It is never easy for an entrepreneur to see the business they built go down the pan as soon as they have sold it. Yet Gems TV founder Steve Bennett says that he witnessed his company turn into a “disaster” before he bought it back.
Bennett set up Gems TV, a jewelry shopping channel, with his wife Sarah Bennett in the UK in 2004, after the sale of his first company, a computer mail order business.
Gems TV was the first shopping channel to offer “reverse auctions”. This is a model where sellers (rather than buyers) compete to win business, gradually decreasing the price to attract buyers.
“We realised that by doing something different, we could sell jewelry at affordable prices for our customers,” Bennett explains.
“We had this marriage of selling rare gemstones and a reverse auction. It was the perfect concept. The supply of gemstones was, by their very nature finite, so it lent itself well to the auction model. It worked brilliantly from day one.”
Gems TV’s Steve Bennett and family
The concept behind Gems TV was to cut out the middle man, buying gemstones at source and passing on the savings to customers.
“Of course, most people want to touch and feel jewelry before they buy it. So the key was to put them at ease with money-back guarantees and ‘no quibbles’ returns. You have to make it easy for customers to send products back,” says Bennett.
With its innovative model keeping it ahead of the competition, Gems TV grew quickly and the company needed to source more stones and jewelry.
That is when the trouble started, says Bennett: “We decided to merge with one of our largest suppliers, Thaigems. I sold half of my company for half of their factory and set up a joint venture together.”
Selling Gems TV
Until then, the vendor-supplier relationship with Thaigems had been “fantastic”, says Bennett. But as soon as it became a joint venture, in 2005, everything fell apart.
“Looking back, the main problem was the distance, which meant you had two entrepreneur-CEOs communicating solely by email. It’s the corporate killer: you end up reading so much into emails that wasn’t intended. We also had a different agenda for where to take the business,” he says.
The communication problem, plus the fact that Thaigems wanted to float the business while Bennett did not, meant the relationship turned sour. By September 2006, Bennett decided to get out of the business. He sold it and walked away.
mixed gemstones (Photo credit: Wikipedia)
What had made Gems TV different from the competition was that the brand was built on selling genuine gemstones, helping its customers become gemstone hobbyists.
“It wasn’t about the jewelry, but about selling elements from the earth that are precious. And, because we cut out the middle man, we could make it affordable, rather than our customers needing to have the wealth of a king or queen,” explains Bennett.
What Thaigems got wrong, he says, is that they thought Gems TV was just about the jewelry. “They thought they were jewellers, but Gems TV was always about creating hobbies for people, helping them to collect beautiful gemstones.”
From introducing glass jewelry to reducing manufacturing operations and buying from other suppliers – which made products more expensive – the business that Bennett had sold started to fail.
“They just got it all wrong. They lost sight of the business and the gemstone hobbyists just stopped collecting,” he says. “If you had a checklist of things you could do to really screw up a business, they checked them all.”
By the beginning of 2010, Gems TV’s new owners had to take drastic measures to keep the business afloat, closing factories and making staff redundant.
“When I sold the business, it was still making a large profit. Yet it quickly went from being extremely successful to being a disaster, with the new owners closing down divisions to try and stop the bleeding,” Bennett explains.
Buying Gems TV back
Although Bennett had nothing to do with Gems TV anymore, it was not easy to watch the company he painstakingly built go down. By June 2010, Gems TV’s new owners had had enough. They wanted to get rid of it and Bennett was in a good position to buy it back.
“Right before I bought it back, they closed down the US, German and Chinese divisions of the company, and they were on the cusp of closing down the UK. So rather than wait for that to happen, we decided to buy it back,” Bennett explains.
Having sold it for “tens of millions” in 2006, Bennett bought the business back for £3.2m in 2010.
“We managed to turn the business around almost overnight,” says Bennett. “We sold off all the fake jewelry and brought the prices down. Within several months it was back on track.”
Today, Gems TV is one of the UK’s largest jewelry retailers, competing against the top bricks-and-mortar businesses.
It is safe to say that Bennett has managed to turn his business back around. The company broadcasts 24 hours a day, every day of the year, helped by a team of presenters who talk minerology for four hours at a time. The presenters mix their sales patter with jokes and high jinks that have viewers dialing in at a furious rate – up to 3,000 calls an hour, and everyone who gets through to the call centre wants to buy, making up to £250,000 worth of business in just four hours.
The business will turn over £100m this year, with 500 employees based near Birmingham. Net margins for the business are “around 6%” after overheads.
Bennett says that growth is important to him not just for the money, but because it means he can give more. His charity, EqualWorld.com, is the world’s only not-for-profit shopping channel.
EqualWorld.com raises this money in two ways. First, by selling products made in disadvantaged communities, and secondly convincing other companies’ to donate excess stock. EqualWorld.com can then sell it through its shopping channel, with all proceeds going to charity.
“We’ve averaged a donation of around £500,000 a year, but now we’re aiming to raise £5m a year,” he says.
One key way for Gems TV to grow is by expanding its geographical reach. The company, which already owns seven mines in the Americas, has re-entered the US market through its brand Rocks TV.
The US market is straightforward for Rocks TV, says Bennett, as it is so like to the UK:
“We’ve had to tweak a few things in the US, mainly around language and how we sell, but American ladies like the same gemstones that British ladies like. People around the world are more the same than they are different.”
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