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Mr. Dirt Cheap: Deepak Agarwal Started In Erotica. Today He's An E-commerce King

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Already 15 minutes late to his next meeting, Deepak Agarwal stands on a corner in Manhattan’s Diamond District, waiting for a hired car to whisk him 20 blocks south. The 29-year-old founder of a bargain-bin e-retailer called Nomorerack.com has just finished placing orders with a jeweler inside a stuffy, dimly lit fifth-floor office. Next up: a bedding merchant. Short and plump, Agarwal perspires in the late spring heat. A buzz cut makes him look like a teen; so do the canvas shoes, jeans and Oxford shirt with a flyaway collar. He grins as a black Suburban pulls up–his preferred way to get around the city–and a black-suited driver jumps out to open the door. “I’m a VIP customer,” he says with his trademark giggle.

Agarwal issues no instruction to hurry, knowing that people are waiting. Tough. Meetings begin when he shows up. The duvet suppliers know this as well as the jeweler, who waited 45 minutes for Agarwal to show.

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He sells it all: Nomorerack.com’s Deepak Agarwal.

They excuse his behavior because no site moves its merchandise like Nomorerack. Since Agarwal, called Dee by all who know him, founded the company in November 2010, he has traded low gross margins (roughly 25%) for immense volume (more than 24 million items sold). Nomorerack sells cheaply priced tablets, knife sharpeners, rings, boxer briefs, sundresses and LED bulbs. Go to the site–or sign up and be hounded by e-mails–to find 50% to 80% discounts over other retailers.

If you believe Agarwal, sales have exploded from $9 million in 2011 to $340 million last year, when the company made an estimated $85 million. This year, he claims, revenue will surpass $700 million. Maybe. Maybe not. Nomorerack is privately held. Says Sucharita Mulpuru, an e-commerce expert at Forrester, “I’m not going to fully believe anything that’s not audited by the SEC,” assuming it goes public. Agarwal claims he has hung on to about 65% of the company through two equity raises that brought in $52 million from adoring, small-name investors. No one will comment on the exact valuation, but Agarwal offers up Zulily as a point of comparison, which on the face of it seems reasonable. If valued like that fast-growing e-retailer, Agarwal’s stake is ostensibly worth just under $800 million.

If this all sounds too amazing, it is. Over the last three years 2,670 customer complaints–mainly about shoddy merchandise, lousy phone reps and foot-dragging refunds–have been filed with the Better Business Bureau, which has assigned Nomorerack an “F.” (Most complaints do receive a company response, if an unhelpful one.) That’s an extraordinarily high number, considering that Wayfair, with $915 million in sales, had 502 complaints over the same period. Nor does Wayfair have such active haters. Sites like Ripoff Report and Complaints Board bulge with angry testimonials; various Facebook groups such as Nomorerack Is Evil have proliferated. Agarwal shrugs. “For every one screamer out there, we probably have 20 to 25 happy customers.” Which still means 4% to 5% of his clientele despise him.

Then there’s his past, parts of which he isn’t eager to discuss. Agarwal got his start–and his nest egg–running a Philippines-based outsourcing firm and working within the pornography industry, becoming inextricably linked with a number of adult websites. When first confronted by these facts, Agarwal says, “There are a lot of rumors out there. I’ve read rumors about me being part of the Illuminati.”

Agarwal prefers the sanitized biography, which starts with his parents dropping him off to live on his own as a high school student in an Orlando suburb while they returned to India. After graduating in 2003, he says, he moved to the Philippines, where he launched Contact Center, an outsourcing company that did data entry and phone support. Four years later he followed his girlfriend to her native Vancouver, B.C., then sold his business. In 2010 he launched Nomorerack with four people.

Matt Groover, a high school buddy, remembers the past differently. Teenaged Agarwal, he says, developed a fascination with **** (and its easy money). In 2003 Agarwal registered a site with a name suggestive of violent oral sex. Agarwal used an address in Sanford, Fla.–the small ranch house where Groover lived and, for several years, collected Agarwal’s mail and deposited stacks of arriving checks. Groover still occasionally gets mail for Agarwal, though he’s tried to stop it and hasn’t spoken with Agarwal in perhaps a decade.

Over the next two years Agarwal registered at least another seven sites using this arrangement, perhaps two of which are printable: Daddysfriend.com and DeeCash.com. The sites didn’t make skin flicks but mostly offered the kind of movies you would’ve seen in the theaters that once crowded Times Square. Back in the early 2000s people still paid for **** on the Web, and the sites registered by Agarwal, say a couple of sources in the business, could easily have brought at least $10 million a year.

A former business partner emphatically describes Agarwal as the mastermind behind the sites. “He’s got balls you could see from space,” he says. One ex-rival, Jim Carter, claims Agarwal poached some of his best Filipino employees from his staffing company, which also serviced the adult industry. He has little fondness for Agarwal: “He’s a f–king snake.” (Recruiting for Filipino call centers is “competitive,” says Agarwal.)

Agarwal denies he ran or owned the **** sites. Instead, he says, Contact Center provided designers to create ads and programmers to ensure the ads drove the traffic to the **** websites. The adult clients, he says, were only a small part of his business. So if Dee Agarwal didn’t own sites like DeeCash.com, who did? “There were various owners of various businesses,” he says. “To ask me who owned what is a broad question.”

