How These Startups Are Flourishing During Retail’s Darkest Days
Porter Road founders James Peisker and Chris Carter with their heritage hogs in the woods of Kentucky.
Three small businesses, all founded by Forbes 30 Under 30 alums, share their secrets to thriving in the time of coronavirus.
Every Monday, Chris Carter drives his GMC Sierra nine hours north from Alabama (where his family is quarantining) to the Kentucky headquarters of his high-end meat startup Porter Road. His cofounder, James Peisker, makes a similar, grueling trek seven hours south from Chicago to help handle the booming demand for Porter Road’s gourmet steaks, chicken, and pork. “It’s like we are in the middle of the holiday season,” says Carter, 37, who sells top-shelf cuts of beef for as much as $20 a pound. “Our business is up more than four times our projections for 2021—and that includes the hiring, infrastructure buildout and fundraising that’s supposed to happen later this year.”
And the growth comes as a large portion of Porter Road’s traditional business sits shuttered. Before the coronavirus pandemic, 50% of its annual sales, which Forbes estimates were around $5 million in 2019, came from supplying trendy restaurants and its Nashville storefront. Business from restaurants is now frozen, and its butcher shop has been limited to curbside pickup, but Porter Road’s online sales have made up the slack—and then some.
Thanks to obtaining its animals from nearby farms, the owners’ digital smarts (Peisker, 36, was a Forbes 30 Under 30 in 2012), and a shipping strategy optimized to deliver fresh meat nationwide, Porter Road is well positioned to thrive during the pandemic. Most of America is stuck at home, constantly cooking, and looking for meat without a stressful trip to the market. With a few clicks, Porter Road will deliver dry-aged fillets directly to your front door. The startup sources its pasture-raised animals from farms within a 45-minute drive of its headquarters. It then butchers and quickly ships fresh meat straight to customers via cardboard boxes lined with ice packs and biodegradable, cornstarch-based insulation. Its biggest pandemic challenge? Keeping prime beef in stock. Says Carter: “We’ve got customers that are placing two to three orders a day as new cuts become available.”
As some major meatpackers struggle with plant closures, sick workers and supply chain snags, Porter Road is hiring. It recently increased staff at its fulfillment center by a third, to 32 people from 24. Carter and Peisker are looking to bring on up to six more. With relatively few employees–the troubled Smithfield pork plant in South Dakota has nearly 800 workers by comparison—Porter Road has been able to adapt to the new safety codes with corresponding ease. The company takes employees’ temperatures before each shift and after breaks and enforces social distancing during butchering and packing—a process already heavily regulated by FDA hygiene standards. “Our business has proven that it’s quite resilient,” says Carter. “[The pandemic] has opened up a ton of opportunities for us.”
The coronavirus crisis—and the social isolation needed to beat it—has rocked the retail and restaurant industry alike. The U.S. Commerce Department reported that March’s total retail sales (both physical stores and online) fell nearly 9% from the previous month. Clothing sales dropped 50%, revenues from restaurants and bars more than 25%, electronics and gadgets 15%. And, bear in mind, most of the economy was only closed during the final third of March. April data will be far grimmer. The National Restaurant Association warned that if the country remains in lockdown for three months, the restaurant industry could lose $225 billion in sales and shed 7 million jobs.
And long before the pandemic hit, legacy stores—mall-dwelling chains and mom-and-pops in the center of town—were already teetering under a dual-pronged assault from e-commerce giants like Amazon, and nimble, social media-savvy startups. COVID-19 just has accelerated the squeeze. Macy’s has furloughed 125,000 workers. Best Buy has suspended 50,000-plus employees. Neiman Marcus is in the process of filing for bankruptcy.
Rating agencies S&P and Fitch have downgraded the debt of brands like Nordstrom, Coach, Gap and Michael Kors. J.C. Penney recently skipped an interest payment. Staples said it wouldn’t pay rent in April. “To put it simply, most of the traditional retailers rely on stores for about 75% of their sales, and all the stores are closed,” says Bank of America retail analyst Lorraine Hutchison. “They’re in survival mode and trying to conserve cash to make it through. They’ve furloughed employees, they’re negotiating rent, they’re cutting every head office cost possible. And they’re working with suppliers to try to cancel or delay incoming orders.”
