”The part of this business that is the most fun for me is that I literally don`t know what I`m going to be selling from one month to the next,” Ellis says.
That is true. Ellis` inventory is totally dependent on the vicissitudes of nature and other people`s bad luck. He has 18 buyers–Ellis calls them
”merchants”–who spend a good deal of their time on the road. Because Ellis is probably the largest salvage buyer in the nation, his buyers are called in anytime and anywhere there is a disaster such as a flood, hurricane or tornado. They are also called in for truck crashes, train wrecks, fires, bankruptcies, closeouts and sales of imperfectly produced goods.
Such transactions are made on the spur of the moment, because the longer damaged and neglected goods sit around, the more damaged they get. There are a couple of hundred salvage-buying firms around the country but only 20 or so big ones like Ellis` that are routinely called in by insurance companies when large stocks go up for sale.
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A salvage transaction is a cash transaction, and insurance companies like to keep things simple. If they have a load of furniture worth several hundred thousand dollars, they want to sell it to one buyer as quickly as possible, so the larger buyers are most desirable.
The buyers know each other well, running into each other at various disaster scenes around the country. While they are extremely competitive and secretive during the bidding process, they are also extremely nosy afterwards. They spend a lot of time trying to find out why they may have lost a bid or whether or not another buyer made a bad deal by bidding way above the other buyers, a mistake known as ”leaving money on the table.”
”It`s amazing,” Ellis says, ”how close the bids usually are. Everybody who`s been in the business for very long pretty much has a handle on the worth of merchandise. I was up in New Hampshire a few years ago bidding on the stock left over from a furniture-store fire. I tramped around the place for a long time with the insurance adjuster, a guy I`ve known a long time. Finally, I told him I`d give him $22,219 for the whole lot. `Jerry,` he told me, `you lost the stock.` He pulls out a piece of paper that had the bid of the guy I was up against, and he came in at $22,220. I lost out for one buck.
”That happens to everybody once in awhile, and once in awhile you goof and you do leave money on the table, or you buy a load of turkeys you can`t get rid of afterwards. But the object for me is not to buy the cheapest. The object is to get the most invitations to bid. We treat the people we are buying from in a way that they will want to do business with us again, pleasantly and fairly, getting the job done as quickly and efficiently as possible to make them look good.
”We also end up buying a lot of stuff we don`t particularly want. That`s because, if you take something particularly difficult off somebody`s hands one time, the next time he has something really good to offer, he may call you first.”
It is the ”particularly difficult” things that often become the most interesting goods to appear in Building 19 stores. Rather than groaning when a buyer comes in with smoke-damaged coffins, inflatable airplane escape chutes or two pieces of a three-piece suit, Ellis chortles with glee. That is an opportunity for him and his lieutenants to sit around his jumbled office and brainstorm a marketing campaign.
Building 19 ads for the pantless suits boldy proclaimed an offer of two-piece matching men`s suits for $19.95. It went on to explain that the pants happened to be missing, but reasoned there would be ”no waiting around to get your pants cuffed!” Mat Brown illustrated the ad with two handsome male models attired in the coats and vests, striking sophisticated poses though their lower regions sported only undershorts. ”Say,” one asks the other,
”did you get your suit at Building 19?”
”Yeah, how did you guess?”
The pantless suits, later reduced to $9.99, eventually sold to customers as sportcoats.
With the inflatable airplane escape chutes, sold by airlines that must
–by federal regulation–install new ones every few years, Ellis simply put them out for sale at $199 each. That is a considerable savings over the $4,000 airlines must pay for new ones, but Ellis could think of no earthly use for them, other than to suggest using them as swimming floats. That was enough, it turned out. The chutes disappeared.
The hundred salvaged coffins didn`t fare as well. A few were sold to bohemian college students who used them as coffee tables, but Ellis eventually gave the rest to the Salvation Army.
”Sometimes you get in a large stock of items that you simply have no idea if they will sell or not,” Ellis says. ”Once we got thousands of doll carriages that had no wheels, and they sold out quickly at 79 cents apiece. Another time we got roller-skate shoes with beautiful leather uppers but no wheels attached, and they didn`t do so well. We`ve still got them sitting around in a warehouse somewhere.
”Another time we got thousands of bird cages that were missing their bottoms, and they sold out quickly at a buck apiece. We got a shipment of nuclear-fallout protective suits that sold pretty well, too. They were supposed to be impermeable to anything, but the manufacturer for some reason made them with air holes in the armpits. That`s how we got them. I think a lot of people with sailboats snapped them up as waterproof outerwear.
”Part of our business is to make lemonade out of lemons.”
