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Pallet Cleanser

by Joel Russell Staff Reporter, 2011

JACQUES Stambouli is the king of returns. The chief executive of Via Trading Corp. in Lynwood owns a warehouse filled with pallets of clothing, shoes, cosmetics, tools, toys, appliances, electronics and home décor: All of it had been sold in major stores and returned by customers. Stambouli’s mostly Hispanic clientele buys these goods by the pallet and resells them at swap meets, flea markets, thrift stores, yard sales and on eBay. Founded in 2002 by Stambouli and his brother Alain, Via Trading is a surprisingly good business. It has appeared on the Business Journal’s list of fastest-growing companies for four years running, generating $22.4 million in revenue in 2009 and employing 90 people. Not bad for an entrepreneur who grew up in Cyprus and whose father did business behind the Iron Curtain, importing hard -to-find consumer goods from the West. Here’s what’s even more surprising: Stambouli attended Harvard Business School, where he has friends who went on to work at big Wall Street firms. It was a path he decided not to take. Stambouli met with the Business Journal in a cluttered conference room at the warehouse to discuss why he preferred to drive a forklift after getting his M.B.A., how his family background prepared him for a wholesale career and why he’s not allowed to bring his work home from the office.

Question: What’s your favorite part of the job?
I love the goods. Every time you open a truck of returned items, you have no idea what you’ll find. No one ever thinks about what happens to the stuff that customers take back to the store. They end up here.

What are the strangest shipments you’ve seen?
Giant bolts. Hot tubs. Vending machines shaped like dinosaurs. It took us ages to get rid of them.

Do you ever pick out items for your personal use?
Only if I see something I really like. I used to bring things home but my wife has forbidden it.

Our house became a big junkyard. Still, it’s difficult for me to leave an appliance, for example, at work, then buy the same item in a store and pay full retail price.

Do you ever separate the good items from the bad?
We do it as little as possible. A lot of people who get into this business fall into the temptation of going through the loads and pulling out the good stuff to sell at retail for really high dollars. Then they sell the bad stuff at wholesale. They don’t get any repeat business because their wholesale customers only get junk. They only last a year or so.

What was your career plan when you arrived at Harvard Business School?
Banking, Wall Street or management consulting. But I did a summer internship at Bain & Co. and discovered consulting wasn’t for me. I wanted to get my hands dirty and feel how a business operates.

What was your Plan B?
I started my own company. I spent most of my second year at Harvard writing my business plan and talking to professors about it.

Did you follow your plan?
No. Originally the company was going to be an online-offline retail store specializing in discontinued and returned merchandise.

Do you regret not working for a big bank or on Wall Street?
No, I’m much happier here. All my friends from Harvard got nice jobs in industry or on Wall Street, and I was driving a forklift and loading pallets! But at the end of the day, it’s a question of how much value you’re creating, not just the image of success.

What was your business like at first?
It was a combination retail and wholesale store in West Los Angeles called Close-Out Center. We sold returned merchandise in the store and sold the same stuff wholesale in the back room.

What happened?
Retailing is really hard and we quickly realized there was a lack of reputable wholesalers who deal with surplus and close-out merchandise, especially returned merchandise because it is not first quality and has wide differences in its condition. It can be as good as new or it can be junk.

So you decided to go into wholesaling?
Pretty soon we had more repeat business than we could handle, so we abandoned the retail side. We converted the entire space to wholesale and the business took on a life of its own.

Wasn’t West Los Angeles expensive real estate for a discount store?
Let’s say yes. Obviously, we didn’t know what we were doing.

What was the solution?
After 18 months, we moved to a larger space in Huntington Park. Then 18 months after that, we moved to Vernon. Everyone told us we had to be in Vernon and they were right. It was the best place.

I’ve never seen such a business-friendly city. Every city in the United States should be run like Vernon. I really hope they keep it as a city. I know they’ve had their internal political problems, but at the end of the day the people who are the supposed victims, the business owners, are not complaining. So why are other people bothering them?

Why did you leave Vernon?
We needed more space and couldn’t find it anywhere in Vernon. This building in Lynwood became available.

When you left Harvard, why did you come to Los Angeles?
I could have started the business anywhere, but after two years in Boston I wanted a nicer climate.

Do you think your company would have succeeded anywhere, or only in Southern California?
Whatever I started would have succeeded, simply by adapting to the needs of the market. I never intended to own a cash-and-carry warehouse selling pallets. If I had started this company in Boston, it would have become something different, maybe a mail-order company.

How do you handle complaints?
Usually when people complain, they want to buy again from me and they’re trying to justify a discount. I have an easy test for them. I say, “You’re right, I’ll compensate you and in the future I’ll never sell you that particular item again.” They immediately change their tune. Maybe the previous pallet wasn’t so bad after all and they’re willing to try it again.

How many pallets do you sell?
About 400 every day. The price varies, based on what’s on the pallet, but the average price is about $450.

Where do you get them?
Big store chains. Our agreements with the stores prohibit me from disclosing their names. But I’m sure you’ve heard of them because only the biggest stores generate large volume of returns.

Did your childhood prepare you for this career?
Yes, very much. I was born in Lebanon to Jewish parents. My father was an entrepreneur almost by default because by law Jews couldn’t own property or work for the government, and in that country the government employs half the people. The only option was to start a business. When the civil war broke out, we moved to Cyprus.

When was that?
1975. I was only 2 years old. I grew up on Cyprus.

What was your father’s business?
Through a friend, my father had a connection in Bulgaria. It was communist at the time. He started selling stuff that they couldn’t buy directly from the West. For political reasons, it was OK if the goods went through Cyprus.

What stuff?
Procter & Gamble detergent, Gillette razor blades, Revlon cosmetics, Cadbury chocolates. The big-name brands went through us because there were no other major players in the market.

Was it difficult to deal with the politics?
Well, when communism collapsed, he was already established. All the stuff he formerly sold to the government he started wholesaling and retailing to the public. He employed about 1,500 people at one time and owned 50 stores. I worked for him for four years after going to college in London.

How did you get to the United States?
I left Bulgaria because I liked the comforts of the West. I wanted to try to make it in the United States, and the easiest way to get here was with a student visa. So I applied to Harvard and got my M.B.A.

Is your family still involved in Via Trading?
My brother Alain started the company with me. Our father financed it. And for a time, my sister, who lives in Cyprus, opened a chain of stores selling discounted items that we supplied. It’s a closely involved family business.

Is it a challenge having your brother as a partner?
On the contrary, I find that working with family brings an element of trust that you don’t have with outside partners who come from different backgrounds.

Do you ever disagree over decisions?
Ninety-nine percent of the time we agree. The 1 percent when we don’t agree, it comes down to whoever feels more passionate.

Who are your heroes?
Margaret Thatcher. She inherited the U.K. with three-day workweeks, strikes all the time and the economy in complete shambles. Now it’s the most prosperous country in the European Union. I like leaders who are transformational, where you can see a clear difference between when they started and the end.

What’s your plan for the future?
We are two years from hitting full capacity at this warehouse. At that point, we’ll have to decide whether to treat it as a cash cow (it would be a very nice cash cow) or do we want to move again, to 1 million square feet? Or do we want to repeat the process in Houston or Miami? Or we could start another business that’s ancillary to this but allows growth without the warehouse constraint – maybe an online version, for instance. I don’t know the answer.

Has business ownership lived up to your expectations?
Yes, but I expected to be retired by now. When I was a kid I thought, “When I grow up I’ll make $1 million and retire.” But once you get married, the number goes up. When you get kids, the number goes up again. Now I realize I can’t retire anytime soon.

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