Amazon and Walmart, with their massive size, strong balance sheets, and ubiquitous delivery power, are the glaring exceptions. Both are hiring hundreds of thousands of workers as demand spikes and their shares hit all-time highs. And some minnows, like Porter Road, are also flourishing during the plague year thanks to digital-first thinking with baked-in delivery models ideally suited to the country staying at home. While their long-term success remains uncertain, this new breed of retailer offers a road map for retail success even after the pandemic recedes.
Take Ro, an online pharmacy and telemedicine startup. In response to the pandemic, the New York-based concern has broadened its focus beyond men’s health. Launched in 2017 to discreetly deliver generic drugs for embarrassing ailments (erectile dysfunction, hair loss, herpes), after COVID-19 hit, the company quickly expanded a pilot program selling 500-plus common prescriptions (diabetes, hypertension, cholesterol) as customers look to avoid setting foot in brick-and-mortar pharmacies.
Last month Ro launched an online COVID-19 triage service that gives people guidance and advice on symptoms, treatments, and courses of action. “There’s a massive shortage of healthcare providers,” says Ro cofounder Zachariah Reitano, 28, who appeared on the 2020 Forbes 30 Under 30 list. “If we can reserve in-person capacity to those who need it most, it’s a more efficient spread of resources.”
With headquarters in high-cost Manhattan, Reitano says that 40% of his team has always worked remotely, making the transition to social isolation relatively seamless. Also helping: an early warning on the dangers of the pandemic. “My father is a retired infectious disease doctor who was in New York during the AIDS epidemic, and we’ve been watching the coronavirus since it came out of China last December,” says Reitano. “Well before the lockdown, we were adjusting our employee travel abroad and stocking up on essential medicine so that we could provide it to our customers.”
Reitano says that Ro, which has raised more than $175 million in venture funding and booked a Forbes-estimated $150 million in sales in 2019, is currently doing more business than ever. The company, which previously reached its male customer base by advertising during NFL and MLB games, has shifted marketing to cable news and social media. “More people are at home, watching TV, searching online, and spending time on Facebook. So you see demand going up,” says Reitano, who continues to advertise as others slash marketing budgets. “Smoking cessation treatments are up 90% month to month, and some women’s sexual health and sleep treatments are up more than 280%.”
Smaller health startups are seeing a rush of new orders too. Carly Stein, the 28-year-old founder (Forbes’ Under 30 class of 2019) of Toronto-based Beekeeper’s Naturals, makes throat sprays and supplements derived from propolis, a waxy substance that bees use to construct hives. Stein says her online sales have increased 600% as people search online for purported immunity-boosters like propolis. (As a natural supplement, propolis’ health claims have not been evaluated by the FDA.) “It’s a terrifying and devastating time in the world, but we’ve seen a huge surge in business,” says Stein. “My entire team is jumping into different roles and departments.” Google searches for propolis are up 400% since the coronavirus. Stein, who did more than $5 million in sales last year, says 75% of recent orders have come from first-time customers.
Like Chris Carter of Porter Road, Stein has a local supply chain that has remained mostly untouched by the coronavirus pandemic. Beekeeper’s Naturals ingredients come from its apiaries in rural parts of Canada that are far from virus hot spots. “We set up our apiaries, so they aren’t within a 5-mile radius of any agriculture or pollutants. The bees are constantly socially isolating,” Stein laughs, “And our beekeepers are wonderful people who like to live in the middle of the woods, so we’ve been largely insulated.” Her supplements are made by Toronto medical manufacturers—deemed essential by the Canadian government—which must remain open during the crisis.
In late March, Beekeeper’s Naturals released a new propolis-based cough syrup. Stein says that the product was in development for two years, and the launch date was set well before the outbreak. “The timing was ironic, and we thought about delaying the launch because we didn’t want to seem opportunistic,” says Stein. With coughing a primary symptom of COVID-19, the syrup is selling fast. To serve the largest number of customers, Stein says they are limiting the syrup to one bottle per order. “For an e-commerce business, it’s not the usual approach.” These days, what is?
(Disclaimer: Forbes Media has a small investment in Ro).
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