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Etailz CEO Josh Neblett says acquisition was months in making, won’t affect Spokane company’s operations

October 23, 2016 GMT

The $75 million sale of Spokane-based etailz Inc. announced last week was in the works for months, but the owners had to keep it quiet. And that proved challenging for CEO and co-founder Josh Neblett.

“I tend to be overly transparent with the employees. Really, they know everything that’s going on,” Neblett said at the etailz headquarters in the University District. “They didn’t know this was going on, and they couldn’t with a publicly held company and all that.”

On Monday after the close of the stock market, the 190-some employees of the e-commerce and marketing company gathered to hear about the acquisition by Trans World Entertainment Corp., a New York-based retailer specializing in video, music, pop culture and electronics products. Trans World’s stock trades on the Nasdaq exchange.

Revealing the big news was liberating from the “deal fatigue” that built up over the past nine months, Neblett said. “Being able to let everyone know so that they could share in the excitement, that was a sense a relief from that anxiety,” he said.

It was important to assure the team “that we were still going to operate as etailz, we were still going to accomplish the goals that we set forth,” he said. “We just now have the opportunity to accelerate that growth and to tap into resources we never had previously.”

Etailz will stay put, including the company headquarters in the McKinstry Innovation Center along the Spokane River, a warehouse in the Spokane Business and Industrial Park and the Wollnick’s retail store downtown.

“The plan is to stay in Spokane, grow out our infrastructure, grow out our team. There’s a wealth of talent here,” Neblett said.

“The quality of life and cost of living and all the things that Spokane has to offer are really tough to replace,” he continued. “So there’s no reason for them to want to move us. For this deal, I think as much as anything this was about talent acquisition for them. We have a very talented team, and they know that.”

Technology increasingly important in retail

The business has grown rapidly in the eight years since Neblett launched it with Sarah Wollnick, now his wife, and Gonzaga University adjunct professor Tom Simpson, their angel investor. As Gonzaga students, Neblett and Wollnick won the school’s Hogan Entrepreneurial Business Plan Competition in 2008 with their pitch for what then was called Green Cupboards, an online seller of eco-friendly products.

“One of the things that has made us get to this point is our ability to pivot along the way. The only thing that’s consistent from our original business plan is we sell product online,” Neblett said.

Likewise, Trans World has had to pivot, he said, as consumers have migrated to digital downloads and streaming music and movies.

“The leaders in tomorrow’s retail will be those with the best technology solutions,” he said. “We’re still at the very infancy of what this all can become. And that’s what gets us excited. I think that’s what Spokane also should be excited about.”

Dan Stewart, a Gonzaga University professor of entrepreneurship and director of the school’s Hogan Entrepreneurial Leadership Program, applauds the company for the impact it has had on the area’s economic development.

“We’re super excited they made that conscious decision to stay in Spokane,” Stewart said. “We have a retention problem with some of our graduates that they don’t feel like there’s career opportunities. As much as we would like to keep our graduates here, they go where they perceive the jobs to be.”

They’re good at bricks; etailz is good at clicks

Trans World has over 300 F.Y.E. entertainment media stores and Suncoast movie and film memorabilia stores. Etailz operates five niche websites and specializes in helping brands sell online. It sells around 30,000 products, including through Amazon.

“They’re really good at brick and mortar; we’re really good at e-commerce and marketplace,” Neblett said. “We think there’s an opportunity to combine those two specialties into something that’s bigger.”

But etailz will continue to operate autonomously and grow its brand, Neblett said. “They’re going to continue to grow the F.Y.E. brand. And we’re going to tap into each others’ resources to grow,” he said.

Etailz has about 150 employees crammed into its corporate offices and about 40 more in its distribution warehouse in Spokane Valley.

“We still need all our support people, we still need our process, we still need everything to help us grow. So everything stays in place,” Neblett said.

Etailz sells worldwide and keeps inventory in Canada, Germany and the United Kingdom as well.

Neblett, who just turned 30, will remain in his role and report directly to Trans World CEO Mike Feurer. Wollnick will continue to oversee the etailz partner relations team, which works with over 2,000 suppliers. Simpson, their entrepreneurship professor at Gonzaga, has served as chairman of the board and now will serve as a consultant to Trans World.

Feurer is a former executive at Coldwater Creek, the Sandpoint-based women’s clothing retailer that went out of business in 2014. He and Neblett met at a consumer technology trade show, and Feurer reached out to Neblett last year to say he kept hearing about etailz and wanted to learn more.

“So he actually came Spokane, and we sat down and talked for a while. That was almost nine months ago,” Neblett said. “From there on it was starting to create a vision around what could be. As we continued down that path it got more and more exciting, and the potential seemed more and more apparent that it made a lot of sense for both sides.”

Neblett said he wanted to be sure the partnership would benefit the long-term success of etailz.

“I’ve always said we’re not building this company to sell, we’re building this company to be an industry leader, to be sustainable, to be here 20 years from now,” he said.

He wasn’t shopping around for a buyer but said he always has explored partnerships in building the business.

“This was no different,” he said. “The acquisition was all that could make sense, because this was a dynamic of retail to retail, and if you’re in a retail-to-retail relationship you need to likely be a wholly owned subsidiary. You can’t partner in any other way, in my opinion.”

Breaking the news to employees this week no doubt filled many of them with apprehension, Neblett acknowledged.

“A lot of these people have gone through acquisitions before, which haven’t gone how this one is going to go,” he said. “I think everyone feels good about it.”

Outgrowing space in McKinstry building

Neblett said he and Wollnick, who live in Otis Orchards, have no other immediate plans in light of the sale, which included cash, stock shares and future earnings based on company performance.

“From a business standpoint, I’m locked in. We’re barely scraping the tip of the iceberg,” he said. “We think we can do a lot more. So no, I’m not thinking about opening up a restaurant or starting some new technology company. Will I in the future? Maybe. My focus is fully on executing on the vision here.”

As etailz continues to grow, it likely will need a larger space than what it occupies in the McKinstry building, where 15 months remain on the company’s lease. The prime location has worked well, Neblett said, but “we’re exploring everywhere from downtown to Liberty Lake for opportunities for us to expand into.”

The company’s move into the McKinstry building in 2012, when its workforce was at 50, dovetailed with “an intellectual hotbed of entrepreneurship” there, said Gonzaga’s Stewart.

“I think they’ve just become the core of a new entrepreneurial energy in this area,” he said.

“We make a point to walk our students over there so they can see the space and just absorb some of that culture,” Stewart said. “They love to go over there and hear the story and see the environment. It’s my way of telling them there’s hope for you to have a career here.”