TVI, Inc. History

Address:

1400 S.E. 6th Street
Bellevue, Washington 98004
U.S.A.

Telephone: (206) 462-1515
Fax: (206) 451-2250

Private Company
Incorporated: 1972
Employees: 3,000
Sales: $152 million (1995)
SICs: 5311 Department Stores

Company History:

TVI, Inc. was the largest for-profit chain of thrift stores in the United States in 1995. At the beginning of 1996, TVI, based in Bellevue, Washington, had 110 "Value Village" and "Savers" stores in 17 states and eight Canadian provinces. The company planned to open 90 more stores by the year 2000.

TVI was started by William Ellison, whose father, Benjamin, managed a chain of thrift stores in Sacramento, California. Benjamin enticed his son to join the business by offering to bankroll a store in San Francisco. That was in 1954, when William, a graduate of the University of Washington, was selling advertising for a radio station in Seattle. But it was almost inevitable that William would wind up in the thrift-store business.

Benjamin and his brother, Orlo, joined the Salvation Army as career officers during the Depression and managed the charitable organization's secondhand clothing stores for more than two decades. Orlo's wife, Stella, was credited in family lore with coining the term "thrift store." Orlo left the Salvation Army in 1949 and opened his own thrift store. Benjamin left in 1951 and also went into business for himself. They were later joined by three younger brothers, and by the mid-1990s there were at least 100 members of the Ellison clan operating secondhand-clothing stores throughout the United States.

When William Ellison, then 24, opened The Thrift Shop in San Francisco's Mission District in 1954, he followed a successful business plan established by his father. He financed and managed the business, but the store was actually owned by a local charity. Six years later, Ellison had management contracts with several charities. He incorporated his business as the Salvage Management Corporation. Within a few years, however, Ellison decided to become the store owner as well the manager. As he later explained, "Each time we got a store going well, the charity would terminate our contract because they figured they didn't need us anymore. When we lost six stores in one year, that's when we decided we needed to own our own stores."

In 1966 Ellison opened his first company-owned store in Renton, Washington, using the name Value Village. The next year, he opened a store in Redwood City, California, that used the name Thrift Village. Within five years Ellison had stores in several more cities, including Los Angeles, Portland, and Seattle. In 1972 he incorporated the business as Thrift Village Inc. and moved his company's headquarters to Renton.

By the mid-1970s, with the nation in recession, Thrift Village was operating nine stores. But only five were profitable. Thomas Ellison, William's son, later recalled a ski trip with his father in 1975 when they discussed "how to slice up" the company if it went under. "Contrary to what most people believe, the thrift business is not better in rough times," Thomas Ellison recalled. "In 1975, it was a matter of survival." Although Thrift Village Inc. was turned down for loans by several banks, the company managed to hang on and began to grow again in the late 1970s. The company opened its first Canadian store in Vancouver in 1980.

By 1983, Thrift Village Inc. was doing business in Canada as Value Village Stores and was operating 23 secondhand clothing outlets. However, as the for-profit company grew, its financial association with local charities came under scrutiny. When Orlo Ellison opened his first thrift store soon after World War II, he negotiated with veterans' organizations to supply secondhand merchandise. William Ellison had adopted the same practice. In a straightforward arrangement, Thrift Village Inc. contracted with nonprofit organizations to provide used clothing and other items for specific stores. The company absorbed all the nonprofit organization's costs of soliciting and picking up the items, and then split the profits evenly at the end of the year. Thomas Ellison later defended the arrangement, explaining, "It would have been hard in the early days for nonprofits to function as a business. They didn't operate that way philosophically."

But in 1979 a nonprofit organization that supplied a Thrift Village store in San Jose, California, suggested a more formal arrangement, with Thrift Village Inc. contracting to buy used clothing directly from the nonprofit group. In the early 1980s the company began changing the way it treated nonprofit organizations. Ellison explained, "We also decided it was good to be totally at arm's length. We were spending too much time running [the nonprofit organization's] business and not enough time running ours." By the mid-1980s, Thrift Village Inc. (which changed its name to TVI, Inc. when it became a Washington corporation in 1984) had signed all its nonprofit suppliers to bulk-purchase agreements.

