For the six-month period ended Aug. 31, 2015, revenue at Educational Development Corp., which sells children’s books under the Kane Miller and Usborne imprints, jumped to $22.2 million, up 59% compared to the same period in 2014, and net income soared by over 300%, to $969,000. Sparked by those figures, EDC’s stock price rose from $4.69 per share on June 1 to $14.48 on December 10, more than a 200% gain. And for the first nine months of the current fiscal year (March through November), Randall White, chairman, president, and CEO of EDC, estimated that revenue was about $47 million—far higher than the $32 million in sales the company generated for the fiscal year ended Feb. 28, 2015.
Before business took off earlier this year, a good day’s worth of orders was $1,500, White said; last week EDC was averaging about $30,000 in orders per day. To try to keep up with demand, White added a third shift to the warehouse—3–11 p.m., which he is personally overseeing—and increased EDC’s workforce from approximately 75 to 300. At the beginning of December, EDC bought the building where it has its offices, a move that will also double the capacity of its warehouse.
White traces the current growth spurt to his highly publicized decision three years ago to stop selling books through Amazon. That decision, White explained, was made to assure retailers, as well as EDC’s sales consultants, that Amazon could not undercut the prices of EDC titles. The Amazon decision, White added, was also made with an eye toward stemming a nine-year decline in sales through its Usborne Books & More division, which uses independent sales consultants to sell its books through a combination of direct sales, home shows, book fairs, and Internet sales. In that regard, the move to stop selling to Amazon has proved to be a brilliant business decision. While sales through retailers rose modestly in the first six months of fiscal 2016, sales through UBAM skyrocketed by 99%, and the furious sales growth has continued into the third quarter.
The key to growth in the home division has been the dramatic increase in the number of people who have signed on to sell EDC’s titles. At the end of the second quarter, EDC had 10,700 reps (up from 7,800 at the end of the second quarter last year) and the number of consultants was above 17,000 at the beginning of December. Like any multilevel marketing organization, EDC counts on existing reps to recruit others, but White believes that because EDC sell books, it operates differently than companies that carry other products. For example, unlike reps in multilevel sales groups in the home and beauty industry, who may use most of the products they order, reps for EDC sell the books they order. EDC’s consultants “operate as a real sales force,” White said. Reps must sell at least $1,000 worth of books a quarter or face being dropped from the sales ranks. For a growing number of reps, that is not a problem. The top-ranking sales consultant in November earned more than $20,000 in the month, White said. Another way EDC helps its reps sell is by providing books to them on consignment. White said he has more than $3 million in inventory with reps in the field, something he does to encourage them to sell at book fairs and other channels.
The tremendous growth of the home party unit owes much of its success to the Internet. While sales through parties conducted at the actual homes of its consultants have increased, virtual parties, conducted largely through Facebook, have exploded. Sales through the Internet—the term used by EDC in its filings with the Securities & Exchange Commission—jumped 303% in the first six months of fiscal 2015, over the same period last year. Many EDC reps teach new recruits how to use social media to boost sales, and EDC encourages the use of the web by providing an e-commerce platform that its reps can use for $100 a year, and which many then add to their Facebook component, White said.
White doesn’t see any slowing of the rapid sales pace the company has enjoyed. He thinks revenue for fiscal 2016 will be about $65 million, and he has his eyes on the $100 million mark for fiscal 2017.
Sales Increases in the Usborne Books & More Division, First Six Months of Fiscal 2016 vs. Same Period in Fiscal 2015
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