -- until there's a simple way to administer it, that would hurt us.

Schramm: How are your prospects for growth looking right now?

Sikes: Fantastic. (laughs) Really good. We had about a 25 percent growth last year over the year before, 35 percent in our retail business, which is the fastest-growing part of the company. We're going to meet or exceed that this year if we stay on track, which we have been. We're actually beating our first-quarter projections very nicely. It feels good to us. There's a real sense out there that the economy is turning around. We're seeing people spending larger and larger amounts of money. It's not unusual for us, in a given day, to get two, three, four orders of $5,000. People are spending substantial amounts of money.

Schramm: Because when the economy goes south, art, people consider it kind of discretionary spending and they can do with out it.

Sikes: Yes. I think so. And yet, during a down economy we were doing well and when it recovers I think we'll do even better.

Schramm: Blue sky, in five years, where do you see yourselves being? Do you see yourself being the "eBay" of art"

Sikes: Absolutely. We already are the largest retail marketer of original art. We're not as big as some of the poster companies; we're not as big as Sotheby's, who's selling the work of dead artists, but in terms of a company selling contemporary art by artists who are alive and producing today, we are the largest. That's not to say that competitors might come along, but I think we're well on the way to being a pretty dominant company in the art world.

Schramm: What's the best-case scenario for five years down the road? Have you thought that far ahead?

Sikes: I would love to one day be able to look to Europe. That would be an exciting kind of evolution for us. The other area of potential growth for us is an actual retail presence. And we have some ideas of ways we might do that.

Schramm: You're kind of a clearinghouse. You don't have warehouses?

Sikes: No. No, it's very cool, it's a great business model. We take the order, charge the credit card, a purchase order goes to the artist -- all of this happens automatically -- the artist gets an e-mail saying they have an order, they log in to our extranet, they see the order, they commit that they're going to ship it in the time they told us they would ship it. The customer gets an e-mail confirming the order and the ship date. When the artist is ready to ship, they go into the extranet, enter the package weight and size, click a button, UPS is notified to come pick it up, they print out a UPS label and the customer gets an e-mail saying here is your tracking number. All of that happens without us doing anything -- it's all automated.

Schramm: So it's kind of a more moderated eBay?

Sikes: Right, no inventory, it's really a beautiful business model.

Schramm: Are you unique in the art world doing that?

Sikes: Yes. There are a couple of companies, much smaller companies who are competitors of ours. I'm not exactly sure how they work. The technology that we have that allows this back-end infrastructure to work is something we've spent millions and millions of dollars developing when we had the money to do it. It would cost a lot for somebody to develop this system -- we're actually thinking about trying to patent it, because it's pretty amazing.

Schramm: So you'd become a software company?

Sikes: More than anything else to protect it. When I wanted us to be an e-commerce company it was because I thought it would allow us to present the work of huge numbers of artists to huge numbers of people. What I didn't really understand is that at the end of the day we would be an Internet company because of the back-end system, the way it allows us to do business today would be impossible if our systems didn't lay on top of the Internet . In that sense, that's really why we're an Internet company. We certainly use the Internet to market, but the more important function it serves for us is the back-end function.

Schramm: How would an artist go about getting listed?

Sikes: We do jurying four times a year.

Schramm: So it's not just someone with a lot of money can say "I want to buy an ad"

Sikes: No. Because we feel like the brand that we've developed means customers can look to us with confidence, that they can trust -- since they can't pick up the piece and touch it.When you're selling expensive pieces of art and no one has seen it, they have to trust that we're the ones who have said: "It's this value, it's worth it. You can buy this with confidence."


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