In 1996 the company paid its suppliers per "OK" (an industry measurement of 2.7 cubic feet that approximated two grocery bags, or one box, of used goods). TVI paid nonprofit organizations $37 million for almost 7.5 million OKs in 1995, which amounted to more than 50,000 tons of secondhand clothing and merchandise. Jim McClurg, executive director of the Northwest Center for the Retarded in Seattle, which started supplying TVI in 1966, told The Journal American that "TVI is one of the lesser known companies in our community, but it has a greater impact on the success of nonprofits nationwide than any other I know of. I know it's a business, but the net result is that TVI finances social services across the United States and Canada." For example, the Northwest Center for the Retarded, which supplied eight Value Village stores in Washington, expected to receive $4 million from TVI in 1996, netting $1.5 million after expenses. In 1995, TVI estimated that it had paid more than $264 million to charitable organizations.

Thomas Ellison, who had gone to work for his father in 1974, became president of TVI in 1984, by which time he was 27 years old. Under the younger Ellison, the company nearly doubled the number of secondhand shops to 45 by 1990, expanding into Texas, Alaska, Arizona, Minnesota, Idaho, Utah, Hawaii, and three more Canadian provinces. TVI stores used the name Value Village in Canada and the Pacific Northwest, but adopted the name Savers for other areas of the country. The Savers name was trademarked nationally.

In the late 1980s, TVI also introduced the concept of the "thrift department store," which proffered bright lights, wide aisles, neatly arranged displays, and clothing racks. In 1995, Thomas Ellison told The Voice, TVI's employee newsletter, "The goal was to take our stores mainstream. Back then, many people wouldn't admit to shopping in thrift stores. We wanted to create a store that would appeal to a broader segment of the population."

Forbes magazine, in 1993, noted, "TVI's outlets look more like Wal-Mart's than the dingy, cluttered Goodwills of years past." Likewise, in 1995, The Toronto Star's fashion editor wrote, "Not every garment is a prize. You may find the perfect handknit sweater, but not necessarily in your size. And time and energy are required to rifle through the jam-packed racks. But that's half the fun."

One of the company's first "thrift department stores" was a Value Village in Redmond, Washington, which was an upscale suburb of Seattle and the home of Microsoft Corp. TVI had started moving its stores out of low-income neighborhoods (where secondhand stores were traditionally located) into blue-collar communities in the early 1980s. Market research, however, showed that the stores were also attracting shoppers from more affluent neighborhoods looking for bargains. Indeed, the Redmond store, which opened in 1984, was TVI's best performing store for many years.

As the idea of the thrift department store caught on, Value Village and Savers stores became "anchor tenants" in retail strip malls. TVI, which had never before done any marketing, also began advertising its stores on television, starting in the Seattle market. Scott Blomquist, then a TVI vice-president, told The Voice in 1995, "We started seeing middle-income customers who were excited about our stores and had discovered them through hearsay or driving by. We wanted to speed up the process of 'hearsay' and get more of those people in." The company started by advertising sales, but soon introduced everyday advertising as well.

Under Thomas Ellison in the late 1980s, TVI also began selling over-stocked or discontinued items, referred to as "Labels," from major department stores including Bon Marche, Nordstroms, Neiman Marcus, and Bloomingdales. But TVI eliminated its Labels department in 1996. "A lot of us at TVI liked to say we had new merchandise as well as used," Ellison said. "It made us feel good about ourselves. We had upscale people coming into our stores." But the new merchandise cut into the sales of used clothing, which ultimately hurt the bottom line. "We actually got good at marketing Labels," Ellison said. "But we agree to buy all the secondhand clothing the nonprofits can give us, and if it doesn't sell, we lose money."

The decision to eliminate Labels wasn't without risk. Forbes magazine had noted in 1993, "The new merchandise makes up only about 20 percent of TVI stores' sales, but it serves a more important marketing purpose by upgrading the entire store's image, bringing in customers that might otherwise never go into a secondhand store." But when TVI eliminated Labels in it's Canadian stores in 1995, overall sales went up, which convinced TVI to eliminate new merchandise in all its stores.

TVI also abandoned two other efforts to expand beyond used clothing and household goods. In the early 1980s the company became a national distributor for Buck Stoves and Hunter Fans, and also opened secondhand furniture stores in Seattle and Spokane. Neither venture lasted long. "They were distractions," Ellison said in 1996. "My commitment now, as long as there is room for growth, is to stick with what we know."

The company doubled in size again between 1990 and 1995, opening its 100th store in Mount Vernon, Washington, and solidifying its place as the third-largest thrift-store chain in the United States, behind only the nonprofit groups Salvation Army and Goodwill. In 1995 the company formally adopted a business plan that called for 200 stores by the end of the century. Thomas Ellison predicted, "We will probably top out at 80 to 90 stores in Canada, but we could go as high as 600 in the United States, so we have lots of room for growth."

TVI, Inc. History

Company History:

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