If you’re anything like me, you become spend-happy when around fine furniture. Because of this, I try to limit the number of times I go into Restoration Hardware each year. On my last visit, my husband had to physically pry me off a worn-in, chocolate leather couch that, I swear, was asking me to take a nap on it.
Apparently I’m not the only one in love with the retailer. On Friday, the company posted a $124 million IPO and, according to press reports, stock prices were up 30 percent within 24 hours.
How did Restoration Hardware get its start? For that answer, I called up founder Stephen Gordon to hear his incredible story of entrepreneurial success.
From Social Worker to Home Fixer-Upper
Gordon was born and raised in upstate New York. He went to a local university for clinical psychology and paid his tuition by spending summers working on a Wyoming oil field. When he didn’t get into graduate school on the East Coast, he enrolled in a program at Humboldt State University in Eureka, Calif.
A few years later and with his master’s degree in hand, Gordon quit a job as a counselor and started bartending. “I realized that I hated psychology after all,” he says. He and his wife had just moved into a Queen Anne Victorian in Eureka that needed work, so Gordon set out for quality doorknobs and fixtures.
A Company Is Born
Gordon became obsessed with finding the perfect fixtures. He requested catalogues from retailers all over the country, but then realized that even if he found the perfect piece, he couldn’t afford it.
“So I put together photocopied catalogues of fittings and fixtures, hung a sign advertising, ‘Restoration Hardware,’ outside my house, and invited people in to look at binders and order things,” he remembers. It was 1979.
After purchasing a small package of radio ads, customers came calling. Within four months, Gordon opened a 500-square-foot store. He invested $500 of his own money (the only money he ever invested into the company) to purchase knobs and tools for display. His vendor base expanded and six months later he’d saved up enough money to move to a 1,500-square-foot space in downtown Eureka.
Did he have a customer acquisition strategy?
“No way. I don’t think I would have known what a customer acquisition strategy was back then,” he laughs. “I just had a product that no one else had and an overhead structure that was about zero.”
The early days of Restoration Hardware were tough on Gordon. He wasn’t taking a salary and didn’t have any employees. He supported his family by working nights as a bartender. It wasn’t until two years later that he was able to give up bartending and work full-time on his new company.
Gordon had another problem, too: the so-called museum crowd.
“I was getting a ton of foot traffic, but not everyone had a need for fixtures and cabinet knobs so they were coming in, looking around and then not buying anything,” he remembers.
He solved this problem by bringing in what he calls, “compelling finds”—little items that could be loosely tied to home goods. These included things like mixology books and multi-function screwdrivers. His plan worked and even today stores sell gift-like items.
The early and mid-80s were slow growth years for Gordon. It wasn’t until 1988, when he opened an outlet in Corte Madera, Calif. (now the company’s headquarters), that he introduced furniture into his inventory mix and sales took off.
“My decision to introduce furniture was not strategic at all,” he says. “I just thought my fixings would look better on nice furniture, so I brought in a few pieces and when people started asking to buy the furniture, I got it into my head that we should expand our product offerings.”
In 1993, Gordon was ready to really grow his company. He enlisted outside investment and landed funding the following year. Then he did the impossible: between 1995 and 2001, he grew Restoration Hardware from five stores to 112 stores.
He credits the company’s success in having a tremendous team beside him, strong vision, well-articulated store operations, human resources compliance and offshore logistics. “It was a confluence of things, none of which I thought about until afterwards,” he says.
Gordon left Restoration Hardware in 2005. By that time, he’d hired another CEO and was operating as chairman of the company, a job he found boring. He missed being in the trenches, so he took the CEO job at Sundance Holdings and commuted to Salt Lake City, Utah from the Bay Area, where he and his family had relocated a few years prior.
His days at Sundance ended in 2010 and today Gordon is working as a retail consultant. He is also developing a new concept – one he isn’t willing to talk about yet.
“I have no desire to create something massive, but it will be in retail,” he says.
Advice for Entrepreneurs
Gordon recommends entrepreneurs always have a strong point of view when selling a product or service and to never underestimate the importance of hard work.
“Determination trumps talent,” he says. “It is all about being tenacious; stay with it.”
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Photo courtesy Stephen Gordon