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The Money Patch
Columbus C.E.O. - December 1998
Two back-fence friends turned Gooseberry Patch from a part-time country crafts business into a multi-million dollar catalog enterprise. The road to success wasn't an easy drive, though.
Starting with only $10,000 between them, Jo Ann Martin and Vickie Hutchins managed to capitalize on their mutual interest in country arts, crafts and decorating and turned their onetime kitchen-table business into a catalog powerhouse with projected sales of $9 million in 1998.Over the past 14 years Gooseberry Patch, the Delaware County company founded by Martin and Hutchins, has gone from a $27,000-a-year start-up to a multi-million-dollar mail order, wholesale and book publishing business.In an industry saturated by more than 8,000 mail order catalogs hawking products of all kinds, Gooseberry Patch stands out in two important ways: its one-of-a-kind, original items and its efforts to cultivate warm and friendly relationships with customers.
"To succeed in the catalog business, you first have to have a product, a niche that nobody else is filling, which they (Gooseberry Patch) obviously have," says New York catalog consultant Ray Slyper. "What they are doing is very different from other catalogs you see out there. It's also the way they present. That's absolutely important in marketing in the catalog industry. You need to present it in a way that is different, even if the product is somewhat similar."
For customers of Gooseberry Patch, going through the pages of a catalog is more than taking an armchair shopping trip; it's traveling to a time when close family ties and home-cooked meals prevailed. Customers are not merely seeking special items; they are looking to buy a way of life. Martin, 42, and Hutchins, 47, bill their catalogs as "A country store in Your Mailbox," and 100,000 customers support their vision with repeat orders.
"We'd like to think with the mix of our PRODUCTS or what we do to them--add a recipe, always do a little bit extra--that we're creating the whole reason to buy the Apple Brown Betty," Hutchins says. "You're buying the feel and the warmth. This cookie mix is something you can do with your kids and family. We select products that really buy into that theory."Items presented in the country catalogs and books reflect a homey feeling. "We are focused on family and tradition and values and warmth," Martin says. "That's what everyone is looking for. And we're saying, 'That's what you can have, regardless of what is going on in your personal lives.'" In addition to hand-drawn original art, messages from Martin, Hutchins, and the artists who create original pieces for the catalog are interspersed throughout the pages. Photos of the women and their families are also included.
Keeping that personal touch is important to both women, who were good friends and next-door neighbors in Delaware before becoming business partners. Hutchins and Martin chatted over the backyard fence, swapping recipes and exchanging advice about child rearing. They also shared a passion for shopping at antique stores, flea markets and auctions. While hunting for antiques and other country collectibles, they noticed how prices kept going up. "Wouldn't it be neat if we could provide this to people at a much lower cost?" the women wondered. As they toyed with the idea of opening a shop in an old schoolhouse, Vickie's husband Shelby suggested a mail order business.
"It kind of sparked us, thinking there weren't too many out there in 1984," Hutchins says.
Neither knew the first thing about running a mail order business. But Hutchins, a former TWA flight attendant and legal secretary, and Martin, a first grade teacher at the time, were not deterred. Based on what they did know about catalogs they read and admired, they felt confident enough to put out their own.Their first effort, published in 1985, was "not a big hit," Martin says of the 12-page catalog which featured 40 items. After printing 5,000 copies, the would-be entrepreneurs rented a list of names from a retail store and advertised in Country Living magazine. "Things didn't sell particularly well," Martin says; that first holiday season produced sales of $27,000.
"Jo Ann and I were buying things that we liked," Hutchins says. "That was the first mistake." The pieces they selected for the catalog were not attractive to their customers, plus they were too expensive--a $400 chair and a $195 punch bowl, for example.
Other problems followed. "We didn't think about the mark-up," Martin says. "We didn't think about the shipping costs. There were a lot of handcrafted, very fine pieces, beautiful pieces." But despite their quality and beauty, the items weren't moving. Solution? "We decided to make it more affordable."
Martin and Hutchins also realized publishing a catalog was a lot of work. "The photography was grueling, a lot more than we expected," Hutchins says. They switched to a one-color newsletter format, which was easier and less expensive to produce. Original illustrations by a local artist and calligraphy captured the warm, friendly feel they wanted. Then they picked 20 items under the price of $25. It was the right move. Suddenly, things "just clicked," Martin says.With each new experience the women were becoming savvier. "We knew we had a good shop and good instincts, plus we loved it," Hutchins says. "We both had the same goal about what we wanted to do. It just felt right."
