Why we’re closing Walnut
medium.com
medium.com
-In terms of stress, moving ranks just under death and divorce. Movers joke that half their job is carrying furniture, the other half is therapist.
-1 in 5 moves involves some kind of claim. This isn't because movers are careless, it's just the nature of moving furniture. Damage is a part of moving. Considering customers are already stressed, layer on some damage and things get really fun.
-Margins are slim. Most people assume movers are "making out like bandits" charging hundreds or thousands of dollars. The reality is most well run moving companies operate on 15-20% profit margin.
-The industry is cut throat. Bait-and-switch has become the standard sales approach.[0] This is due to a number of factors including deregulation(debatable), uneducated consumers, and the internet (movers are on the cutting edge of fake review schemes. We track a few companies who change their name every Summer.)
-The industry is also trying to deal with millennials who tend to move more frequently but have much less stuff to move. These small moves are harder to turn a profit on. Also, household goods drivers are a dying breed putting further pressure on the long distance moving industry.
[0]https://www.movebuddha.com/blog/2017-summer-moving-scams/
(Both those things occur even in winter, where the temperatures might reach -25 degrees for a couple of weeks of the year.)
http://www.aei.org/publication/the-public-thinks-the-average...
Even more accurately, moving generally accompanies these events, and other painful life disruptions.
Meeting someone in the process of moving is often to meet someone on one of the worst days of their lives.
Source: worked at a U-Haul rental counter throughout high school
Sounds like their marketing wasn't great or they ran out of runway.
I'll quote the relavant section at the end, but my when money is no object, you usually go by recommendation of friends. At that high of a premium, would you go to a team with good marketing copy, or somebody who has already moved your equally rich friend with superlative service?
FTA:
We considered our second option more seriously. High-end customers understood our value proposition, and we believe they would be willing to pay for it. But as we dug deeper, we realized turning Walnut into a premium service had too many challenges along the way.
The strategy would shrink the serviceable market, and we would also have to be excellent at finding a smaller customer base at the exact moment they’re looking for movers. Even if we solved the marketing challenges, our moving service would also have to meet new, higher expectations. Our concern was whether we could ever deliver enough value in this compulsory experience to justify the substantially higher price.
So they wanted to claim to offer a high-quality product, but don't think they can actually do that.
Startup culture is so terrible.
Consider it the difference between an iPhone and a 24 caret gold plated iPhone elite (which apparently exists)
A truly upmarket experience is a concierge who knows your tastes and scours the stores to bring you what he think you'd like to wear. Just like any sort of suit you can buy in a store is orders less luxurious than a bespoke suit you get made for you on Saville Row.
Take a look at this article: https://www.nytimes.com/2017/06/03/business/economy/high-end...
So high-end medical care is like a really good health plan that covers a lot of procedures. It's good enough for most people, not like the US's public safety net. You pay a little more but the market is there.
The article above is an example of a LUXURY health care service. The consumers really don't care how much they spend, but every time they got the sniffles, they get tended to by the top specialists in the field.
Kudos to the Walnut founders to realize so quickly that they'd have to pivot into the luxury segment of moving, not just the high-end one, as the luxury segment is lucrative, and the high-end non-existent.
Unfortunately, they couldn't cover their labor costs this way. Movers who will show up, take good care of the customer's stuff, are courteous and don't take tips clearly cost more than typical movers who simply provide a pair of strong arms to lift stuff up and down stairs and onto trucks, but don't give a shit about your brand. Normal people use normal moving services who provide a so-so service not because they are stupid but because they don't have the money to spend on premium movers. Obviously customers who got a heavily discounted service gave them five stars and said they would recommend them.
Presumably they tried to interest investors in subsidizing their customers' moving to build a brand. However investors are more cautious now and have been burned on laundry apps and similar. They understand that real-world services don't scale or offer first-mover-advantage (npi) the same way search engines and social networks do.
The second time, about five years ago, my new company was paying to move us about 200mi, my wife was pregnant with our first child, and I needed to start ASAP so a company was paid nearly $12K to pack and move everything. What a freaking nightmare! Things were lost or broken in inconceivable ways and for no real good reason they couldn’t unload on Friday and don’t unload on weekends so we got to spend the better part of 5 days with an empty house when we’d been lead to believe we’d be up and unloaded the next day. And the waste! They used an INCREDIBLE amount of packing/filler material and so much of our shit still broke!
