Marcus Lemonis traveled to Austin, TX to meet small business owner, Lauri Turner, and learn more about her boutique hat shop, Hatbox. Intrigued by a fast-growing accessories market, Marcus is interested to learn more about this business devoted entirely to hats. Although there is competition in the hat space, including some larger chain stores, Marcus was trying to determine if Hatbox had the product knowledge and a customer experience unlike the competition that would really set them apart in this market.
After arriving at Hatbox, it became very clear that Lauri and her team were fully immersed in the hat lifestyle and offered specialty hats of all types. As soon as a customer walks into the store, the team at Hatbox is able to look at them and know exactly what type of hat would look the best on them. They are able to make recommendations and customize hats to fit each individual customer. Their store also features a white glove room that showcases hats of historical significance. Impressed by all the added charm of their store, Marcus is excited to learn more about Hatbox and its business model.
Although Lauri is great with her product knowledge it is clear to Marcus that Lauri is not as strong with her understanding of the financial picture of her business or making good financial decisions based on the financial health of the business. This is evident by the cash wrap that Lauri had custom-built for $30,000. Marcus would like to bottle up her product knowledge, but questions her decision-making process if she is willing to spend that much money on a cash wrap that should have cost a couple of thousand dollars.
Is it better to wear many hats or have too many heads? Often small teams need to wear many hats. In this case… literally. Yay or nay on this new @Marcuslemonis hat? pic.twitter.com/sPmy2MeUCA
— CNBC's The Profit (@TheProfitCNBC) December 10, 2019
Although he is nervous about the financial health of the company, Marcus is impressed by the training program that Lauri has her employees go through. This 6 week training program teaches each employee how to pair hats with consumers based on their features as well customize existing products to better fit their personalities. This value add is something that other companies don’t have and Marcus feels that it is one of the main reasons that customers continue to do business with Hatbox. Although they have many charming features, Marcus is concerned that doing business with Hatbox can be difficult for the consumer because of the number of relocations that they have undergone. Since opening in 1999, Hatbox has moved locations 21 times. In the last two years alone they have moved 5 times. This makes it very difficult for customers to continue to find them and do business with them.
While their location changes concern Marcus, he is also very concerned about the financials. Every year since 2012 sales have gone down. Hatbox hasn’t made money for years and every year the revenue continually drops. Lauri blames this on a large chain store moving into her area and taking a large chunk of her business. Marcus explained that she could do more with the web domain that she owns to grow her online sales in response to this. He feels that her products are very Instagram-worthy and could do very well in the eCommerce world. He also feels that her specialized craft is something that is very hard for other stores to knock off, however when he compares this to the financial trouble the company is in, there is no denying that it will be very difficult for Hatbox to survive long term.
In order for Hatbox to survive, they would need to more than double its business. Marcus felt like it would be very difficult to help Lauri on this journey because she is very fragile as a result of PTSD from being violently robbed at one of their locations several years ago. Because of this, he finds it hard to be firm with her and he would need to do that in order to help them acquire new customers and grow their online presence. Marcus ultimately decides to walk away from Hatbox without making an investment.
Do you think that Marcus made a wise decision to walk away from Hatbox? Would you have invested in Lauri’s company? Start the conversation in the comments below!
“The Profit” airs Tuesday at 10 p.m. on CNBC.
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