In 2015, Americans spent $3.3trn on goods, of which 8% were returned – $260bn worth. Add in items that never leave the shelves and you can see why returned and unsold items create a “pounding headache” for retailers and manufacturers, says Susan Adams in Forbes.
So, Tobin Moore, now 35, set up a business from his room at Brown University in 2004 to help sellers on website eBay shift used goods. After graduating, he and a friend, Justin Lesher, borrowed $350,000 on 37 credit cards. The financial crisis struck. Interest rates rose and their debts soared. Facing bankruptcy, Moore convinced angel investor Nigel Morris to part with $1m, and developers produced a software system. Two years later in 2010, the new business, Washington DC-based Optoro, was launched.
Optoro uses algorithms to compare prices between online vendors, then sends unsold merchandise from its warehouse in Tennessee to wherever it will recover the most cash, including Blinq and Bulq, its own online discount retail and wholesale websites. Forbes estimates that revenues will double to over $50m this year.
The jazzman who turned to making juice
“We were broke and we weren’t that good”, Greg Steltenpohl, a pioneer in America’s $69bn whole-foods sector, tells the BBC’s Daniel Thomas. Seeking to fund his career as a jazz musician in 1980, Steltenpohl co-founded Odwalla, now one of America’s best-known juice brands. “I came up with this idea that we could squeeze fresh orange juice every morning, sleep during the day, and play music all night.”
The jazz fell by the wayside, however, after Odwalla took off. By 1996 it was listed on Nasdaq and sales were almost $100m per year. But after an E. coli outbreak was associated with one of its juices in 1996, sales fell by 90%. The founders had to seek new investors and lost control of their firm. Within five years, Steltenpohl had left and the company was sold to Coca-Cola for $181m.
But he bounced back and in 2010 founded Califia Farms, making almond and coconut milks, which come either plain or in flavours such as matcha green tea, ginger and turmeric, as well as ethically sourced natural juices and bottled coffees. Sales are already more than $100m a year. This time, Steltenpohl is determined to hang on to Califia’s independence.
“We tend to celebrate a firm’s growth and quarterly reports above all else,” he says. “But wouldn’t it be great if we were saying, ‘Wow, they managed to stay independent for 20 years, stayed true to their values, and they grew their sales too’?”
Building a business on 48 hours of drinking
“It was an extraordinary amount of beer to put on the kitchen table,” admits Dan Lowe, co-founder of Bermondsey craftbrewer Fourpure. In 2013, he and his brother and co-founder Tom, finance director Lucy Lowe (Tom’s wife), and head brewer John Drienberger sat down for a two-day marathon beer tasting, says Matthew Caines in The Daily Telegraph. “The quartet sipped and debated over what they loved and hated – and 48 hours later, the brewery’s launch beers were clear (even if their heads were not).”
Lowe had gone back to his passion – homebrewing – after leaving UKSolutions, a £70m-a-year data-centre company that he started as a student in 1998. “I like to create new things, challenge the status quo and be told that things are difficult – then do them for that reason,” he says.
So he turned his hobby into a craft brewery now turning over £2.5m a year, located in a trading estate that is home to so many other breweries that it’s now known as the Bermondsey Beer Mile. “We have good friends around us.”
The MoneyWeek Audit: Hugh Hefner
Hugh Marston Hefner, the Playboy magazine founder who died last week, was born in Chicago in 1926. He began his career as a copywriter for Esquire. In 1952, he was offered a pay rise from $60 a week to $80 if he agreed to move to New York. Hefner asked for more. When he didn’t get it, he quit and the following year set up his own rival men’s magazine, with $8,000 raised from investors, including $1,000 from his mother.
For the the first issue, Hefner paid $500 for a nude photo of Marilyn Monroe, taken in 1949 before she became famous. The print run of 53,991, priced at 50¢, sold out and Playboy was on its way to fame, with a mix of pornography, serious fiction, and heavyweight interviews that tried to suggest a sophisticated lifestyle.
What Hefner created was as old as sex itself, says Adam Gopnik in The New Yorker. “He took the heterosexual male gaze and commodified it… He took all the goodies of mid-century American life – the hi-fis and the stereo LPs and the nascent colour TVs and the Flokati rugs – and made them part of a plausible-seeming whole.”
That carried the circulation to a peak of 7.2m a month in 1972 – but by the 1980s, this was falling fast, as the magazine fell out of step with the mood of the era. Then came the internet and “Playboy’s ability to arouse suddenly seemed flaccid and tame”, says The Times.
In 2011, Hefner sold most of his stake in Playboy for a $1m annual salary and the right to live out his days in the Playboy Mansion in Beverly Hills, California, for a nominal $100 a year in rent. A “generous back-of-the-envelope estimate” puts Hefner’s worth at $26m, says Fortune. But given his lifestyle, the figure is probably “significantly lower”. Hefner never met Monroe, whose photoshoot launched his caeer, but was buried in the crypt next to hers, having bought it in 1992 for $75,000.