According to an article by Computer World, online retail sales in the U.S. are expected to grow about $20 billion to $30 billion each year for the next five years, reaching somewhere between $215 billion and $335 billion by 2012.

With this kind of growth, we decided to do a three part series on e-tailers this week– their successes, failures, and lessons learned.

Featured in the series are the following people, their companies, and descriptions of their businesses:

Craig Wolfe, President, Celebriducks

We make the first ever celebrity rubber ducks of the greatest icons of film, music, history, and athletics and pioneered a whole new collectible.
We were voted one of the top 100 gifts by Entertainment Weekly, featured on the Tonight show twice, CBS evening magazine and in hundreds of magazines and newspapers around the world.
They are really fun, unique, and different, and the kind of gift you can get for the person who has everything!

Betty Miller, Manager, Magic Senses

Unique soap for unique people. Moisturizes the skin that you love. Proudly handmade in USA.
Imagine your loved one saying: “WOW! It’s gorgeous! I’ve never seen such a beautiful soap before! It’s almost too pretty to use! Thank you!”. I’m excited to introduce the Designer Glycerin Soap Collections from MagicSenses.com! Each bar has its own personality. The eye appeal and beautiful scent make it an excellent choice for special gifts! We create, you wow!

Lisa Sorrentino, Head Boob, X-Chrom

X-chrom.com offers the best quality sports bras and the largest selection you can find in one place so that every body can find the right sports bra.
Because every style is sized differently, X-chrom.com offers a free fitting service so that we can recommend the right size in the style of your choice prior to making a purchase.

Eileen Parker, Cozy Calm

Our weighted blankets will put you to sleep.  The weight on the body actually induces serotonin and dopamine in the brain (the calming chemicals) and in turn produces melatonin (the sleep chemical).

Deb Babcock, Blue Sky Pottery

What I sell online is beautiful, handmade pottery that I like to think of as functional art. Every piece is beautiful to look at, but even better, it’s designed for daily use. When you buy my pottery, you’re getting something that is handmade in the United States. Something that is eco-friendly in that it will last for eons and is made from materials found naturally in our earth. And finally, because it is handmade, it will have a softer, more ‘touchable’ feel when you pick it up and use it. For instance, my coffee cups have a soft crease in the side of each one that I purposely put there so that when you wrap your hands around it, your fingers have a natural resting place.  Other items are similarly designed with touches that reflect how you will be using the piece.

Kevin Ward, Global Crafts & Gifts With Humanity

Fair Trade products give twice, once to the recipient who gets a great and unique handmade gift made by artisans in the developing world and again to the artisans who through their work are lifting themselves out of poverty. Whether it’s the exotic nature of the products that entice you or a conscious consumer choice  Gifts With Humanity has that special gift you need and will treasure.

Sandy Raddue, Striking Graphics & Embroidery, Inc.

We supply custom bowling shirts for the enthusiast, party crowd, AND the serious competitor. Our satisfaction guarantee is just that – your satisfaction is guaranteed.
Third, we KNOW what bowlers want because we are bowlers.

Teresa Fritchi, Managing Director/Chief Creative Officer, Thistle & Broom, Limited

Thistle & Broom provides a converging paradigm of bespoke luxury and Fair Trade products, culturally significant to, and sourced exclusively from within Scotland’s geo-political borders. The range includes bench crafted bridle leather dog collars and leashes to Edinburgh hallmarked 18ct gold jewellery all structured in pricing so that 66% of the retail price goes directly into the artisan/craftsperson actually creating the object of desire. For those individuals who desire to ensure the continuity of traditional skills, or own something not commonly available – anywhere else – there can be no finer purchase made.

Ana Maria Echeverri, Owner/President, FunIQToys Inc

I commercialize Educational Toys to help children discover and develop their multiple talents.  Why buy from me?
-    We make emphasis in providing information not just about the toy, but on how the toy supports development of different talents in kids
-    We also provide resources and information on how to help children reach their full potential as individuals.
-    Great customer service.  All products are kept in inventory and shipped within 24 hours.

Ben Robinson, Bike Trailer Shop

We sell bicycle trailers, bags, racks, and panniers, as well as, parts and accessories for all of them.  Our online positioning allows us to sell at a very competitive rate (with free shipping on larger purchases), but more than that, you should buy from us because we are the world’s experts on the products we sell.  From selecting the product that will best fit your purpose and lifestyle, to knowing the ins and outs of installation for all types and sizes of bikes, to advice on repairs and maintenance.  You would be hard pressed to find another store that sells bike trailer replacement parts, let alone one that could help you use them.

In the next few day, we will be publishing their answers to specific questions.

When you start a new company, getting your first couple hires in place is one of the most important decisions you have to make.  A great hire can accelerate your growth, and a poor hire absolutely can cripple your venture.  This process is compounded when personal relationships are co-mingled into this effort.  While hiring a friend or family member may seem like a great idea because you know the person and are familiar with him personally, it also opens up big issues if it doesn’t work out.

With this in mind, we interviewed some entrepreneurs who have had to go through this situation:

Kevin Burton, CEO,  Burton Asset Management, Inc.

