Shift to e-commerce pays off for Goedeker's

When the economy crashed in 2008, people stopped buying appliances and furniture.

That meant trouble for Goedeker’s, a 40,000-square-foot store filled with exactly those big-ticket items. The cash coming in wasn’t enough to pay the mortgage and other bills.

Owner Steve Goedeker was turned down flat when he asked a banker for additional credit. “He said, ‘This business stinks. We’re ready to foreclose,’” Goedeker recalls.

Just answering the phone was stressful: Every other call was from a creditor demanding payment. Goedeker, a devout Catholic, prayed for a solution but the only answer he came up with, an e-commerce website, seemed like the business equivalent of a Hail Mary pass.

He didn’t know whether consumers would buy expensive, complicated refrigerators and washing machines over the internet, but he wasn’t ready to close the family business that started in 1951 as his father’s TV repair shop.

Goedeker’s children, then in high school and college, designed a website, and he began figuring out the logistics of shipping bulky appliances to homes in Los Angeles or Houston. He admits that he made plenty of mistakes, but apparently he did enough things right. By 2009, sales of some brands had doubled.

“It surprised us too, frankly,” Goedeker recalls. “Every vendor was saying, ‘What are you doing over there?’”

A decade after the crisis, online sales account for 90 percent of Goedeker’s business. The old two-story showroom in Ballwin has been reduced to 15,000 square feet on the lower level. A temporary-looking plastic curtain keeps shoppers from wandering into the upstairs area, where call-center representatives and web designers work, and trailers are lined up to haul appliances into and out of the warehouse at the rear of the building.

Goedeker says annual sales are between $50 million and $100 million, and I’m guessing that they’re closer to the upper end . The company has 90 workers, significantly fewer than the 150 its two superstores employed in the late 1990s. (The south St. Louis County store was a casualty of an earlier recession in 2001.)

Nationally, consumer-tracking firm NPD Group says online appliance sales grew 42 percent last year. Joe Derochowski, NPD’s home industry analyst, believes Goedeker’s business model should be in an industry sweet spot for years to come.

“They’re picking up on a trend that’s growing, and it still has more room to grow,” he says.

Goedeker, 66, has seen many big-box competitors go bankrupt over the years, including Circuit City, Silo Electronics, American TV & Appliance, Ultimate Electronics and HH Gregg.

The online operation’s low overhead keeps it competitive with remaining giants such as Home Depot and Lowe’s. For customers outside Missouri, Goedeker’s also has the advantage of not being required to collect sales tax.

Goedeker himself has a daily ritual that helps keep overhead low: He mops the bathroom floor and cleans the sink and toilet before leaving the building.

Goedeker’s is also the rare retailer that is closed on Sundays and sends workers home at 6 p.m. on other days. The website is open 24/7, but Goedeker knows limiting the call-center hours costs him some sales. It’s more important to him that employees can have dinner with their families.

“We could do a lot of things to drive more volume if we wanted to drive our people and ourselves harder,” he muses.

Then he remembers how close the business came to going under a decade ago, and figures there’s no reason to compromise his family-first principle. “That mom-and-pop mentality has held us back in some respects, but also may be the reason we are still here,” he says.