When Ely Khakshouri graduated from his master’s degree program in 2009, he was entering a slow job market amid a recession. So he created his own job, starting a company called Retrospec, where he sold vintage-inspired bikes for everyday commuters, students, and leisure cyclists.
It turned out to be great timing. While gas prices were soaring, Retrospec could fill the need for cheaper modes of transportation.
“People were looking for ways to save money, and so bicycles fit well into that because it’s a one-time cost,” explains Ely.
And Ely says that it’s not just bike businesses that do well during a recession. He came on the Shopify Masters podcast to share why starting a company during uncertain economic times is actually advantageous.
1. It’s easier to build relationships
For new founders, it can be difficult to get potential partners, like suppliers or manufacturers, to agree to a meeting, much less agree to work with an unproven company. But in Ely’s experience, partners were more than willing to meet.
“When we were looking for space or vendors or other relationships that we needed to start the business, folks had time for us,” he says.
These partners were often looking for new opportunities to make up for lost business during the recession. That means it’s a good time to lock in a cheaper lease for retail space or negotiate better prices for goods.
2. The benefit of bootstrapping
Recessions generally aren’t a great time to raise money for a business, so Ely bootstrapped Retrospec, putting all of his capital into more inventory. He would take the money he made from selling the first batch of bikes into the next batch of bikes. When he took some meetings about funding, he didn’t find the offers very attractive.
“It was very important to me to retain equity, even if that meant growing a little bit slower at times and having some out-of-stock periods,” he says.
And it’s a decision he stands by today. Once Retrospec had been in business for a few years, Ely had the tax returns and receipts to show growth, and it made it easier for him to get a revolving line of credit from a bank. He has never taken outside capital, and he still controls the entire company.
3. Embracing an omnichannel approach
The uncertainty in the economy also gave Ely the freedom to experiment. From the beginning, Ely knew he wanted to take an omnichannel approach by selling both online direct-to-consumer and wholesale, which was unheard of in the bike business at the time. Bike dealers were concerned that the online sales would cannibalize brick-and-mortar sales.
“I was told over and over and over again by many people that ‘You can’t sell bikes online if you’re gonna be in the dealer network,’” Ely says. “It’s one or the other.”
But Ely knew he wanted to serve consumers that shopped online as well as those who shopped in stores. So he set up his online store on Shopify, and continued to sell bikes to dealers open to the idea.
4. Saving by going back to basics
Selling to customers who might be hanging on to their wallets more tightly during a recession meant the price point had to be accessible. That means Ely had to figure out where the company could save, while still making a high-quality bike.
“We find that a lot of outdoor brands and gear brands in general are both kind of like over-engineering and maybe over-emphasizing the importance of some of the things that come with the products,” Ely explains. “And we really try to take, like, a less-is-more approach to the products and make sure that they do the things that they need to do really.”
To learn more about how Ely keeps outdoor gear accessible and what he has in store for Retrospec’s newest electric bike, listen to Ely’s full interview on Shopify Masters.