One of my first employees is still a great friend but no longer works for me.  As the company grew and the demands of our entrepreneurial firm pressed, he “felt like he was working for the Man.”

In a strange twist, I, the guy who was the best man at my friend’s wedding and had been friends for over 15 years had to let him go.

1.  His salary demands were outrageous.
2.  His work standards suffered because of our relationship.
3.  We didn’t see eye-to-eye on growth.

I remember a long talk we had as I was letting him go.  I said, “Look, I’d rather have a friend than an employee.”

I didn’t want it to get to the point where business resentment impacted our friendship.

In an interesting twist, we’ve had massive growth in the past six months and are exploding in a space he loves.  He and I were talking yesterday and he said, “I hate that you are finally in the position to take the company to the next level, and I can’t see myself there.”  It was strange because the work he could be doing for us is the work he
loves- but I guess I’m still the Man.

Question and Answer:

Q: How did you eventually separate business from the personal relationship?
A: I fired him.  It was one of the hardest things I’ve done as the Founder of our company.  I mean, this guy is really, really good at what he does.  But in the end, what did I need?  What did he need?  We both needed to be ourselves and remain friends.  “Look, I can hire a guy to do what you do,” I said. “But I can’t hire a friend.”  So there it was.  He wanted to work on computers and systems without constraints.  My business model needed to be more constrained so that we could sustain our rapid growth.  There wasn’t a trade-off to be had there.  Nothing to negotiate.  Staying friends, that’s what was important.

Q:  Was there any point where you thought the friendship would go down in flames?
A: Big time.  He embarrassed me in front of a client once and on several occasions was late or put me in a position where I was unsettled because we’re doing the OJ thing to an important meeting.  It was how he was wired- the last minute guy.  I’m the ten minute early type.  I had to think about how I wanted to approach that with him because as a friend, there was a lot I could have said that would just be nasty.  As a boss, there were things I could have said that were nasty, too.

This is the main problem with hiring friends, you have the potential to have personal stuff you might say or do get mixed with the professional stuff.

Carlos Chiossone, sprout.net

I unfortunately had to do this twice. Both times, fortunately, both people understood why, and we are still good friends. You just need to make it clear from the start, business is business, and I can be a jerk of a boss.

Question and Answer:

Q: For what kind of role did you hire your first friend that didn’t work out?
A: He was hired as Director of New Business.

Q: How early on did you know it wasn’t going to work?
A: About 3-4 months after he was hired

Q: Did you stop being friends with the person that didn’t work out?
A: No, they understood exactly that business was business. I do remember we did not go out for beers probably for the first 3 months or so after I had to let him go, but we were good friends prior to hiring him, we remain good friends.

Q: Would you hire friends again?  If so, with what caveats would you do that?
A: It’s a touchy subject, but while they understand that doing business does not last forever and that I have to make decisions to keep our business growing, then I will consider it.

He was hired as our 12th employee. I never believed in having sales people as all of our business came from word of mouth. But since we had a new web product to promote I decided to hire him. He did a great job in gathering possible buyers, showing the product and getting response. Unfortunately sales did not come in. In 1999 we introduced some of the first easy to use e-commerce sites at super low price, it was an amazing product but the small stores still had little understanding on how to use the internet for sales. Readysites.com grew 3 years later.

Q: For what kind of role did you hire your first friend that didn’t work out?
A: Senior art Director

Q: How early on did you know it wasn’t going to work?
A: It did work but she was the first of 4 art directors to have to go due to slow downs.

Q: Did you stop being friends with the person that didn’t workout?
A: I sat her down and explained that business was business as we discussed years earlier when I hired her. I gave her 3 months to find work but unfortunately she did not. We remained good friends.

She was and is a great art director. She had no web experience when I hired her and learned on the job. She became very good, but her style was not what we needed at the moment, the client she handled was moving their work to India. Of course, letting her go did not go well at first, the stress from it overwhelms everyone. But from the beginning we cared about each other and understood the fact of business. We remain good friends.

Vince Collura, Team5 and Gotham Photo Company

I have hired my share of friends for both www.team5.com and www.gothamphotocompany.com.  3 turned out to be disasters.  2 turned out to be excellent moves for both of us.  There are a lot of grey areas.

Question and Answer:

Q: What kind of role did you hire your friends that didn’t work out?
A: Developers and designers

Q: For the two that did work out, what made their situations works?
A: Being extremely mature.  More so than thier ages would warrant.  Even though they were employees, they took ownership of their work, as if they were partners.

Q: Did you stop being friends with the people that didn’t work out?
A: At first, yes.  Time heals all wounds, and we are now on good terms.

Q: Would you hire friends again?  If so, with what caveats would you do that?
A: Yes.  They have to understand the difference between work and hanging out.  I am not their friend at the office, and friendship puts thier jobs at risk more than helping them.

