Capital Gaines

by Chip Gaines

  The days, weeks, and months that followed the reopening of Magnolia Market were a whirlwind. We were simultaneously filming season one of Fixer Upper, and without the help of this team that surrounded us, we wouldn’t have survived even two weeks.

  Then, pretty soon after the shop reopened, we launched our online store. I guess we’ve always been workaholics to some extent, because we just couldn’t leave well enough alone. It was a major high point to see those first seeds we’d sown with this little shop finally come to fruition. With every online order that came in, Joanna became more and more excited and emboldened to make this thing work. She was so energized by this part of the business that our team took notice and started helping out as much as they could, wherever they could, even if it meant staying late to help pack and ship boxes. These nights would turn into all-night pizza parties. Our folks would even invite their roommates and their friends because there was so much energy and excitement that even outsiders wanted to be a part of this.

  These were such good times, and all of those involved remember this season with such fond memories. Everyone was learning how to service the online customers. We were using shoeboxes, vendor boxes—whatever we could find—to pack our products in, and we padded each package with crumpled newspaper.

  I think we have known for a long time that there is something unusual about our business. Not a week goes by that we haven’t seen some sort of bona fide miracle take place somewhere at Magnolia. In fact, so many remarkable things happen all the time that it has simply become a part of our culture, our DNA. We expect God to show up, and He does—over and over again.

  In those days, our shipping headquarters was basically a big metal barn in the backyard of the Little Shop, and our “warehouse” was a slew of white carnival-looking tents set up around the perimeter of the barn to (inadequately) protect our product from the elements.

  There was one night back in 2014 that a tornado watch fell over our county. Jo and I were out of town for the weekend, so our employees banded together and called an emergency “all hands on deck” meeting to save the product under the tents from getting completely ruined. Every last one of them showed up at the Little Shop in the middle of the night, ready to help. Having no other choice, they stuffed everything they could first into the barn and then into all available floor space inside the store. When they ran out of room there, they started stuffing items into their cars, just doing their best to keep the inventory from getting damaged.

  That night it stormed like nothing you’ve ever seen, and Jo and I heard the news where we were staying. Unable to leave, we just prayed we’d come back the next day to find our shop still standing. First thing the next morning, we beat a path home and showed up to survey the damage. Only two thousand dollars’ worth of inventory had been ruined.

  We weren’t happy about that loss, of course, but we knew it could easily have been ten times that. Our hearts were overwhelmed to realize our employees had come to our shop in the middle of the night, in the pouring rain, just to protect our little business.

  Shortly after that, we got ourselves an oversized shed to store our backstock product (product kept on hand in the back-of-house that is set aside to replenish what we sell through on the sales floor). We named it Big Blue—and we soon outgrew it. Then we got another, smaller shed and a few storage pods to make room for more lamps and candles and other stuff Jo sold in the store. We outgrew them. Soon we were back to setting up white carnival tents, and this time they covered the entire backyard. It looked like some sort of traveling-camp-revival setup. And you guessed it, we outgrew every single one of those too.

  Things were moving at such a breakneck speed that we didn’t even have time to read How to Build a Retail Empire for Dummies (if such a book existed). We were just doing well enough to realize that we needed boxes. And packing peanuts. And people to put those peanuts in the boxes. And customer service reps to answer complaints about the peanuts.

  Emmie trying to ship Ella to Virginia.

  So many products were being shipped out of the backyard of that little shop that FedEx had to back up an eighteen-wheeler to our makeshift warehouse every day just to handle the onslaught of orders that the online store was producing. The long and short of it was that we were finally making real money. And I’ve never met an entrepreneur who wouldn’t agree that making money feels good—especially coming out of the kind of drought we’d been in.

  By this point, obviously our Magnolia Homes design team had moved to a rented office space, because there was no place for any productive work inside that madhouse. And our three customer service reps moved into that same oversized closet that the design people had occupied. Our store manager and purchasing agent were working out of the only two “real” offices in the place, which probably totaled thirty to thirty-five square feet together. There wasn’t even space for a door to swing open and shut, so they hung curtains instead.

  Looking back and recounting all of this is actually hilarious. I really don’t know how we even got from one end of the hallway to the other without tripping over one another or the quick-to-grab restock product that lined the walls.

  Did I mention that the whole place had only one bathroom? I’m pretty certain that every single unfavorable Yelp review we ever had in those early years was due to the fact that we had to reserve the bathroom for our employees (with the exception of kids and emergencies). Even with that restriction, a line would form down the tiny back hallway leading to the john. That’s because at that point, maybe four or five months into this gig, in addition to the customer service reps, purchasing agent, store manager, shop workers, and Jo, at any given moment we also had ten to twelve people in the backyard packing boxes. That’s more than twenty people who all loved coffee and shared a single bathroom. Exciting times indeed.