Whoever owned and controlled the sites, they developed a bad rep within a seedy business. Former business associates and rivals say the websites engaged in so-called cross-selling, in which customers signed up for one site while inadvertently registering for several others, and also in what erotica executives call “banging credit cards”–relentless overbilling of customers. “I personally was never involved in any kind of fraud, any kind of credit card banging,” says Agarwal. In another matter, a gay-**** production company, BluMedia, sued both DeeCash.com and DeeDevelopments.com (a Nevada company once registered in Agarwal’s name) over alleged trademark infringements on BluMedia’s “Broke Straight Boys” videos. BluMedia never received a response to its lawsuit from either DeeCash.com or DeeDevelopments.com.

Again, Agarwal denies any involvement in the lawsuit. He does admit Philippine authorities raised questions about his business–presumably opportunistic bureaucrats looking for a handout–and stresses he never paid a bribe. A Federal Trade Commission spokesman would confirm only that it had received a complaint about Agarwal, who says he isn’t aware of any investigations.

What is clear is that Agarwal started living a lifestyle befitting a young tech entrepreneur. He cruised around Manila in a BMW, and apparently wasn’t the only one in the car. His former partner says he eventually started traveling with armed body guards. (Agarwal denies this.) When he found a restaurant with a Mediterranean cuisine he enjoyed, he became a partner in it. On one birthday, he and his friends decamped for Necker Island, the lush isle owned by billionaire Richard Branson. The group developed a craving for Taco Bell. Burritos were flown in from Miami.

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Agarwal clearly knows how to throw a party. In 2010, when he insists he was out of the the adult industry, he hosted a networking dinner in Vancouver that featured a couple of marquee names: George H.W. and George W. Bush. He says he met the 43rd president at a talk Bush gave in Calgary and claims he impressed him with his entrepreneurial verve. “If you reach Bush and ask him, I’m sure he’ll recall the dinner and me,” says Agarwal. A Bush spokesman wouldn’t comment.

Once in Vancouver, Agarwal fashioned a new identity as an e-commerce impresario–and went to some lengths to conceal his past. “He cut off contact with everyone,” says his former business partner. His LinkedIn profile says merely that he founded and runs Nomorerack, and doesn’t include his picture. He isn’t on Twitter (“I really haven’t had time”) but is on Facebook–again without a photo of himself visible. The **** websites are no longer registered in his name, listing instead BlueRiverAlliance.com or MediaRevenue.com. (Neither could be reached for comment.) They redirect traffic today to a **** site called CountingStacks.com, which also isn’t registered to Agarwal. (It, too, couldn’t be contacted.)

Nomorerack launched just before Black Friday in November 2010. Agarwal and his girlfriend (now his fiance), Melina Ash, corralled a small team to help pick products as well as design the site. An early hit was a Zhu Zhu Pets toy hamster. A mention on ABC’s The View in early 2011 gave the site a lift.

The move to New York City in April 2012 gave Nomorerack greater access to suppliers and employees. Investors followed. On the heels of a $12 million Series A round led by Asian e-commerce company Gmarket came a $40 million Series B funding dominated by Oak Investment Partners, a small firm in Greenwich, Conn., and HTV Industries, a Cleveland holding company. They all express confidence in Agarwal and praise his lean, capital-light company. What do they think of his earlier enterprises? “There’s nothing wrong from a business perspective,” says Ronak Khichadia, who invested in both rounds. “His ability to gather a large audience at a low cost is something of an amazing talent.”

The New York office of Nomorerack doesn’t pulse with the electric vibe of many startups. While a skeletal bride drenched in blood–an apparent Halloween leftover–greets you near the door, the real lifelessness lies inside, where dozens of hushed engineers and other employees tap-tap on keyboards. There’s no one at the ping-pong table or using the dartboard. A pile of empty boxes and returned socks crowd one corner. Sitting at small desks, 20 or so buyers source products and upload descriptions before turning the operation over to a series of algorithms, which place the most popular items at the top of a nearly endless stream. Each item has been tagged with various keywords that correspond to customer searches; microfiber sheets, for instance, might have “bed,” “bedsheet” and “hypoallergenic.”

Nomorerack maintains no inventory of the goods sold on the site. It collects the money, books the selling price as revenue, then pays the supplier. The company charges a flat rate of $2 to ship but doesn’t fulfill the orders. Suppliers log in to retrieve a list of the orders they need to fill. Agarwal makes such good use of advertising on social media (as well as on television) that Nomorerack earned some praise from Facebook COO Sheryl Sandberg during a quarterly earnings report.

But it’s also earned the scorching enmity of many customers. “I placed three orders with them totaling close to $2,000, and they refused to replace the five items missing or refund me the money totaling $333,” says a typical complaint. Others say the products are incredibly shoddy: “My daughter’s boots have fallen apart already. What kind of deal is buying boots and having them fall apart in less than two months?” Many gripe about how tough it is to send something back. “The company refuses to aid in the return of any products, claiming return labels were sent,” says one. (“We always strive to ensure the merchandise we sell are high quality,” says a Nomorerack spokeswoman.)

Agarwal’s customer-service SWAT team is outsourced half a world away in the Philippines. They dial in from home. They’re on call 24 hours a day and, supposedly, respond to every e-mail usually within 30 minutes. Nomorerack, he says, has made improvements, stretching its return policy from 21 days to 30 days, adding 30% to 40% more folks in the Philippines and hiring more customer-service managers in the U.S. Shoppers are still grouchy.

So is Agarwal at the end of 55 minutes, deflecting questions about **** and Nomorerack’s challenges. The constant flicker of the motion-sensor lights in his conference room add to his annoyance. Gone is the candy bowl where he often helps himself to Nestlé Nerds. Gone, too, is his customary giggle. The interview ends abruptly. Says Agarwal, “I’m actually late for a meeting.”

Source: Mr. Dirt Cheap: Deepak Agarwal Started In Erotica. Today He's An E-commerce King - Forbes
 
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