Read founder Kelee Maglio’s blog on Red Canary here

Tell us about Cherry Chula and your business model.
KELEE: Cherry Chula offers a free service for women who want to buy or sell designer/brand name clothing and accessories locally but online. Using a part Ebay, part Craigslist functionality, the user can post a list of items she has for sale or she can browse the items that other members have for sale. There is also a fashion blog and forum where ideas and experiences can be communicated with other visitors and members in the site.

Craigslist started out in the San Francisco Bay area and expanded city by city, Cherry Chula has the same plan for expanding beginning with Vancouver.

So you’re making money through ad revenue?
I was generating a small revenue from Adsense but opted to remove adsense in place of other affiliate ads coming from the Linkshare network. I found that Adsense was doing better because it was based on clicks. My current campaigns do not pay by clicks but rather by sales or leads and that is something that is going to need some tweaking. A lot of factors come into play when you are trying to generate revenue from ads. The types of ads placed, the placement of the ads, the type of visitors to the site, etc. Generally you should have ads that reflect the same area of interest as your website, but this doesn’t seem to be enough. I have noticed a fair CTR percentage to impressions but no sales or leads with the current campaigns I have running. I am going to bring Adsense back in and have a little bit of both.

My main concern at this point is to generate more traffic. I’ll do more testing once Cherry Chula meets a larger audience. Substantial revenue will come later.

See screenshot in full here

Why is Cherry Chula going to succeed?
Because it offers a service to a niche market of (local) online shoppers. It is free and very user friendly. I don’t believe that there is any other classifieds-based website that caters to this market and offers it for free. I noticed that the clothing and accessories category is always a big part of any classifieds site.

How do transactions work?
Like purchasing your local classifieds newspaper such as the Buy and Sell, you look up an item and give the seller a phone call, make arrangements to come and take a look at the item and then make the decision to exchange the goods for the cash. If you don’t want the widget, you don’t give the cash.

You don’t have a feedback or rating system. How are you going to deal with the buyer/seller credibility issue?
Most of the communications can be done through email. A feedback rating system is something that is being seriously thought about and will be introduced later on. It’s more a matter of how this system will work best. There is talk of being able to comment or give testimonials to sellers from the buyers of their items. Just like Ebay, the seller will have the option of posting a response. Based on these testimonials potential buyers abroad can make a decision if they want to deal with the particular seller from a non-local standpoint thus opening up a wider market for sellers on the site.

Who are the 800-pound gorillas in your space?
Ebay and Craigslist are the big competitors to Cherry Chula. However, Cherry Chula is so small that I can’t even really compare them.

Right now I’m concentrating on getting the word out so that I can build a loyal base of members and visitors. I pay very close attention to the feedback I receive and try to make the site as user friendly as possible based on what people want. I also add a very personal touch in that I write a blog and answer any questions or concerns that members may have as promptly and as helpfully as I can. By the time these competitors come out, I will have a sharpened business model to go along with my loyal base of members.

What has been your biggest challenge to date?
The biggest challenge I’ve had to face so far was getting the site up and running. I had some harsh dealings with the programmers of my site. The rest has been smooth sailing. I have had a great response in such little time.

What has been your greatest success so far?
I’d have to say the biggest success so far has been getting the word out without using a lot of money. The internet offers so many avenues for networking and it seems like the traditional more expensive methods of getting the word out are less successful. I recently placed an advertisement in a local magazine but found that it didn’t bring in as many visitors as another method that came totally free: Myspace.

(Visit Kellee’s Myspace profile at www.myspace.com/www.cherrychula)