Working from their kitchen tables, they did the catalog mailings themselves. "I remember putting things all over the floor by zip code," Hutchins says. They also took, packaged and sent out orders. Help was needed, so "we hired my parents at $2 per hour each."
Initially, Martin continued teaching. "The business was such that I could work it around my job the first couple of years," she recalls. While on a leave of absence for the birth of her second child in 1986, she realized Gooseberry Patch was going to make it. The evidence? Each partner was earning $100 a month from the business. Martin did not return to teaching.Because of the nature of the mail order business, both women realized it was time to get more working capital. "The cyclical income is very different from retail," Martin says. "We build inventories earlier, and we have postage earlier." Catalogers cannot mail unless the postage is paid up front. Then there are the printing bills. "We print in May and June to start the Christmas season, so those kinds of bills come early."
Building a catalog business means being in "investment mode" for the first several years, says catalog consultant Slyper. "A lot of people don't have any idea they are going to be spending and investing money for at least three years before they see a gain. In many cases, they don't even see their investment back for five years."Armed with a business plan, Martin and Hutchins started to approach banks. As women asking for funds for a craft-related, mail order business, they were not warmly received. But at the Delaware County Bank, they finally got a yes. "We've been working with that bank ever since," Martin says. "We've always done what we've said we would do and more, and the bank has always been there for us."
With money for more inventory, Martin and Hutchins added a few other people to help package in the basement, plus a full-time secretarial/clerical person. "She worked in the bedroom next to my bedroom," Martin says, "It got to the point where I would want to go to bed and she would still be there. On Thanksgiving, she would be trying to catch us up and I'd be cooking the turkey." It was time for a change.
Moving Downtown
In 1989, Gooseberry Patch moved into a downtown Delaware storefront, occupying 2,200 square feet. "It was a store and it felt very extravagant," Martin says.
"And a little scary, especially in a small town," Hutchins adds."We never had overhead before," says Martin. "It was a big step."
"And if you're going to fail, it's O.K. if it's at home; it's a protected environment," Hutchins says. "But you don't want to go downtown and fail."
That didn't happen. In 1992, Gooseberry Patch began publishing an exclusive line of cookbooks, written and illustrated in the same folksy manner as the catalogs. The series has 16 hardcover cookbooks and two coffee table editions. The cookbooks contain favorite country recipes, how-to tips and cherished family memories--many contributed by customers.
The popularity of the cookbooks led to the creation of the Country Friends Collection in 1996. The paperback books feature hand-drawn friends named Mary Elizabeth, Kate and Holly, who share various home projects with readers. "We created the characters," Hutchins says."The three women have all the characteristics of what we see as our customers and shoppers," Martin explains. Martin's and Hutchins's caricatures depict the three country friends as they garden, entertain and cook through books with titles such as "Parties," "Gardens," "At Home," and "More Christmas."
The collections are big sellers. "The books we publish are among the top 30 items of our catalog. They make up 40 to 50 percent of overall sales," says Gooseberry Patch chief operating officer Liz Plotnick. Wholesale sales of books and Gooseberry Patch paper products to stores make up 20 percent of sales. Five percent of the firm's business is done overseas, where Japan is the biggest market.
Around the Next Bend
In 1995, Martin and Hutchins were named Columbus and Central Ohio Retail Entrepreneurs of the Year by Ernst & Young, Merrill Lynch and Inc. magazine. Last year, Gooseberry Patch moved into a 23,000 square feet of offices and warehouse space at Delaware Industrial Park. The business continued to grow as the catalog was expanded to 88 pages with 500 items. Six million copies were mailed during the 1998 holiday season.Still, they are always looking around the next bend. "The future is filled with so many opportunities, and we're looking for what opportunities to take," Plotnick says. Those opportunities include licensing the company name and art in retail stores and other catalogs.
Defining themselves as "risk-takers who are willing to explore anything," Martin and Hutchins say there's not much they won't consider. One thing they do know, though: they will never opt to go public. "We like being spontaneous. We like to do what feels right," Hutchins says. Running a public company, they believe, would be anything but spontaneous.