One buyer cornered thousands of shiny, new paint-can covers without the cans. One marketing plan was to sell them or give them away as metal Frisbees, but even that seemed too silly. The metal lids gathered dust in a warehouse for several months until Ellis came upon an idea that allowed him to move them at $10 apiece. He printed gift certificates on the lids, redeemable at any of his stores.
A big cosmetic company turned its entire stock of a failed product over to Ellis. Called ”Only One,” it was a skin lotion marketed as a multipurpose emollient that would make it possible for women to discard all their other lotions. The product failed miserably in test markets and, even at 69 cents a bottle, failed in the Building 19 stores, too. Finally, Ellis relabeled the bottles as ”Preparation 19,” advertising it as the world`s first ”ugly lotion” manufactured expressly for ugly people. The label was graced with a cameo-shaped, Mat Brown caricature of a warty old hag. Out went the entire stock–at 89 cents a bottle.
Ellis brought in thousands of plastic fly swatters whose manufacturer had stamped holes through the business end. No problem. He had the handles stamped with the Building 19 logo and the admonition to his customers to ”give a fly a sporting chance,” and sold them out as gags.
When the New Orleans World`s Fair ended in financial disaster a couple of years ago, Ellis bought thousands of commemorative coins that went unsold as souvenirs of the event. He repackaged them as ”bad luck” charms, noting on the label that they had originally been sold in New Orleans at 75 cents each, and that he was charging $2. ”See?” the label taunted prospective buyers,
”The bad luck is starting already . . .” Even with that forewarning, the coins sold out.
”One of the worst buys I ever personally made,” Ellis says, ”is when a guy called me up from Maine and told me he would sell me two boxcar loads of white birch dowels. I didn`t even know what a dowel was, so I told him I`d get back to him. I called a friend of mine who knows the lumber business and he got real excited. He said there was a real shortage in the furniture business at that time, with chair factories closed down because they couldn`t get dowels for their chair backs. He agreed to come in with me as a partner on the purchase, and we made a deal the same day with the guy in Maine.”
What Ellis failed to hear when the seller from Maine made his original offer was that they were ”short” white birch dowels. The dowels turned out to be only six inches long, totally useless to chair manufacturers. Pondering what to do, Ellis put them out in his stores as cha-cha sticks at a few cents a pair, but no sale.
Two boxcarsful of sticks sat in a warehouse until Ellis had another brainstorm. He put huge ”Free Admission” signs over the store entrances that warned customers they could leave the store only if they took five dowels out with them. Free of charge, of course. His customers figured it was just another one of Ellis` oddball promotions and accepted the sticks in good humor.
”I really got a laugh out of that,” he says, ”because I saved myself at least four hundred bucks in dumpage fees that it would have cost me to throw the damn things away. It got to be a little less funny a couple of months later, though. Some guy from a factory, maybe it was a doll-furniture factory, called and said he`d heard I had these dowels and he desperately needed them and would pay me top dollar for them. You win some, you lose some.”
Most of the humor in Ellis` ads is self-deprecating. He usually is depicted in Brown`s caricatures as a greedy, slightly evil but inept huckster. During a ”back-to-school” sales campaign, for instance, Brown drew Ellis as a schoolchild sitting in a classroom. ”Know what I did last summer?” he brags to the teacher, ”I went to 4 train wrecks, 15 fires, 3 tornados, a shipwreck, a derailing, 4 bankruptcies, an explosion and 12 floods, and I had a wicked, excellent time.” A girl at the desk ahead of him sneers, ”What a creep.”
Some years ago the Harvard Graduate School of Business used Building 19 as a case study for its students. The supervising professor wrote Ellis that he thought the study would prove to be one of the most useful and popular in the history of the course. ”It shows the hopeful, happy, generous and customer-oriented shop you run when outsiders might offhand believe that salvage stores are likely to be quite the opposite.”
Ellis credits Building 19`s success to the late Harry Andler, the man with whom he founded the business in 1964. Ellis says Andler, who died in 1978, taught him how to be successful and still have fun in business. Whatever he has contributed himself, he says, are lessons learned the hard way.
Born Gerald Elovitz, Ellis grew up in Hartford, Conn., where his father ran a radio shop. Always a free spirit, he was kicked out of eighth grade on graduation day for a youthful prank and, while in the Army, was busted from private first class three times because of tomfoolery. Describing himself as an ”undistinguished graduate” of Trinity College in Hartford, he went to work as an appliance salesman in a small, cut-rate discount chain in Boston.
