Simon Han is answering calls from venture capital firms and other investors on the regular, and it makes sense — business at Yoogi’s Closet, a Seattle-based online consignment shop for women’s luxury items, is bringing in $1 million in monthly sales.
But Han, who founded the company in 2008 with his wife, Eugenia, isn’t interested in taking any funding for now — especially since his company continues to grow without a single dime of outside investment.
The bootstrapped Yoogi’s Closet has been turning monthly profits ever since Han sold his Ferrari six years ago for $102,000 so he could start the business. The company focuses on pre-owned women’s luxury items like purses, shoes and wallets, creating a marketplace for both those interested in selling their products and those wanting to save money on used goods.
Prices in the luxury market have been increasing in recent years, which is helping attract more customers who don’t want to pay retail price to a place like Yoogi’s Closet.
“Our average ticket is $900, and that is off-the-charts high,” Han explained. “That’s the magic number that makes it all work and is why we did $10.5 million in revenue last year.”
Yoogi’s business model has been the same since Day 1: Sellers fill out an online form, receive a quote and then get paid on the spot or take a consignment deal.
There are a flurry of competitors in this space, all the way from individuals on eBay or Craigslist to VC-backed companies like Portero or Seattle-based Bag Borrow or Steal (formerly Avelle). Han said his company sets itself apart with a customer service strategy modeled off Nordstrom and a serious focus on authenticity.
“We put customer service above all else,” Han said. “We have a 30-day return policy, and no one does that in the pre-owned space.”
Determining whether or not a product is real is a huge issue for sellers of pre-owned goods, and especially in the luxury market. Han explained that other competitors frequently take a “reactive approach” to authenticity, meaning that they rely more on customers to flag fake items they see.
“Why is it the buyers’ responsibility to be proactive and say what is real and what is not?” he said. “We do our own authenticity checks and never list an item unless we are certain it is authentic.”
While venture capital firms have taken notice of Yoogi’s success, Han likes the idea of an organically-grown company. It’s helped the 18-person startup stay nimble and make decisions in an efficient manner.
“We switched our e-commerce platform four times — imagine if we had to explain to our board why that made sense each time,” said Han, who almost took outside money in 2011 but canceled the deal last minute. “We don’t have do to stuff like that, and it speeds up our decision-making process.”
Han admits that he’s made mistakes, too, but the company has been able to correct them and move on quickly. Not having outside investors has also enabled the company to set its own sales goals and grow at its own pace.
“If we had to shoot for big top line growth numbers, we’d have to consider our 30-day return policy, move into other categories more quickly or not authenticate properly,” Han said. “That growth would come at a price.”
However, this isn’t to say that Han is against VC or institutional money — “it just needs to make sense,” he noted. For now, though, he wants the company to maintain a focus on the luxury goods market for women and continue growing revenue.
“We don’t talk exit at all here,” Han said. “We are just focused on the next milestone. If we can bootstrap our way to $25 million in annual sales without sacrificing overall customer experience, that would be quite an accomplishment.”