  In January 2015 it became clear that shipping out of the Little Shop simply wasn’t sustainable anymore. The brick and mortar store needed the product storage space for restocking, and we had maxed out our available space for new packers to work. So we started looking for a real warehouse.

  The one we chose was near downtown, about ten minutes away from the shop. The minute Jo walked in, she knew it was the one because of its old, familiar, distinct smell. Turns out this vacant warehouse had been previously occupied by a tire wholesaler. Jo vaguely remembered picking up inventory there for her dad back in her Firestone days. This building reminded her of those nostalgic times spent at her daddy’s tire shop, which made it feel like it was meant to be. So just like that, we bought it.

  The empty warehouse before we moved in.

  It felt surreal to own an entire warehouse. It felt like we were growing up.

  The day we moved in, it snowed in Waco, Texas—which happens about once every three years if we’re lucky. The snow seemed like some sort of sign, like the weather was celebrating this new season with us.

  Rented box trucks drove back and forth that day, moving product from the Little Shop to the warehouse until every last bit of our online store’s inventory was transferred over. I remember walking around the new warehouse and realizing that even with what felt like a ton of pallets of inventory, they still only took up a fraction of the available space. Maybe we’d overdone it with this new building. It seemed massive. How would we ever fill it?

  But wouldn’t you know it—the online store started going bananas. It turned out that the “oversized” warehouse was in fact a godsend. We did all we could just to keep up. We now had a staff of six customer service reps who worked full-time. We had at least ten people picking orders and twenty more packing them.

  The very first Shipapalooza at the warehouse.

  On more than one occasion we had to host a “Shipapalooza,” in which every single Magnolia employee worked in the warehouse packing boxes morning, noon, and night just to keep up with the online orders. They were rewarded with overtime pay and all the barbecue they could eat, but I honestly believe these people would’ve done it for free. It seemed t
hat each and every last one of our employees was just as excited as we were for this sudden boom in business. It felt like those late-night pizza parties in the backyard of the Little Shop. Something about the rush of it all never got old. And having so many people in our corner was the best part. We were reminded at every turn that we couldn’t do this alone.

  It wasn’t just the online business that was growing. The Little Shop on Bosque continued to do well, too, and for the first time in our lives, we were drowning in something other than debt. This time, it was customers. People from all over the country were stopping into Magnolia Market to stock up on candles and oversized clocks, cake stands, and Magnolia wreaths. We had four or five full-time people manning the registers and restocking the floor. And on weekends we had interns and even friends of ours show up to help. On Saturdays we zoned someone to stand at the front door and control how many people could come in. Space was tight. Eventually it got so crazy that we set up a large white tent out in the front parking lot to display product.

  * * *

  THE LITTLE SHOP ON BOSQUE

  TRAFFIC JAM

  By the way, the Little Shop had a parking lot big enough for eight or nine cars max. And on a busy day, we could have thirty or forty customer cars needing a place to park at one time—not to mention the employees’ vehicles. Behind the Little Shop was a residential neighborhood without much street parking, and Bosque Boulevard is a busy four-lane road, so there just wasn’t a safe place to get in and out of a car. But we were fortunate enough to be located right next to a church that allowed our customers to use their lot Monday through Saturday. We had decided early on to be closed on Sundays, no matter what, so this worked out perfectly for everyone. I don’t know if Magnolia Market would have survived without that gracious church. That fact alone is enough to be enormously thankful for the generosity of others.

  * * *

  Despite the obvious growing pains, we were keeping our heads above water. Operations at the warehouse were coming together, and we’d hired a few extra people to run the Little Shop as well. We were all chugging along when our store manager, Alissa, who had been with us from the beginning, asked, “Don’t you think it’s time to create a marketing department?” And then she offered to run it.

  What would we do with a marketing department?

  That seemed like a complete luxury to me. We still had real fires to put out and real problems to solve. I was nervous that if I lost this key employee to some “feel good” role like marketing, I might miss out on the practical, crucial, day-to-day tasks she’d been responsible for. But despite my reservation, I told her to go for it.

  So Alissa carved out a little corner of the warehouse for her new team. She pulled a girl from customer service who’d been spending part of her time posting on social media, and she pulled one of the assistant managers at the store who’d had some experience doing marketing for a minor-league baseball team. And voila—our marketing team was born.

  Alissa is still with us today. It’s amazing to see how some of these original hires have grown to become valuable members of our executive team.

  Prior to this we didn’t really have official departments established, other than maybe customer service, the crew that ran the Little Shop team, and the warehouse folks. It was really more like a group of people who were all working together to accomplish the same goal. Back then, one person might be doing four or five different assignments at one time. When needs would present themselves, a group of us would peel off to make sure they were taken care of.

  Once Alissa set up her marketing team, however, it didn’t take long for people across the company to start forming actual departments. Groups of different employees clicked together to form our purchasing, operations, accounting, merchandising, visuals, photography, e-commerce, and human resource departments.