Hearing a story about someone who gets handed lemons and makes lemonade is always inspiring.  That is the tale of Bev Payton of Payton Communications and is the focus for this week’s Start-Up Profile:

After working five years as a developmental editor and project manager for a large multi-national medical publishing company, I was laid off in the fall of 2007 at the start of the economy bust. Prior to that, I was a print journalist for more than two decades.  I couldn’t go back to the newspaper industry—no jobs or money there.  The medical publishing industry was contracting, too, and the few places that were hiring were looking only for entry level candidates. So my chance of getting a job that was commensurate with my education (I hold an M.A. in journalism.) and experience was slim at best.

So, last year I cared for a dear elderly aunt who is like a mom to me. She never said, “I don’t have time for you,” when I needed her, so it broke my heart to watch her became increasingly frail and housebound and know that my work schedule didn’t leave me with enough time to help her. During the year that I cared for my aunt, (she is in a nursing home now after suffering a stroke) I also became closer to my cousins who helped me help her. So, the layoff turned out to be a blessing for improved family relationships.

In my free time I learned as much as I could about the business of running a business. I also took advantage of numerous professional development opportunities through the Public Relations Society of America. I learned a lot about public relations best practices, especially in using social media and developing a strategic communications plan.  Right now I’m using my knowledge and skills to help a few nonprofit organizations whose causes I am passionate about.

Question and Answer:

Q: Have you ever started a business from scratch before?
A: Well, I was a freelance writer way back when my kids were little. Bad, bad money. Nevertheless, I liked it because the work was intellectually substantial, and I enjoyed researching and writing about topics that fascinated me.

Q: When you first loss your professional job, was creating a new business the first thing you thought to do?
A: I had toyed with the idea—off and on—for many years before my layoff, but for the first six to eight months I did hunt the online job posts and applied for full-time jobs that seemed to be a good fit.  But after a while I realized this was diluting my time and energy away from what should be a laser-focused goal of starting my own public relations firm.

Q: What is the largest challenge you have had as you started a new business?
A: I would have to say laying down the proper infrastructure. For example: researching  how much to charge, getting my client and vendor contracts in place, setting up a business bank account, learning QuickBooks (I’m still learning), applying to the state for an EIN number, joining and participating in appropriate professional and business networking organizations.  Now, I can’t simply hand off tasks to an administrative assistant or send my travel receipts to the bean counters in accounting. I’m my own administrative assistant and my own bookkeeper, and my own janitor…etc.  I was naïve about how much time this would take.

Q: What is the largest lifestyle change you had to do undergo as you moved to being an entrepreneur?
A: I would say that initially it was changing my mindset from that of an employee who got a defined sum of money in exchange for time spent working to being a business owner whose time investment will pay off sometime in future after I build a sufficient client base and hone a rock solid reputation for delivering high quality service.  The other challenge was realizing that I can’t simply rely on the knowledge and skills I gained in the past. Public relations is a dynamic field, and I will have to work hard to stay current with best practices.  So, I am currently pursuing accreditation in public relations (APR) and learning as much as I can about social media for audience engagement.

Q: Do you ever see yourself going back to the corporate world?
A: No, never. I recently heard someone say that an entrepreneur is someone who is willing to work 18-hour days for him/herself in order to avoid having to work 8-hour days for someone else. So true.

Q: When will you consider yourself a success as a start-up?
A: I’m already a success because I’m happy with my decision and feel secure that I’m moving in the right direction both personally and professionally.  Success is not only about money but in enjoying your day-to-day life and having a healthy balance between work and play and nurturing relationships with the people you care most about.

As mainstream media continues to highlight #swineflu, @aplusk’s follower count, and status updates, they continue to miss the more important trend percolating in social media.  That is, e-commerce’s embrace of social media and willingness to invest in this medium because of the important role it plays in the business.

Every relevant e-commerce establishment is moving ahead and connecting to their customers via their blog, Twitter profile, and Facebook group.  The stories about companies building customer service support into their Facebook pages or local yogurt shops giving away free yogurt through Twitter are only growing.  Unfortunately, there still are many skeptics who question the value of these actions – especially because of the widespread belief that directly selling to customers via these channels tends to be viewed as digital assault.  If you can’t sell to them, then why bother?  Here’s the simple reason why social media matters to online retailers – brand advocacy.

When I was a consultant at Bain & Co, I directly witnessed the positive effects of brand loyalty on sales growth.  Companies with high customer advocacy (American Express, Southwest airlines, to name a few) experienced a much faster sales growth than those with lower advocacy ratings.  If you still don’t believe me, the London School of Economics also did a study quantifying and linking sales growth to brand advocacy.  In this study, it noted that a 7 percentage point increase in brand advocacy results in a sales growth of 1%. What better way to build loyalty and engage an audience than to interact with them on the platforms they spend most of their time on?  A recent report by Nielsen highlights that the amount of time spent on Twitter has increased by 3712%, Facebook by 700%, and Blogger by 30%.  In short, if you are an online retailer, ignore this avenue at your own peril.

Written by: Anton Dy Buncio, e-commerce entrepreneur and founder of funsherpa, Stanford graduate, and former management consultant.

EDITORIAL NOTE: funsherpa is a stealth start-up that is a Wasabi Ventures portfolio company.