He married his high school sweetheart, Elaine, they bought a four-bedroom split-level in Newton, Mass., and had two daughters and a son. Changing his name from Elovitz to Ellis, he says half-jokingly to avoid getting appliance service calls at home, he seemed settled in for life. He was good at his job, but he also had strong opinions about how the business should be run. That led to his firing after 10 years for personal differences with his superiors.
Ellis then opened his own cut-rate appliance business in South Boston in the late 1950s. His first foray as an entrepreneur was a disaster. In 1961 during the middle of a dinner party at his home, a sheriff`s deputy served him with an attachment on the house after an appliance manufacturer complained he was not paying his bills.
”Going bankrupt just about killed Jerry,” his wife says. ”He was worried sick about what would happen to his employees. But he got through it by maintaining his sense of humor. That`s about all we did have then, because there wasn`t any money. We were barely able to hang on to the house.”
To keep the wolf from the door, Ellis went to work for another discount chain, G.E.M. department stores, as an appliance salesman in their Hingham store. Again he clashed with management.
”They didn`t exactly fire me,” Ellis says. ”One day they just told me that beginning the next month they would no longer pay me. I was in my office cleaning out my desk drawers when the telephone rang. It was Harry Andler.”
That was in early 1964, and Andler, a business acquaintance, asked if Ellis would be interested in surveying the remains of a burned-out furniture store in Rhode Island as a possible salvage buy. With nothing else to do, Ellis made the trip and told Andler much of the stock was undamaged. He thought Andler could get it for $6,000.
Andler, 15 years Ellis` senior, suggested a partnership, with Andler supplying the money and Ellis supplying the time and labor to sell the goods. A long-time salvage merchant, Andler already had some space in a dilapidated warehouse on the Hingham harbor wharf, and a few other odds and ends to sell. Ellis opened the warehouse to customers only two days a week to give him time to look for a new job.
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”We didn`t even have a sign, but the warehouse already had one,” he says. ”It simply said `Building 19` to distinguish it from the buildings on either side of it, which were, of course, Building 18 and Building 20. So we decided to save some money and leave the sign up.”
Advertised in the auction section of the Boston Globe`s want ads, Building 19 enjoyed brisk business from the start. Ellis, however, admits to having been wary of Andler, a suave, dapper dresser who looked like the late actor Adolphe Menjou. Though partners, the men didn`t know each other all that well.
”We didn`t even have a cash register at first,” Ellis says. ”I did most of the sales and Harry just sat on a high stool watching what was going on. All transactions were made out of our pockets, and at the end of each day Harry and I split the profits, which were supposed to be 50-50.
”I`d come out of the appliance business with my brains handed to me, really beat up. I was not a very trusting soul, so I figured I better keep my own running score on the side as to how much money was coming in each day. It didn`t take long for me to figure out that Harry wasn`t playing straight with me. The first day I kept count, he gave me $50 more than my share. The next day it was $100.
”That steamed me up. I didn`t feel like I was a charity case, so I confronted him. He just told me, `Look, you got three kids and a lot of expenses, and my kids are already grown and out of college.` From that day on Harry began to teach me his way of thinking, which is to try to always give the other guy the edge. It turns out, it not only works in business, it makes life a lot more enjoyable, too.”
After a year or so of operating the original outlet in his spare time with Andler while he looked for work, Ellis says he suddenly realized he didn`t need another job. Building 19 was a growing success.
Eventually the store opened seven days a week, and as business continued to expand, Ellis and Andler began opening new stores elsewhere in the Boston area. Building 19 1/2 in Burlington. Building 19 3/4 in Norwood. Building 19 7/8 in Lynn. Building 19 1/5 in Natick. Building 19 1/6 in Haverhill. Building 19 1/7 in New Bedford. As irony would have it, when the original Hingham store outgrew its dockside warehouse, the G.E.M. store from which Ellis had been fired in 1964 went bankrupt. Ellis bought it and moved his original store there.
All of the Building 19 stores retain the same studied, seedy disarray of the original. The problem now, Ellis says, is to keep the stores looking disheveled and disorderly. Perhaps that is what charms his customers, the idea that a Building 19 store has the aura of a flea market.
”I`ve got a business that`s been going great for 22 years,” he says.
”I`ve got seven stores and a concept that the public loves. But every time I hire a manager who learned retailing with some big, computerized, standardized chain, I`ve got a fight on my hands. They get into one of my stores, and the next thing they`re doing is telling me how I have to widen the aisles and spruce up the displays.
”They want to be safe and do it the way they were taught retailing someplace else, in those kinds of outfits that have studies done to show you exactly where to locate your toothpaste in the store. When we sell toothpaste, we put it wherever there`s empty space on a shelf.”
