Let the stock market gyrate. The Longaberger Co., based in Newark, OH, is as far removed, figuratively, from the maelstrom as it’s possible to get. The non-union, family-owned company founded in 1973 is the largest manufacturer of handmade maple baskets in the country. And, in more than one way, it’s an anachronism.
In an age of e-commerce, for example, Longaberger doesn’t even sell directly. Like Tupperware and Avon, it relies on 65,000 independent contractors who stage home shows, and it earns a 25 percent commission on baskets that cost an average of $50; the priciest is $250.
The products sold make for an unusual mix: hand-woven bread and cracker baskets, limited edition holiday baskets, wrought iron gear, glazed pottery and dinnerware, fabrics, shower curtains, chair pads, napkins, lampshades, place mats, and pillows. “We make low-tech products that are a high-touch antidote to high-tech lives,” says Tami Longaberger, the 38-year-old president and CEO of the company her father founded.
And, just in case the casual observer mistakes the company for ordinary, its headquarters showcase its uniqueness: the building is designed as a replica of its trademark basket, and its staff is predominantly female, with women in many top posts, including the CFO and CIO. Longaberger’s only sibling, Rachel, six years her junior, runs its nonprofit arm, the Longaberger Foundation their father set up three months before he died in March of 1999, which distributes 30 percent of the company’s net profits to charity.
With Longaberger ringing up $850 million in sales in 1999 and shooting to bring in $1 billion this year, both sisters are shouldering hefty responsibility. The figures rank the company as one of the largest privately held firms and one of the nation’s largest direct sellers-which has many wondering how Longaberger plans to handle the issue of Internet sales.
“The Net will dramatically change how consumers buy, but we’re in the relationship business and we recognize that people turn to us not just for the quality of our products but for the opportunity to get together and socialize,” she says. “At this point, we won’t go that route.”
“Our products aren’t consumable and don’t operate in a highly competitive market. We offer unique exclusive pieces of art,” she explains. In fact, there’s a considerable “secondary market” for Longaberger wares, with more than 1,000 products regularly listed on Web auction sites such as eBay. Its charmed life owes to the fact that the company does virtually no paid advertising, yet every basket bought is paid for before it’s shipped. “Our sales force and word of mouth are our marketing tools,” says Longaberger, who notes that this year marks the second in a row that the Academy Awards has asked Longaberger to provide its Wash Day Basket for presenters. “Competition comes from other direct sellers for consumers’ time.”
And more competitors are surfacing. Bath & Body Works, Williams Sonoma, Pottery Barn, and Harry & David have all added baskets to their lines. “Pier One and Cost Plus carry an extensive line of baskets,” says Ralph Jean, a Wheat First Butcher analyst who follows home decor, who points out that other retailers crowding into the space may sate America’s thirst for basketry.
Unfazed by new entrants, Longaberger is using new lines of its own and the cachet of its name recognition to fight back. While its sales have grown 15 to 20 percent every year in the past decade-with net profits between 5 to 10 percent-things weren’t always so smooth. In 1986 the company nearly went bankrupt, a victim of cash flow mismanagement. In quick response, Longaberger and her father raised prices 17 percent, slashed the product line 80 percent, laid off 900 of 1,400 workers, and cut the pay of its remaining crew and sales force. “We owed the IRS money; I remember creditors coming to take inventory,” recalls Longaberger. The efforts paid off. A year later the company had rehired everyone furloughed and restored the pay scale. Today, in addition to its field sales associates, it employs 8,000 workers.
Longaberger has worked at the company since she was 14, officially joining in 1984, right after graduating from Ohio State University “as a way station while I looked for a
real job,” she confides. “Dad stationed me outside his door and told me to stay there for five years watching and learning.”
She appointed herself the company’s first head of customer service. “We have a whole floor doing that now,” she says. In response to customer feedback, she cut the delivery cycle from three months to three weeks and began including a story about how the basket was made in each shipment. And she opened the Homestead, a resort with five restaurants, a retail center, craft demonstrations, and an 18-hole golf course that attracts 500,000 visitors a year.
Then there’s the Longaberger Collectors Club whose launching she spearheaded in 1996. Longaberger’s primary customers-largely white women with household incomes of $60,000 from the Midwest and California-share the same psychographic profile with buyers of Hallmark cards. “It’s not uncommon for them to buy 50 to 300 baskets,” she says. Members pay $75 to join. They receive a basket and a quarterly magazine with special offers. Some 175,000 people have signed on, making it the fourth-largest collectors’ club in the country, generating $100 million in business, she says.
Longaberger navigated her way into different departments while “working out my relationship with my dad and with my own ego.” As the first Longaberger employee with a college degree, “I thought I knew everything.” Five years into her tenure, Tami quit in a rage. Her father, also strong willed, announced they’d be doing things his way. “He was proud of me, but used to say he’d pay for my college but I’d have to work it off. Anyway, I kicked a basket on his floor and told him I was tired of hearing about my college education and its worth or lack of it, and I quit and stormed out.”
She returned 20 minutes later. “The reality of car payments and rent and realization that my dad was very capable of not hiring me back motivated me,” she recalls. Her father never mentioned her college education again. She became president of the company in 1994.
Basket weaving has been in the Longaberger genes for generations. In 1919, Dave’s father, J.W. Longaberger, joined his own dad as a full-time basket maker in Dresden, OH. In 1973, Dave opened a small shop, J.W.’s Handwoven Baskets, that blossomed into The Longaberger Co. In 1978, the company began to sell baskets through home presentations. Nine years later Longaberger was selling 1.4 million baskets through home shows across the U.S. In 1990, Longaberger added pottery and began expanding into other home and lifestyle products.
“That’s where we’ll extend,” says Longaberger, noting that baskets are now only 51 percent of the company’s sales. Fabrics account for 18 percent, woodcrafts and plastic basket protectors 7 percent each, pottery 12 percent, and wrought iron ware 5 percent. “We’ll look to acquire manufacturers of related products like candles and explore other ways to diversify,” she says. “But at the same time we know what we do well and we’ll stick to that.”
As the company continues to grow, maintaining its neighborly image and “high-touch” philosophy while satisfying such an enthusiastic customer base will be the challenge. That and building the infrastructure to accommodate growth to a $5 billion dollar company with B-2-B and international components.
Currently all sales are in U.S. “We’ve invested $250 million in capital in the last five years out of cash flow to develop the infrastructure,” she says. But the real tricky terrain will be “figuring out how to produce more without jeopardizing our quality and craftsmanship.”
President and Chief Executive Longaberger
“We make low-tech products that are a high-touch antidote to high-tech lives.”
Birthplace: Dresden, OH
Family: Divorced; shares custody of daughter Claire, 10, and son Matthew, 8, with her ex-husband, who works for the company, running the golf course.
Education: BS, Ohio State University, marketing
Animal Farm: Two golden retrievers and three horses; rides Western
Car: Red Jeep Cherokee
Passions: Tennis, gardening, hiking, running, experiencing the great outdoors, travel, college basketball (Buckeye fan), autobiographies, especially about England’s monarchs, being with her kids, and being a soccer mom.
Travel schedule: 8-10 overnights per month when children are at their dad’s house
Hero: Father, Dave, who started the company and taught her work ethic
Worst years: 1986, when the company nearly went under; 1999, when her divorce and father’s death happened within three weeks of each other
Quote: “The house we were raised in had no glass ceiling. You can be far more effective having a seat at the table than standing outside trying to make changes.” Valley Story by Michael Lewis
Goal: Run a marathon