Spring 2003 LoveSac Story
Once upon a time not so long ago, a teenager named Shawn Nelson made something. A very big something. It was like a giant beanbag but it wasn’t a beanbag. (No, not a beanbag.) He made it in his basement from scraps of fabric. He filled it with sponge foam and other stuff (but not pellets). He called it a LoveSac and took it everywhere. His friends tried it. They sat, slept and vegged out on it. Three or four people could fit on it. It was “really cool” and “really big,” like a huge pillow hugging every curve. And they wanted one for themselves.
The LoveSac story might have ended right there in 1996, when Nelson (just 17) took the first of two sidesteps. Between high school and college, he went to Taiwan for two years as a missionary, where he became fluent in Chinese. As it turned out, this was an integral chapter in the LoveSac story.
Back from Taiwan and on to college, where, in the fall of 1998, Nelson and his LoveSac became something more than a day in his truck with friends. After many “Where’d you buy that?” inquiries and unhappy reactions when he said they’re not sold anywhere, Nelson decided to get down to business—in the basement. He took his paper cutter, chunks of foam and scraps of fabric he got from a local furniture store, and started stuffing foam into fabric. He later added a foam shredder to his equipment (he was happy to learn there was such a thing), and made more LoveSacs. He traveled to furniture shows and expos, sold them one by one, and conducted his not-a-beanbag business this way for two years. Annual revenue: roughly $40,000 a year. And in those two years, he never took a dime out of the company.
So OK, if “it’s not a damn beanbag” (as the company proclaims), what is it? LoveSac is next-generation furniture. It’s body-molding comfort. It’s a giant sac stuffed with chopped “memory” foam that can be flattened for sleeping on, or puffed up for sitting on. The most popular model is the SuperSac; at 6′ in diameter it can seat as many as three adults. The line also includes the 5′ TonOLoveSac, the 3′ LotOLoveSac, and the 2′ LittleLoveSac. There’s also the TubeSac pillow, the BackSac bedrest, and the DoggieBag pet bed. Packaged to move, even the largest LoveSac is only as big as a big sleeping bag, thanks to a patent-pending process that compresses the sac, which fluffs back up naturally by itself at home.
After graduating, Nelson took the second of two sidesteps: a year in Shanghai teaching leadership, team-building and other management skills to Fortune 500 companies. Again, LoveSac stayed home. Nelson put his growing company in the hands of trusted friends for the duration, and took back the reins when he returned home.
That’s when he took his trusty LoveSac to an Advertising Specialty Institute trade show in Chicago, where a promotional company saw it. That company eventually brought it to Limited Too (The Limited’s “little sister” chain). Soon after, Limited Too put in a dream order: 12,000 LittleLoveSacs in fuzzy purple fabric with silver specs. Except it wasn’t so dreamy: as with many small entrepreneurs who get a huge order “overnight,” Nelson’s company wasn’t ready for it. “I had probably a thousand bucks in the bank. I took a quarter-million-dollar deal with no office and no factory,” says Nelson (now 26). And no purple fuzz.
Undaunted, Nelson drove straight to North Carolina to catch the last day of a fabric show to search for it. After looking through aisle after aisle, he finally hit on it: fuzzy purple fabric with silver specs. He told the vendor how much he needed and at what price. The vendor turned the offer down. So he asked for the supplier’s name. The vendor wouldn’t tell him. But as luck would have it, just then Nelson spotted some cardboard boxes—with Chinese characters on them. He translated the Chinese, which to his delight was all the information he needed to contact the fabric manufacturer. Nelson soon hopped a plane to Shanghai, visited the factory, made the deal, and flew home.
Thus began the arduous production of 12,000 LittleLoveSacs. “Our equipment was so primitive,” Nelson says. He and Tres White—his partner, cousin, and childhood pal—hired 25 people to get the order out. “We used an old hay grinder powered by a John Deere tractor” to grind the foam. “It nearly killed us,” he says, but they did it: they got the order out in five weeks.
Here’s where the story hits a snag. The Limited Too order went out, but no orders were coming in. Nelson and White called on furniture stores; no joy there. Then White, now VP of retail, had an idea: “Let’s open a store ourselves.” In the fall of 2001, they approached The Gateway, the upscale retail complex in Salt Lake City that was ready to open for the Olympics and the holiday season. Rejecting them at first, The Gateway reconsidered, and the first LoveSac store opened in November 2001.
Nelson’s sales goal for the store was simple: Sell one LoveSac a day. If they did that, they’d make it. Love for LoveSac was larger than that. After just two weeks, Nelson and White could afford to open a second store. After five weeks, they took in more than $120,000. By Christmas Day, they sold out of everything, even the floor models. Retail sales on their Web site started to pick up, as well. LoveSac business was busting out all over.
Production has been an ongoing challenge long after the hunt for the purple plush. “Because we’re growing 1,000 percent a year, we have to reinvent ourselves.” So the company now owns two factories, one in Mexico and one in Shanghai.
The success triangle
To explain the operating concept of The LoveSac Corporation, Nelson suggests a triangle: one point is Ikea, the second is Gap, and Hard Rock Café is the third. Why? He says the company sells furniture that’s similar to Ikea’s, rotates stock the way Gap does, and throws in some humor with their line of T-shirts and other casual clothing, like the Hard Rock Café’s.