This last time, about a year ago, we just did it ourselves. The last experience was so bad we decided to do it ourselves with a two week old baby and two more kids under 4. Our awesome neighbors helped, my mom drove up grabbed the older kids and they spent the night with her (she lives where we moved back to), my sister in law and her fiancé helped because they lived in the city we were leaving, it was a village effort. It was stressful and tiring, but it was also a chance to really bond with friends and family.
We filled the biggest Uhaul truck with their biggest trailer, and two cars and were at our new house and un-packed in 24 hours. We had literally nothing break.
I would write a check to a moving company for $12K or more if I knew they were going to make my life easier. I’d absolutely rather someone else did all the work, but all I’ve experienced and heard about is massive ripoffs, horrible customer service, and generally unpleasant experiences.
I think in total we spent about $1,500 on packing material and a truck and trailer rental. So we were 1/10 the cost for 5x the efficiency in the moving effort.
When we moved to Dallas from NYC (about a 1400 mile move), we did it with our car and a my then-new pick up truck. I bought the truck in Dallas then drove it up to NYC, loaded it and drove it back. She loaded the rest of the stuff into the car and drove it down. I could have stuffed way more stuff into the truck bed had I bought a Leer cover, but I learned that buying truck accessories in NYC is FUCKING IMPOSSIBLE unless done online. (I also didn't want to spend $800 on it. I bought a soft Tonneau cover from Amazon for $200. Still works great!)
We spent about $3000 doing the move, much of it being spent on new furniture. That same move would have cost us >$8000 with a moving company, and then you need to hope that the moving company isn't shit.
"Despite our early successes, we’ve decided to close Walnut. Our tests revealed that we could create an experience customers loved, but we doubted our ability to be profitable long-term."
If people weren't willing to pay for a product you were offering at a price that would sustain the business, then you did not in fact find a product-market fit.
I applaud them for not doing so. And FWIW I usually find these autopsies annoying but this one is well written and insightful. Applause.
Sure, there are companies with astronomical valuations with unsustainable business, but for whatever it is worth they seem to be good at marketing/presenting to VCs too.
Easier, but if you’ve spent time attempting to do it, you’ll agree it is not a trivial type of task by any means.
Judging the center of balance for awkwardly shaped furniture, while safely navigating the interior of a multi-level residence is not on my short list of “easy” tasks I’d sign up for on a regular basis.
In many ways, it’s a task that should benefit from automation in the future. Endurance, strength, precision, and the ability to precalculate the best available three-dimensional routes required to move a piece of furniture are all, individually, solved problems. Bringing them together with a form factor that can adapt to different environments — flooring material, stairs, etc. — and at a price point that encourages use is the challenge.
It costs $4K and a weekend to furnish a three bedroom 2400 square feet apartment in NYC with IKEA + TJMAX ( source: done it ). Say I dont want to do it. So it would be $5k with $1k or labor. This means that for people who make $200k/year or below moving cannot cost more than a replacement.
So you either go upmarket and target people who do not use disposable furniture ( i.e. they are moving hundreds of thousands dollars of stuff ) or you are playing in your $1000/move market.
The contractor paid two Hispanic workers to do most of the heavy-lifting work, but we also helped anyway so we get the move done ASAP. The hardest thing to move was the heavy massage chair so we let them moved the chair. They are strong...
I don't know how much we paid the contractor in total, but I know it didn't go above 1000. We tipped the contractor and also tipped the workers separately ($150 each). We are very generous when we work with nice and hardworking people. They deserve the bonus, especially knowing the contractor wouldn't pay them a lot. So tipping to us have to be personal, and shouldn't be part of a system.
I mention this story because the hiring process may seem bizarre to the non-Chinese immigrants. Contractors (construction or moving) usually hire workers off the street. There is a place the contractors will find workers waiting to get a job. So yes, these workers are literally picked that morning like 7AM and the guy came around 11AM since the contractor had another job early that morning. The contractor might find another pair the next day.