As a result, Ellis likes to take his younger employees and teach them his brand of merchandising from the start. Even with 850 employees, he makes an effort to know each personally. He maintains a private phone line into his office so that any employee can call him anytime to air grievances. He also maintains suggestion boxes in each of his stores and warehouses so that employees can register written complaints, anonymously if they prefer. Every week he visits at least one store or warehouse to open the boxes and read the contents aloud to the assembled staff.
”It can get to be embarrassing,” he says, ”because a lot of false accusations or just plain meanness can get hurled around, but I think I`ve developed a pretty good sense of sorting out the real from the unreal. I think the process works, because my people get to know me as a person, not just a faceless corporate boss, and I get a sense of what`s going on with them.”
Ellis sets monthly and quarterly projected quotas for each store. If a store exceeds the quota, every employee in the store gets a bonus based on the amount of the additional sales. Many of the entry-level employees, stockers, clerks and warehousemen are young, kids just out of high school and starting their first jobs. Like youngsters starting anywhere at a low, basic salary, a lot of them come and go quickly. But for those who stay, Ellis gently encourages them to go to college in their off hours, offering $300-a-semester tuition stipends. Several employees have taken Ellis up on the offer and, after graduating, have stayed with the company.
The most promising employees are soon promoted to department managers, and if they do well at that, eventually become store managers and, ultimately, partners in the business.
There are now 18 partners sharing the business with Ellis. Most of them acquire stock in the parent Building 19 company. A few own 50-50 partnerships set up with Ellis as subsidiary businesses, such as Building 19`s book purchasing and retailing departments or domestics (towels, sheets, curtains etc.). In order to buy into the action, however, the partners are expected routinely to put in the same grueling 50-, 60- or 70-hour weeks as the boss, but they have become modestly wealthy along with him.
”The partnerships,” Ellis says, ”are my way of holding on to my most valued, highly motivated people. I want them to spend their careers here. Giving them a stake in the business is a way to do it, and it also increases their concern and involvement in the operation.”
If Ellis can`t train all of his employees from the start, his second-favorite source of talent is bringing in failed entrepreneurs to give them a second chance.
”I go looking for bankrupts,” he says. ”I review lists of them and invite in the ones who show promise. Most bankrupts have really gone through a beating both financially and psychologically, giving them an education that equals three Harvard MBAs. A guy who has fought for his own business has had a business education that you don`t get anywhere else. The guy who has had to meet a payroll on a Friday night when he didn`t have a cent Friday morning
–that`s the guy I want to go into business with.”
Ellis claims that giving a piece of the action to his best employees through partnerships is merely a good business practice. Murray Saltzman, one of his earliest partners, says he suspects there is more to it than that.
”There is a difference between a person who runs a business to make a fortune and a person who is in business because he likes what he is doing,”
says Saltzman, the buyer who came home with the paint-can lids. ”Somebody who likes what he is doing has fun and is happy to see other people`s successes. I think Jerry feels others` successes at Building 19 reflects on his own success, and that is most of what he is about.”
Saltzman, 75, met Ellis when Ellis got his first department-store job in Boston. Saltzman was manager of the store`s domestics department and trying to support his family. A couple of years after Building 19 opened, Saltzman says he was in a financial pinch. He asked Ellis if he could moonlight a couple nights a week to earn some extra money.
”At first I was horrified to see the way Jerry was running the business,” Saltzman says. ”Everything was so messy and so opposite of the way I was used to seeing a store operated. Kids would spill stuff on the merchandise, and Jerry wouldn`t seem to mind. It was so nerve-wracking to me that a couple of times I just walked out of the store and stayed away for a week.
”But I went back. Jerry would be mad. `So what if some kid ruined a couple of towels,` he`d say. `We`ll just sell them for less. But you, you`re upsetting the customers getting so mad, and you`re upsetting yourself.` After awhile, it began to make sense to me, to make logic. By golly, he`s right, and this is right!”
Eventually Ellis offered Saltzman a partnership and he quit his regular job, becoming Building 19`s vice president for merchandising.
”I`ve worked in department stores all my life,” Saltzman says, ”but this is the only place that has made any sense. Everywhere else, a lowly worker was nothing; you were a number. There was no dignity involved, but there was fear in the total set-up because people ruled through fear instead of cooperation.
”Here, there`s none of that pressure that`s so disgusting, where you hate coming to work in the morning, dreading what has to be done. I`ve made some money here. Certainly I could have retired a long time ago. I don`t have to work anymore at my age, but it`s still so much fun. It`s as good a game as poker. I tell Jerry that I`ll never retire, and after I die, I`ll come back and work part time.”