How a disillusioned worker’s £10,000 eBay gamble became an £85m turnover retailer.
Furniture retailers have not fared well in the downturn, with a series of big names from Habitat to MFI going into administration.
People aren’t moving house, the cost of a bed or sideboard is relatively high for a cash-strapped shopper, and the retailer has to be able to cover the rent on big showrooms.
Jason Bannister, 41, became the biggest eBay retailer in the UK after he started selling hardwood furniture through the online auction site in 2004. However, in 2009, when the economy was on the slide and most of the growth in retail had moved online, he opened Oak Furniture Land’s first “real life” showroom. With an internet business growing nicely, and a grim outlook for physical retailers, why?
“People were ringing us up asking if we had a showroom and we were telling them, no, we’re an online business, that’s how we keep the prices down,” he said. After enough people got in touch, Mr Bannister and his colleagues decided to take some space on an airfield, which had units going spare.
“It wasn’t even a real shop but after a few weeks it was turning over the equivalent of £5m a year,” he said. “At first we thought it would be £5m taken from the website. But the online business was still going up so we opened a proper shop in Cheltenham.”
Oak Furniture Land now gets around 65pc of its revenue from shops on retail parks and the remainder through its website. The company had 36 shops by the end of last year, and turnover increased 140pc to £85m in the year to the end of September. Profit before tax climbed to £9.2m from £3.9m the previous year.
The plan now is to open a shop a month for the next three years, and to take premises on all the UK’s most successful retail parks.
As a relative newcomer, Oak Furniture Land has been trying to build up its reputation with the big landlords, and the weak economy has given it opportunities.
“Institutional landlords don’t like unsafe bets and if the market was buoyant, on an expensive retail park they would not have wanted to deal with us,” Mr Bannister acknowledges.
However, the company has not taken on debt to fund its expansion, paying for it out of its profits. Mr Bannister remains the sole owner of the business. “Once they look at the accounts they’re OK with us,” he said.
Despite the wave of big-name retailers going under, there is still “always a queue” for the prime patches, said Mr Bannister. The business has been able to maintain profitability despite the higher cost of running physical shops because it is still run in largely the same way it was when he started it, he said.
“We cut out the middle man at every stage,” he said. The company uses its own delivery drivers and vans, so it is not paying couriers, and doesn’t buy furniture from wholesalers, but commissions it directly from factories in India, China and Vietnam, as it has from the outset.
Mr Bannister started his working life as a furniture salesman in his hometown of Burnley, rose through the ranks to become a regional manager, and was taken on by a consumer credit company who were impressed by the amount of furniture he sold on finance deals.
One day, feeling disillusioned about working for someone else, he saw an ad for Mexican pine furniture available from a wholesaler. He had recently remortgaged his house to build an extension. Instead, he bought a container of furniture for £10,000.
“I didn’t have a clue what I was going to do with it, I just knew it was great value. When it arrived three months later, my job was going much better so I stored it in a chicken shed until I worked out what I was going to do.”
It sat in the shed for a few months longer until Mr Bannister came across eBay when he was buying a new car. “I had never heard of eBay and I was not internet savvy, but I thought if I took some good photographs and got the marketing blurb right I’d be able to get rid of it.” Putting all the furniture on at 99p, it went “through the roof”, he said.
“Within a matter of days, I’d sold it all for four times what I paid.” That was in 2004, and he looked around for another deal like the Mexican pine, but finding nothing, he went to India in search of factories which would make the furniture he had in mind.
“I was tremendously lucky that the factories I found first were all honest,” he said. “You hear horror stories, but we didn’t have a problem with any manufacturer until we’d been going about three years.”
At the end of 2005, he left his job after working 21 hours a day managing his eBay furniture empire around a 10-hour day for his employer. By the end of 2006, the company was making £2.7m of sales a year on eBay. He then set up a separate website for Oak Furniture Land and when it went live on Boxing Day 2006, “it did the same turnover as the eBay business. We doubled overnight”.
As the website continued to flourish and eBay moved away from auctions and towards standard selling, the volume of people viewing the furniture dropped and the company eventually left eBay altogether. After this success, does he really want to make the high street rather than the internet the linchpin of Oak Furniture Land’s growth?
“We’re paying £250,000-plus a month to Google,” he said. “You need to look at that bill too when you look at the rent for the stores. If we could turn over £150m this year from the internet alone then, yes, the bottom line would be better. But there are plenty of people who want to buy furniture in shops.”