The truth is, every community has its own way to find people to do work for them. In the Chinese immigrant community, we almost never hire an expensive professional contractor. We (at least the people I know) believe Americans charge us way more for the same, if not, less quality work. We "joke" about how schools can save so much money if they'd pay a licensed Chinese contractor.
My dad also doesn't use Uber because (1) he doesn't speak very good English, and (2) he can call a driver for $25 going to JFK with just one call (plus maybe $10, $20 tip). We can go anywhere in the tri-state area in range of $20-$75 in a comfortable SUV. The Chinese community (Korean and Spanish community also have this) also have a shuttle bus that goes from Queens<->Chinatown, Flushing<->Chinatown, Brookyln 8 ave<->Chinatown for $2-$3 dollar. You call the call center, tell the operator which shuttle stop to pick up from.
"If it ain't broken, don't change." For the same service quality, why go for something more expensive?
I'm for communities helping each other, but in your moving example you think those workers have health insurance? Why do you have to sneak the tips?
I bet the bus drivers make a good amount of money though.
[0] Yes, it is extremely common for employers to pay for healthcare in full or in part (and the ACA complicates this a little), but there is no reason employers have to pay anything in order for employees to realize the tax benefit.
When it comes to insurance, yes, that sucks, this is where we need one-payer system, which will make insurance available to everyone. Also, the current Affordable Care Act does not require a company less than 50 people to provide insurance to employees. I also do not believe half of the "professional" local contractors have more than five full-time employees if I were to bet. The ones we did hire (because we couldn't find a qualified one in our Chinese community) run the business with at most 2-3 guys, and are usually family-owned. Subcontractors are hired if the contractor is given a bigger job. You don't need twenty people to renovate a house or fix a sewage pipe. It is not economical for most contractors to have too many full time employees waiting around. The competition is huge.
Also, I think these workers aren't always underpaid. Freelancers can make good money. I don't have any evidences to prove, but if they work 5 days a week, and make $200 per job, they can make $4000 a month. See, the pair we got had two jobs in one morning, so they probably made more than $200 that day along with some tips. I am not defending underpaid, but I am sure these movers make good money in the end. Extremely hard work, but they can make good money. Walnut can't even exist if there were only a hundred jobs a day in NY. I pass by a barn truck lot everyday, and I can say with confident at least 3-4 days a week the lot is mostly empty, so there must be enough demand for a barn truck business to survive. So should the moving industry.
This is largely anecdotal, but back when I was doing landscaping over summers in high school and college (2002-2005). For some tasks (installing sod grass, for example), I'd pick up undocumented Central American day laborers^. They would not even get into my truck for less than $14 per hour plus lunch. There's fewer of these laborers around the Atlanta area these days, but from I hear, they still require well over minimum wage.
^ We did our best to avoid hiring from this pool but finding reliable day labor from any legal source was nearly impossible at any price.
That's curious, one of the advantages of Uber for me is that I don't have to speak the local language, since I can preselect the destination on the app.
Coincidentally, TAL had a story on a car service from Chinatown on a recent episode: https://www.thisamericanlife.org/radio-archives/episode/622/...
For generous people like your family, you feel happy giving good workers a big tip. It's not just part of the moving cost, but a small good deed. Participating in this is something extra you get for your money. You wouldn't get the same feeling from an included tip, which you can't be sure goes straight to the worker. Presumably if the movers were lazy or rude you would also be glad that you could choose to tip less.
For cheapskates who stiff on the tip regardless of the quality of the service, tips-included just means a higher cost for them.
It's just a normal company trying to offer a better service at higher prices — which is okay — you don't need to slap a startup label on everything.
The medium piece was a great read. Kudos to everyone involved!
startup != tech
This gives the appearance that Walnut founders either didn't perform this research (seems unlikely given the research-heavy approach they displayed) or had a large blind spot when deciding to move forward, a bit of blind optimism that somehow it might work out.
Case study is Casper, which is not much else other than a beautifully branded old school product. There is definitely potential for a company in this space. But like most companies based largely on branding, they would need to drop a good chunk of change on advertising to get a running start, may be difficult to convince a VC to invest in that.
There is definitely a potential a company in this space, we'll wait for the next one.