“We sell furniture. We sell it in malls. We sell middle-ground, so everyone can buy it.” They have an enormous demographic to tap into, married couples with kids being their largest market segment, followed by just about everyone else. Toddlers love it (they’ve been known to bond with a LoveSac faster than with a teddy bear). Grandparents buy it. Teens save after-school earnings to buy it. Boomers who loved beanbags but want upgraded fabric and bigger, comfier seats buy it. And Utah Jazz’s Karl Malone buys it—he owns seven of them.
Plus, there’s no competition of consequence out there. Nelson offhandedly mentions a small operator in Florida whose yearly sales are comparable to LoveSac’s monthly sales. But if he had to choose the one key to his success, it would be the price point. “In Gateway, we have the highest sales per square foot: we sell $400 items out of a thousand-square-foot store.”
White says the company puts its “crowd-pleaser” approach to promotions into action—like taking LoveSac to the movies. For movie openings at two Utah Megaplex theaters, they fill the first two rows with LoveSacs, pass around Krispy Kreme doughnuts, give out T-shirts that say “The Alternative to Lame Movie Theaters” (a play on LoveSac’s “Alternative to Lame Furniture”), and lead cheers: half the crowd shouts “Love!” and the other half, “Sac!” Theater management is more than happy to join in.
There’s a more serious side, too, such as taking part in fund-raising for the Muscular Dystrophy Association. “We have a lot of children with these disorders who buy [LoveSacs]. They have trouble getting comfortable in everyday chairs.”
If LoveSac’s biggest hurdle has been overcoming the negative image of the original beanbags chairs—those sticky, pellet-filled but under-stuffed vinyl blobs of the late ’60s and early ’70s—then perhaps its greatest boost comes from “back-door marketing.” Nelson says, “We get a lot of free publicity because it’s a weird product.” And it doesn’t get any better than national TV, such as comedian Wayne Brady telling his audience, “The LoveSac puts the original beanbag to shame.”
Comfort in store
“Our stores are clean, the colors are subdued and our fabrics are expensive. It’s all very classy,” Nelson says. “Malls are concerned about their image, but we’re more concerned.” Nelson says they choose only prime locations.
Step into a LoveSac store, and you’re instantly at home. Music’s playing, the TV’s on, even a (foam) dog lies on a doggie bed. Sink back into the soft, deep recesses of a SuperSac and get lost in comfy-ness. That’s where it happens. Bottoms down equals wallets out: Nelson calls it the “butt-to-buy ratio,” which he says is well over 50 percent. “Rich or poor, you fall in love with them,” he says. The hard decision: choosing a cover. Buyers can customize the LoveSac to fit their own décor in minutes by choosing from among 20 in-stock fabrics, and swatch books for even more—leather, denim, velour and more, all washable, and all of them replaceable when the room’s look changes.
In addition to furniture are LoveSac T-shirts and sweatshirts with catchy, sometimes slightly edgy slogans (“Alternative to Lame Furniture,” “It’s not a damn beanbag” and, for summer 2003, “United, We Sit”). Also this summer: board shorts and flip-flops for a “Ride the Wave” theme. So far, the clothing accounts for more than 10 percent of revenues. But the clothing may not be enough for LoveSac-starved store customers: they want to buy everything they see—the stuffed dog on the pet bed, the leather sofa, the end tables. And now, LoveSac will be selling them. Nelson says the stores will “be more like Ikea,” if Ikea were one room in motion inside a mall.
Seven corporate stores currently dot the western US, with more to come. Plans also include penetrating the east coast this year. Franchising has helped finance LoveSac’s continually expanding operation. But that was never part of the plan—it just sort of evolved. Last Christmas season, Nelson received an average of 50 franchise requests a week. So they put a program together, and prospective franchisees find it an attractive opportunity. With a 200-percent markup on everything, the “margins are incredible,” says Nelson.
To date, 26 franchises have been sold. Start-up time is short (an average of 30 days) if a retailer has an established location. If not, White helps with site selection, thanks to his relationships with mall management, leasing agents, and numerous visits, to ensure prime locations. And LoveSac provides every franchisee with three days of intensive training at corporate HQ, including hands-on experience in the Gateway store. “We run a tight ship, [so] you can’t tell the difference between corporate stores and franchises.” By the end of this year, plans call for a total of 58 stores, roughly half of them franchise locations.
Happily ever after
Now with 200 employees, the man who spent three weeks stuffing his first LoveSac doesn’t stuff them anymore. Nelson is content just to build and create. He travels extensively, and brainstorms on the plane. White calls his cousin, the former straight-A student, a genius—”but he still mixes the fun in with the business.”
What lies ahead for LoveSac? Nelson just flew back from China, and did some of his usual brainstorming on the plane. (“I haven’t even gone over some of this with my staff yet,” he confides.) Eventually, he says, the name LoveSac will mean really soft, comfortable furniture—and no one will say “beanbag” ever again. “LoveSac is a brand,” he says with confidence. “We’ll be around for a long time.”
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