Another area where the partners are proceeding cautiously is expansion. "We are growing slowly so we can control it," Plotnick says. Gooseberry Patch sales increased 24 percent in fiscal 1997 and 30 percent in 1998, taking sales from $7.3 million to nearly $9 million. Plotnick says the business is looking at another 30 percent increase in fiscal 1999. Gooseberry now employs about 20 craftspeople who create the cookie cutters, ornaments, wall hangings, candles, figures, miniatures and other collectibles.
Doing business together has not spoiled the friendship between Martin and Hutchins. "We laugh a lot," Martin says. "When [Hutchins has] a bad day, I have a good day and we kind of offset each other. The shared responsibility helps." Although in the beginning they both did everything, now Hutchins manages the creative side of the business and Martin manages operations."I like to know you're just as miserable some days as I am," Martin tells Hutchins.
"I like to know you're in just as much debt as I am," Hutchins responds.
Naturally, growth has brought changes. There are about 80 full-time employees and 50 part-time and seasonal workers. "We're in a big, new building and it's not the close-knit little group we used to have," Martin says. "It's been hard to maintain the warmth and friendliness and get things done."
"We try and work with people like we would like to be worked with ourselves," Hutchins says. "I love talking to everybody. I love sitting back here at the lunch table at lunchtime and eating with everyone."That type of management style works well for Paul Gaulke, Gooseberry Patch's warehouse and distribution manager for the past seven years. "They've always given me an opportunity to tell them what I think and to design and create some things of my own," Gaulke says.
So far, Martin and Hutchins remain involved in all aspects of the business. "We keep our fingers in everything," Martin says. "From books we produce clear down to the packages we ship out of here, we want to feel proud of the products. The way it is wrapped, the way it is finished off at the top with tissue we've designed ourselves, to the way it smells good when the customer opens the box--all the details are really important."
Success has not come without some small disasters. There was the year the holiday catalog, designed to feature Williamsburg blue and barn red, came back from the printer in gray and rust instead. "That doesn't sound like a big deal, but to a country customer..." Hutchins says.
"We lost $80,000 that year," Martin says."But we bounced back," Hutchins says. "We said we're not going to let this happen again and it's not going to hold us back."
Gooseberry Patch also survived unpopular products, an area code change after catalogs were already mailed out, postal increases and the 1997 UPS strike. Not to mention competition. "There are very few country catalogs left," Martin says. "We're unusual because we manufacture more than 40 percent of our own products. There are no other companies that do that."
That may not be true for long. "One of the trends in the industry is the growth in the specialty niche catalog market," says Amy Blankenship, director of the Direct Marketing Association. Huge companies such as J.C. Penney are putting out as many as two dozen specialty catalogs in addition to their general merchandise catalogs. Specialty titles range from Barbie Collectibles to Scout uniforms for girls and boys and window treatments.
According to a recently updated study conducted by Wharton Economic Forecast Associates and the Direct Marketing Association, catalog sales are expected to total more than $87 billion in 1998, a 7.7 percent increase over 1997 sales of almost $81 billion. With sales of barely one-hundredth of one percent of that total, Gooseberry Patch remains a minnow in a very large ocean.Hutchins has some advice for those who are thinking about diving into the catalog industry: "You've got to stand behind your product, and you have to create something that is unusual or you're not going to get anywhere."
"You have to have a clear picture" of what the situation is, Martin says. "There's a lot against you, but the mail order business is growing like crazy, and for anyone who loves what they do, has a great idea and thinks it through..."
"You have to take care of your customers," Martin says. "I know every article you [read] probably says you have to take care of your customers. But I mean you absolutely have to. Because if you don't, there is somebody else out there who will, and they will take them away."
Keeping customers involves "giving them good service and different products and continuing to mail to them," Slyper says. "Retaining customers, if you have a good product and good service, that's not the difficult part.""If you truly, truly believe in what you do and you love what you do and you're willing to put the hours in and your heart and soul and you have pretty decent instincts," Hutchins advises, "I'd say, 'Go for it.'"
"But you have to have all of it," Martin says.
"We're loving it," Hutchins says, "and I think when the time is right and we're not loving it anymore and we're both ready to move on to something else, we'll know it."
Rini Ranbom is a freelance writer who contributes regularly to Columbus C.E.O.
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