Well, that guy's boned.
Corporates are more likely to appreciate the 'hospitality' service, and less likely to be price sensitive.
(I've no doubt they did consider this – I just wonder why they didn't think it viable.)
Good points though
It was under $500 with tips; while not trivial, it wasn't a higher-end service for sure.
One of the under appreciated benefits of movers is they have their own truck.
Fortunately hertz penske saved us with a much better price (much less than the original u-haul) on short notice and gave us a great truck.
I needed to move the contents of a three-bedroom house from Cambridge to Edinburgh, 400 miles, and my first quote was £4000! It was eventually done for £1000 by a firm who sent two guys and a massive lorry which took all day to fill. I don't think it could have been done with less than three trips of the largest available van to rent without a special license.
They said it beautifully: when people want to spend money, they'll spend more than they should. But when people need to spend money, they'll spend as little of it as possible. Some have more forgiving tolerances on how little they'll be willing to spend. The airlines and, I think, retail companies call this metric "willingness to pay" (WTP) and spend A LOT of money trying to figure this out. The goal is to make prices as segmented as possible, since you "can't" give everyone a different price for a thing.
If Walnut took VC, they would be doing the same because, according to this armchair CEO, that's where the margins are in businesses like these (service industries).
Many people will do crazy-ass things to save lots of money (driving two hours or more to or from an airport with significantly cheaper flights, even if basic economy). And people say they care about the well-being of the workers providing services for them, but when put to the test (increasing prices), the truth comes out.
Case in point: ultra-low-cost carriers (like Ryanair) pay their crews jack shit to be the jack of all trades. The pilots will do light maintenance (heavy maintenance is contracted out). The flight attendants will check you in at the gate and clean the plane. If people really cared about this state of affairs, then they would fly with a legacy carrier that treats people in these positions better. Instead, ULCCs are beating legacies in profit hand over fist.
Quite a few of them seem to be in business for many years and seemingly doing well enough to not close shop. What are they doing different to stay profitable?
Typically, they don't pack your items, either. They load, drive, and unload the truck. They may or may not disassemble furniture. For example, on several local moves, my dining room table was never disassembled; but, on a recent move of a couple of hundred miles, the legs were taken off.
Pulling that off with a sizeable move takes a lot of process and discipline, as anyone who has tried to execute a highly detailed IT project knows. Also, people tend to not focus on details when they are exhausted. I doubt you can get it done well at a price people are willing to pay.
[0] For example, a bookcase might include: A 'frame', removable shelves, pins that support the shelves, and for some bookcases a removable back. All these objects must come back together at the destination - 'what are those shelves for?' 'Where are the pins?'
There were a lot of challenges and concerns described, but rather than attempting to surmount the challenge, the team decided to quit (of course, sometimes that's the best choice given the circumstances).
One of the problems IMHO is that everybody wants a cool and short name like 'apple', without noticing that apple has passed long away the state in what people would identify their trademark name with a grocery. "Fruit means computer" is not something that happens in a day in the mind of customers.
Why to choose a name that does not add clues about what the company is doing (and expect that the customers will learn to fill the gap)? For each sucessfull 'uber' there are decens of other brands that didn't stick. Programmers love add a layer of mystery about what their programs do. Probably to not give much hints to the competition. Graphic designers have also their bible and will say that a name must measure this and be coloured like that, but you as a company have literally a few seconds to grab the customer attention. If the message is unclear or not complete you lost customers.
Starting with something like 'Walnut movers' could look old fashioned but probably will be more efficient.
It's not an easy decision to choose a more obvious descriptive name, rather than a less obvious mysterious one. Clearly, if it's descriptive, people know what you do, but on the downside it weakens the brand.
A company like this is taking an old-school service, and wrapping it beautiful branding and a more hassle free sign-up service. The actual product they deliver (moving services) is almost secondary to this.
So the entire company's competitive advantage is based on their brand and reputation... that's okay, many companies do this. For a company where branding is not the only competitive advantage, it's not a bad idea to be a bit more descriptive (e.g., General Motors, Showtime). But for companies where branding is their entire company, it does make sense to be a bit less descriptive and focus on building a strong brand identity.