Walker Edison Lost $1.5 Million: But It Taught Them A Priceless Lesson
Brad Bonham was attending the China’s largest import and export fair, Canton Fair, when he spotted a piece of furniture he had recently purchased in the United States. “I had just bought this TV stand at Best Buy for $250. Here it was going for $25. I ordered a container on a whim and decided to try selling it to retailers.”
Mr. Bonham’s split-second decision would put him on a life-changing path that resulted in the start of Walker Edison, a wholesale furniture company that sells to online retailers. But while the company has experienced steady growth since its 2006 beginning, Bonham says it went through a rather expensive learning experience. He calls it his company’s “failed experiment.”
Expanding Into New Businesses Isn’t Always A Good Idea
By 2010, Walker Edison had grown into a successful online wholesaler, with annual revenues reaching upwards of $10 million. But Mr. Bonham was anxious to try something new. His previous risk had paid-off—big time—why not take another one? After a thorough analysis of his supply chain, he realized it was the retailers who turned the most profit. “Typically, retailers make a 50 percent gross profit margin,” he said, “we decided we wanted to try the retail end and make the additional profit.”
In April of 2010, the company did just that. They opened five temporary retail stores across the Wasatch Front, stocked a large warehouse full of patio furniture product, and hired nearly 100 employees. Then, they opened to the public. “We thought we understood what it would take and we knew how to make products that people liked. Maybe it was greed. Maybe we were trying to exploit our advantage, but it made sense at the time. We were ready to do this, or we thought we were.”
But by the end of the first month, Mr. Bonham knew he had his work cut out for him. For one, the company made a mistake early on: it didn’t market to consumers. “We grossly underestimated what it takes to get people into your stores and [to] spend money. We thought, ‘We’ll put the stores up in high traffic areas and people will see it and they’ll walk in.’ There was some of that, but not enough to make us profitable,” he says. “No one knew who we were.” Then there’s the fact that patio furniture is a seasonal product, and winter really dragged out that year. As a result, the company didn’t start to see real sales numbers until June. “We knew we were under a time constraint to sell our inventory.” He said. “We realized during month one that it wasn’t working.”
Though the company made some changes and even began an aggressive marketing campaign, it wasn’t enough. By the end of the summer, Walker Edison lost $1.5 million. “For a business only doing $10 million in revenues, it was a massive hit,” said Mr. Bonham.
Stick With What You’re Good At
It’s been eight years since Walker Edison opened the temporary storefronts, and a lot has changed for the Salt Lake-based company. Today, it focuses solely on being a dropship furniture wholesaler to retailers, primarily to online retailers. In other words, they’ve gone back to their roots. And Mr. Bonham says sticking to what the company is good at has been key to its growth and success over the years. Walker Edison is now one of the country’s fastest-growing furniture wholesalers. In fact, it’s close to 15 times the size it was in 2010.
“If I could go back and re-do the whole thing, I would have tried to prove the concept before rolling out the scales. We didn’t need to open five stores and hire 90 people. We should have opened one store and test marketed it… before trying to make it work,” he says. “Proof of concept is key, and we missed it.”
Despite its $1.5 million loss, Mr. Bonham says the company learned a lot about the patio business as a result. “We had never embarked on patio furniture before, because we didn’t have a cost structure that was appropriate for that type of sale at that point. During the summer experiment, we were able to [determine] our top-selling patio furniture and leverage it through our online channel.” That $1.5 million loss turned out to be a price well paid to receive some valuable data analysis.
Looking back, Mr. Bonham calls the experience a “really expensive lesson,” but one he learned a lot from. “In hindsight, I should have done more research and gotten more comfortable with who we were and who we were not. I should have said, ‘Let’s not get greedy. Let’s let the retailers do what they’re good at.’ The biggest takeaway I learned was to stick with what we’re good at and to know who we are.”