  Over the next few months, even with the boom in business, money was always tight. We were trying to bankroll the new warehouse and all of the new products we were buying to keep up with demand. So although it seemed like we were rocking and rolling—and we were!—there was very little margin for error.

  Every single employee had multiple responsibilities. We even hung a “chore chart” in the break room. Each employee took their turn vacuuming, wiping down windows, mopping, cleaning bathrooms, and taking the trash out to the dumpster. There’s just something about picking up trash and taking it to the dumpster. To me it’s always seemed like the most basic, most humble task in any operation. I always knew that if I ever got too important to pick up trash, my priorities had gotten out of whack. What I loved about this crew of ours was that as they buzzed around doing important work that mattered, they were also aware of the little things like picking up trash.

  Not one person complained. No one ever thought certain jobs were beneath their pay grade. Our people just stepped right up to the plate and did whatever was needed. It wasn’t unusual for a member of the customer service team, on the phone with a customer who was waiting for their order, to go out into the warehouse to dig through boxes and stacks of product, then pick and pack that order personally.

  I also remember a time when someone called customer service and offered to give me a pig. I didn’t really know what to do other than accept the offer. So we sent three people from the Magnolia team out to get the pig and bring it back to our farm we had bought just outside of town.

  Whatever it took.

  Texas heat can be brutal, and the warehouse wasn’t air-conditioned. During the summer of 2015 we decided to stop shipping candles temporarily because they were quite literally melting in the boxes before we could get them shipped. Somebody lost their office for a few weeks so that the candles could be stored inside the air-conditioned space and we could continue to fulfill orders.

  Another highlight of those exciting warehouse days was an all-out mouse infestation. They chewed their way into boxes of small wreaths, had babies, and built little mouse apartments out of every last one of them.

  And then there was the photography “studio.” When our photography team needed Web site product photos, they would set up operation in the entryway of that warehouse. We had built a shiplap wall there, and they snapped pictures right there in front of it, using anyone passing by to help. Some poor person would be walking by on an important mission, only to be recruited to help hold up product so we could get the perfect shot. But perfect proved to be a moving target. We usually had to take multiple shots because you could invariably see someone’s face, legs, or arms in the picture.

  Thanks, Jonathan, Alissa, and Rachel!

  And back to those freakin’ packing peanuts. We found out through our customers how bad Styrofoam peanuts were for the environment, so we invested in this amazing machine that converted used boxes into packing materials. What we didn’t consider was how much shipping would cost to ship with all of that heavy cardboard packing material. We were always weighing options in those days. Cost versus quality. Time versus savings. Energy versus efficiency. It was a constant battle.

  The point I’m making here is that as we grew the challenges grew with us. But we turned just about every situation into a learning opportunity. We even brought in a warehouse operations consultant to help us shed new light on issues we couldn’t seem to get right. The only problem was even the experts couldn’t find a business just like Magnolia Market to model ourselves after, and so we really were navigating unchartered waters.

  By the end of 2015, our brand-new warehouse was busting at the seams, just like our Little Shop on Bosque. The same building that had felt so big to us just one year before now seemed entirely too small. And it was crystal clear to us that this newfound nationwide buzz around Magnolia Market wasn’t slowing down.

  By then we’d signed on for a few more seasons of the show, and we knew it had given us a national platform that was only going to get bigger. People were taking notice, which made Waco a destination for the first time in as long as anyone could remember. We were seeing the beginning of a
renaissance in our city, and we knew it was time for the Little Shop to find a bigger place to call home.

  CHAPTER 9

  THE LONG GAME

  We finally had our heads above water.

  We were busy shooting the second season of our show and had just settled our family into the farmhouse—our first real “nonflip” home. Things seemed to be getting downright comfortable as far as the Little Shop and the online store went. We also finally started selling the houses in the development we had built. The construction of these thirty-six single-family homes had almost bankrupted us over the previous couple of years, so getting them off our hands meant we could pay off some debts that felt like a noose around our necks.

  At last Jo and I were sleeping well at night again. Our relationship was good, we had pretty much worked out the whirlwind of business growth, and we were figuring out how to juggle starring on a television show while raising four kids. All this was about all we could handle, but we were handling it. We were even seeing our financial numbers go into the black, and honestly things felt great. And wouldn’t you know, the moment we finally had a little extra cash to stash away . . .

  Jo had a vision.

  It happened when she was dropping the kids off at school one day. For the first time she noticed—as in, really noticed—some abandoned buildings across the street capped off by two desolate, rusty old silos. It’s amazing how something so large could have sat there right in the heart of downtown Waco without anyone in town paying them much notice. And if they did, they were no doubt hoping that some wealthy developer would sweep through and tear those rusty old things down. But that’s the thing about Jo: she sees beauty in places where other people aren’t even looking.