Charles Hunt: Why I bought duvets with my car loan

But "when we started, we didn't have the scale to import goods directly from low-cost countries". So they had to buy from UK-based import agents who charged a hefty mark up, eating into their profit margins. "It wouldn't have been an issue if we had volume, but we struggled to attract customers." Worse still, the mail- order market was "very competitive and we were up against established rivals with much bigger budgets". After four years "still treading water", the pair dissolved the business. They'd learned "lots about retail", but been left "with no cash".

However, they had already spotted their next opportunity. "While we were struggling with Peacock Blue, e-commerce firms had been springing up all around us we realised we had to get online." Their new venture, Duvet and Pillow Warehouse, was a web-only reseller of bedding. "Peacock Blue wasted a fortune sending leaflets to people who weren't interested. Now we only paid when someone clicked on the advertisement." They decided to focus on fewer products "to allow us to build up scale, and thus offer cheaper prices more quickly".

At first, the new firm faced a familiar problem: there were too few customers to justify importing goods directly. But it grew rapidly. The pair kept costs down by shipping goods direct from suppliers to customers, avoiding warehouse costs. And many early e-commerce firms were tech companies that didn't understand retail. "The retailers didn't take online seriously until about 2006. That gave us a couple of years without much competition." As a result, the firm managed to get its name in among the top results when anyone typed a number of key phrases into an internet search engine (such as Google). By the end of its first year, it had generated £400,000 sales. "The margin was terrible, but we had momentum."

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By 2006 the pair were ready for "the second stage of our plan". Hunt went to China to source bedding direct. After several weeks he ordered the first consignment. "It was a big risk because we had to pay for a warehouse and had a massive container of bedding on our hands." But it paid off. Within eight weeks they were ready to order another container and their profit margin had jumped. Reinvesting in marketing led to more sales. Eventually the firm moved to a bigger warehouse. "We kept a lid on costs. Even today we only have five staff."

Duvet and Pillow Warehouse "won't be outspent on marketing, like Peacock Blue". The firm has expanded into Germany and Ireland and sold £5m worth of bedding in 2010. But that's not enough for Hunt his next goal is to expand the product range and hit more countries.