We turned our hobby into a £30m turnover business
The co-founder of a £30 million turnover retail business has revealed the secrets of its explosive success.
Velocity Commerce is an award-winning online consultancy and retailer, with a specialist 30-strong team that processes an average of 3,000 orders per day.
The Cambridge firm manages and retails product ranges for brands such as LEGO, Brita, Nextbase, Hoover and Sony. This year it was named one of the fastest-growing companies in Europe in the FT 1000 report, one of just 27 UK companies to have made it to the top 100, with turnover of £30m.
It has come a long way since PJ Scott and Eddie Latham started the business selling branded clearance stock from their homes in 2012. The pair were working for eCommerce retailer Play.com at the time and launched Velocity with just £1,500 each of their own money.
“When we started the business, it was a hobby,” Latham told BusinessCloud. “We worked on it part-time for 18 months. My girlfriend at the time used to work in London and would wake up at 5am to go to work, so I wasn’t going to lay in bed while she was working hard: I’d get up and go to my garage to pack some parcels.
“A lot of people said it was distracting us from our jobs, but I said to them: ‘While you sit there and watch Coronation Street, I’m packing parcels and listing products on eBay – that’s what I do for a hobby.
“It’s no more time or effort; and how much do you get out of watching Coronation Street? Not a lot – and I was learning about the internet and how to sell products. I enjoyed it.”
That accumulated knowledge of how to increase brand exposure and sales on platforms such as Amazon and eBay saw business pick up fast. “We moved from a garage to a self-storage container and then to a small warehouse, where we got my friends to work. We had no aspirations about where we wanted to get the business, but in that time we took it to a business turning over £100,000 a month,” explained director Latham.
“How we were different to most people selling online is that our skillset is SEO: we understand the sales cycle very well. We’re not product specific and we understand how to market products.
“Everyone tries to grow too big too quickly. So when we went out and bought our first products we used to buy clearance products. And by definition, if you sell online, you can get involved in the race to zero quite quickly.
“You might find one product from a distributor you can buy for £10 and sell for £15; then someone else buys that same product from the distributor and sells for £12. Before you know it, you’re both selling it at a loss.
“We went out to buy all the remaining stock of a particular product so we could control the price over time. The first product we bought was 3,000 laptop rucksacks which came back from retailers when they did a range change.
“I guess we thought that would be a very slow-moving exercise because if you invest very heavily in one product, that means we can make a margin. Lots of people selling online try to go for 1,000 different products with a very small margin and never actually make any money. When you’re building a business, the speed with which you can grow is relative to the margins you make on the products.
“By 18 months we’d moved warehouse three times further and grew the business to about £1.4m a year.”
Latham has nothing but good things to say about Amazon, on which they sell 75 per cent of their products. “Amazon is just the internet for shopping. It helps a lot of people facilitate their products online,” he said. “It has just made it very, very easy and taken out a lot of the negative things that used to be associated with internet shopping, like returns and slow delivery – it has bridged all those barriers.
“It’s not like it’s dominating and destroying small businesses by any stretch of the imagination: it is actually enabling many people, like myself and PJ, to grow a company by selling online.”
Velocity turned to consultancy after building a team of specialists in Amazon marketing, content optimisation, SEO and international sales.
“We have taken brands from £500,000 a year to £10m within three years,” said Latham. “The success that we’ve seen is quite phenomenal.
“We’re ranked 11th in The Times’ top 100 fastest-growing companies in the UK and the interesting thing about that is a lot of the other companies [on that list] have had a lot of venture capitalist money and private equity funding whereas we’re completely self-financing.
“The whole combination of all our stock and sales is literally the fruits of £1,500 that PJ and I each invested six and a half years ago.
“It shows that if you’ve got 1,500 quid and you’re just determined, and willing to put in a lot a lot of hours and work really hard and have the right attitude about things, the opportunity is there for anyone to turn a small amount of money into a very large profitable business.”