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ARTICLE

Cedar Rapids retailer riding e-commerce wave

Explosive growth prompts move, consolidation

Justin Wan/The Gazette

Fulfillment associates Edward G Robinson (left) and Stacy Michalec place items in baskets before feeding them to an automated storage machine at BHFO’s warehouse in Cedar Rapids.
Justin Wan/The Gazette Fulfillment associates Edward G Robinson (left) and Stacy Michalec place items in baskets before feeding them to an automated storage machine at BHFO’s warehouse in Cedar Rapids.
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If you are looking for a local example of how e-commerce has grown rapidly in the past decade, just point your browser to BHFO.com.

The largest seller of clothing, shoes and accessories on eBay has grown from its origins 11 years ago in the basement of a rural Linn County home to a $30 million business that ships merchandise to customers worldwide.

BHFO, which also markets merchandise on Amazon.com, recently moved to a 240,000-square-foot office and warehouse at 4520 20th Ave. SW in Cedar Rapids, consolidating and streamlining its operations.

Stacie Sefton, CEO and co-owner of BHFO with her husband, Jon Sefton, said the new location was needed to accommodate the company’s explosive growth.

”E-commerce is growing at such a rapid pace that if we do not continue to keep up with the technology and diversify into new markets and products, we put our company at risk,” Stacie said. “Our new facility will help us better position our company for new products, increase our revenue and provide the service our customers have come to expect.”

Online apparel and accessory sales continue to capture a greater share of U.S. retail e-commerce sales, according to a 2013 report from eMarketer, an Internet market research company. Retail e-commerce sales, which includes all categories, are projected to top $291 billion this year, according to Forrester Research, a Cambridge, Mass., global research firm.

Digital sales are expected to increase at a 14 percent compound annual growth rate through 2017, according to eMarketer, with shoppers using Smartphones and tablet computers driving that growth. Apparel and accessories is the second-largest e-commerce category by annual sales, topped only by computers and consumer electronics.

Put another way, as John Devine wrote for the Motley Fool investment site this past Tuesday in discussing J.C. Penney’s push for its online sales, “While everyone and his mother has known about e-commerce for years, it’s still a sobering threat to conventional retail. The phrase ‘adapt or die’ remains as relevant as ever, although for retailers being late to adapt to an online model may be just as damning.”

Stacie said moving to the former Alpha International warehouse was necessary before installing Perfect Pick, an automated inventory storage and retrieval system that will increase efficiency and allow BHFO to handle additional product lines.

The BHFO system is the only Perfect Pick in Iowa.

“We were operating out of two separate buildings with inventory stored at Worley Warehousing,” Stacie said. “We did not install any automation equipment because we knew that eventually we wanted everything under one roof to improve efficiencies.”

Matt Wade, BHFO chief operating officer, said the company’s management team checked out the Perfect Pick system at a business in Kentucky. Wade said the system, which uses 20 self-propelled robotic units to load and retrieve merchandise, was custom built in BHFO’s warehouse.

“We’re not having to walk out into the warehouse to get the product. The robots bring the product to us,” Wade said.

“If a customer has ordered five items, it knows where in the system to retrieve those items and combine them in a single tote for shipping. If an item such as a coat or dress is too large to store in the Perfect Pick, it will notify an operator that it has to be retrieved by hand from the bulk area of the warehouse.”

BHFO is shipping about 120,000 items a month, or 4,000 per day. Stacie Sefton said the company, which employs about 150 permanent and temporary workers, is expanding employment to create a second shift, with a goal of processing about 6,000 new products per day.

“By July, we will probably be shipping out about 150,000 items per month,” she said. “We will be adding product lines and expanding our marketplaces beyond eBay to offer merchandise on our own website as well as international markets.”

Jon Sefton, president of BHFO, said the company is still ramping up to fill the Perfect Pick system, which can store about 200,000 items in four 80-foot-long aisles. The aisles can be expanded up to 200 feet in length and additional robots can be inserted to increase speed without.

“We’re hiring more employees to feed the Perfect Pick,” Jon said. “With the automation, we will need fewer people in product fulfillment.

“We’re not looking at laying anyone off because they will be absorbed by our growth. We will shift them to receiving, order entry or other areas of the business.

“When we moved into this building, we increased the number of order entry desks and photo studios to prepare for future growth.”

Jon said BHFO eventually will be a three-shift operation because e-commerce customers are expecting next-day service.

“Customers are ordering something on Saturday and they would really like to have it on Sunday,” he said. “We’re seeing the industry changing to accommodate the desires of the customer. The bar is being raised quite often in our industry.”

Product and brand diversification, including diversification within brands, has been a major driver for ecommerce businesses in Iowa and the nation as evidenced by Amazon.com’s expansion well beyond books and videos to a multitude of products.

Clickstop, an Urbana-based ecommerce business, owns and operates a suite of online retail stores. The company serves a diverse markets that include the moving and cargo control industry, insulation products, and home organizing solutions.

Tim Guenther, Clickstop founder and CEO, said diversification has played a role in the company’s growth from $1 million in sales in 2006 to more than $15 million in 2013.

“We are very diversified within our US Cargo Control brand,” Guenther said. “Our primary lines are ratchet sraps and load-securing equipment, but we’ve also enoyed success diversifying into lifting equipment.”

Stacie Sefton said product diversification also will be crucial to BHFO’s future.

“Home and garden is one of the fastest-growing categories on the Internet, so that’s the category that we will be focusing on next,” Stacie said. “We also will be looking to build up other brands of apparel, shoes and accessories.”

Tom McLaughlin, BHFO chief financial officer, said the importance of the company’s employees to its success is evident in a 9,500-square-foot employee amenity area of the new building. It includes a cafeteria, game room, fitness center, lounge with massage chairs and TV, a computer/reading room as well as kitchen, lockers, coat room and separate employee entrance.

“We want our employees to feel comfortable and want to come to work here,” McLaughlin said.

Comments: (319) 398-8366; george.ford@sourcemedia.net

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