Tuesday, October 26, 2004
Copyright © Las Vegas Review-Journal

LV pair near top of Inc.'s fastest-growing companies list

ScripNet Chief Executive Officer Dennis Sponer on Monday shows a prescription-drug card outside a Las Vegas drugstore. ScripNet is one of two local companies on Inc. magazine's latest list of the nation's 500 fastest-growing privately held companies. Photo by Ralph Fountain.

What do a prescription-drug processor and an online shoe store have in common?

Both Las Vegas-area enterprises were among the top 25 companies making Inc. magazine's list of the 500 fastest-growing privately held companies.

Zappos.com ranked 15th on the magazine's 23rd annual list, which hits newsstands today. The company, which moved to Las Vegas from San Francisco in April, had annual sales growth of 1,115.2 percent and reported 2003 revenues of $52.6 million.

Las Vegas-based ScripNet, which is in its third year on the magazine's list, works with 3,500 nationwide pharmacies to provide insurance companies with discounted prescription drugs. It ranked No. 22 on the magazine's list this year.

Zappos.com, with 1.1 million pairs of shoes in its 280,000-square-foot warehouse in Kentucky, Zappos.com debuted on Inc.'s list this year.

The company strives to have a "wow" effect on its customers, Zappos.com spokesman Nick Swinmurn said.

"We offer free returns and free shipping and upgrade customers to next-day or two-day air," Swinmurn said. "We try to exceed their expectations."

The success of Zappos.com's efforts to lure customers is apparent in the surest sign of customer satisfaction: returning buyers, Swinmurn said.

"We've grown a lot just because of word of mouth," Swinmurn said, adding that the company, which has primarily advertised online, is running print ads in 40 magazines this year. "Fifty percent of our customers are repeat buyers, and of those nonrepeat customers, 20 percent were referred by a family member or friend."

The company said it expects to double its revenue by next year.

"Well, we've increased every month," Swinmurn said. "In July sales were $15 million, in August $16 million and in September they were $18 million. We get 8,000 orders a day."

Zappos.com officials admit that most people have never heard of their company but are encouraged by the market's potential.

"In 1998 the shoe market was a $40 billion industry in the United States and 5 percent of that was mail order," Swinmurn said.

Swinmurn said Tony Hsieh, Zappos.com's chief executive officer and a former Web developer, decided he would hire five developers to design and control a system for the company's warehouse inventory and merchandise systems.

"We are run mean and lean," Swinmurn said, adding that computer systems were designed using open-source software to reduce the company's operating costs.

The software automates sale prices. A Zappos.com employee identifies shoes and bags eligible for price reductions. The system automatically uses a math equation, which considers the products' value and time on the market, to set a sales price. This system saves the company time and money, Swinmurn said.

Using technology to save money also landed Las Vegas-based ScripNet on Inc.'s top 25 list.

ScripNet negotiates prescription-drug prices with pharmacies and in turn provides them with clientele and guarantees payment for the drugs from insurance companies within 30 days. The company also works with insurance companies to save them money on the cost of drugs.

"It's great for ScripNet when people talk about how expensive prescription drugs are," ScripNet Chief Executive Officer Dennis Sponer said. "Because we save our clients money."

The company uses technology to transmit an insurance company's parameters on prescription benefits and allows the pharmacies to bill for the prescriptions immediately. The electronic process saves clients from traditional costs of paper payments and lengthy negotiations. Inc. lists ScripNet with 854.5 percent annual sales growth and a total sales growth of 4,273 percent with $18.1 million in revenue in 2003.

"We negotiate with the pharmacies for a discounted rates and we make it easier for them to get paid," Sponer said. "We bill them electronically and can tell them immediately, in less than a second, what the insurance companies cover and what they don't."

Sponer said if a customer went into a participating pharmacy with one of ScripNet's prescription cards and tried to fill a Viagra prescription, the pharmacy would immediately be alerted and could explain to the customer that the insurance company wasn't willing to pay for the medication.

"It's all built into our system so they're billed immediately and they can see if we'll pay and how much we'll pay," Sponer said. "We have contracts with all our pharmacies so the price is built into the system.

Sponer said ScripNet saves its customers 15 percent to 20 percent.

Companies such as ScripNet and Zappos.com are examples of businesses using technology to save customers and clients money, said Carol Hirsch, senior editor of Inc. 500.

Hirsch said information technology companies providing similar services made up more than half of the top 25 companies on Inc.'s list this year.

Hirsch said that among all the CEOs surveyed by the magazine, 42 percent of IT companies said they plan to hire 25 or more employees in the upcoming year, a promising sign for their future. The surveyed CEOs also said they saw IT as the fastest-growing market in the upcoming year.

Hirsch said that of the 500 companies, 102 were founded in 1999.