Very few people understand just how difficult it is to operate in the moving industry. Having worked with a lot of moving companies, here are just a few reasons:
-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.
I moved several times in Japan. Extreme care was taken in each case to correctly estimate the work, itemize the inventory and note existing damage, to secure the home, elevator, and common areas against new damage, and to obtain necessary approvals from building and local officials. The price was quite low — about USD$1,500 to move a four bedroom household to a two bedroom penthouse condo in a city three hours’ drive away, including removal, transport, and installation of four AC units. No tips allowed. There are even movers who specialize in overnight moves where great care is taken to be as silent as possible. After seeing this in action as a customer, I think the level of service elsewhere is quite low and providers have set very low expectations for themselves.
Japan is such an outlier in so many things, especially things involving care and precision, that I don't think it's reasonable to assume that things elsewhere can be similar. 6-year-olds take the subway alone in Japan, and it would be great if we could do that in the US, but most places, we can't.
It's fairly common to see small children out on their own in German cities too. I'd suggest that the US is frequently the outlier in many things, and of course it's easy to see them as normal if you've only ever lived there.
Elementary kids travel in packs, often without adults, but almost never alone. A large reason this isn't allowed in the US is because of helicopter parents who insist it's impossible to teach this skill to children and report parents who try to give teach their kids independence.
In short: “What we found was that while many people complain about their moving companies, even the highest income consumers would not pay for a better service. Our mistake was conflating desire for a better product with desire to pay more for a better product”
I’ve moved three times since I had enough money and not enough time to justify paying for the help. The first time was pretty “meh”. We moved 15 miles, from 1500sqft to about 2000sqft. We did all the packing, they did the moving. They were an hour late, got lost and separated from us for another hour. But all said they were nice, didn’t break anything, and didn’t change prices on us.
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.
There's several companies dedicated to moving ultra high net worth individuals. It's hard to believe there's no market between that and the cheapest options.
Sounds like their marketing wasn't great or they ran out of runway.
The service they offer has existed for a long time. Rich people pay top dollar to get good, professional movers who take care of their stuff and don't add to the stress of moving. This company tried to provide this service, but at a lower price, so low that they couldn't be profitable.
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.
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.
As I understand it, they wanted to offer a high-quality product at high-quality product prices, however if they moved to service the very rich they'll need to offer a luxury product, which would obviously require luxury product price.
Consider it the difference between an iPhone and a 24 caret gold plated iPhone elite (which apparently exists)
No, what they wanted to do is use a sharpie to fix the the defect on a Louis Vuitton bag from Canal St and offer it to an NYU student from Taiwan as a real thing without realizing that the said NYU student's family has hundreds of real bags.
No, to continue your analogy, they wanted to be the Nordstrom of the moving world, not the Saks Fifth Avenue, not knowing that not enough people would use the high-end but not quite luxury service to make it worth their while.
I suppose that's the problem, which he alludes to in his article. Basically we go shopping a lot (well a lot of people do) that's why there's so much market differentiation. JC Penny and Macy's and Nordstrom and Saks and Bergdorf Goodman all offer a slightly different experience tailored to different budgets, and the stratification is very clear.
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.
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.
"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 don't much care about the semantics of product market fit, but there are a lot of companies - some with astronomical valuations - that sell things at prices that won't sustain the business. These guys could have taken other people's money and done the same thing. "We just need to buy market share until the autonomous moving robots are available!"
I applaud them for not doing so. And FWIW I usually find these autopsies annoying but this one is well written and insightful. Applause.
This might sound cynical but given the way the conclusion has been phrased, it is most likely they were on path to "autonomous robots" but no VC was interested in their unit economics.
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.
Moving awkwardly shaped pieces of furniture up and down stairs without damaging them or the building is one of the jobs that is not likely to be performed by robots for a long time to come. It is very difficult to automate, and very easy for humans to do.
> It is very difficult to automate, and very easy for humans to do.
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.
The price point is exactly the challenge. Robots to do this on the Moon, or inside nuclear power stations after an accident, will make economic sense quite soon. Robots to do this competing with a semi-skilled worker who may have substance abuse problems, a criminal record, or be undocumented (all factors which make them cheaper to employ) are not going to be seen for some time. Most desk jobs will be made obsolete before this is an automation priority.
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.
I am a Chinese so my family usually have some Chinese contractor do the moving. A couple years ago my family and I bought a home (finally!) and we hired a contractor to come in, after my family and I had packed up everything (since my dad is a jack-of-all-trade kind of a smart man).
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?
You've mentioned it yourself: Many of the people in these systems are likely underpaid. Systemic exploitation is the name of the game for a lot of the base infrastructure in our society.
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.
I didn't have to sneak the tips. I simply walked up to them and paid. The boss wouldn't care. He was tipped too. Of course, we don't show the boss how much we tipped the workers.
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.
A couple of pieces of legislation in the 1940s and 1950s had the effect of encouraging companies to offer health benefits in lieu of others forms of compensation. Seems to have just snowballed from there.
Everyone agrees that it's terrible, but it's hard to change anything without screwing over at least one huge industry in some way, plus now the question is totally politicized and everyone assumes the worst about everyone else's intentions.
It is absurd; its roots lie in world war II wage controls and then once the interests were entrenched, it stuck. Plus a change in the rules on health care profits in, IIRC, the 1980s.
About half of the US gets government-sponsored healthcare (via Medicaid, Medicare, or one of the state-run programs). The other half don't, and getting it via your employer is generally a win-win (they are providing a benefit that costs them nothing [0], and you get to pay for healthcare via pre-tax income). You certainly don't have to rely on your employer for healthcare, you can buy any legal health insurance you like with your own money.
[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.
> Many of the people in these systems are likely underpaid
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.
My dad also doesn't use Uber because (1) he doesn't speak very good English
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.
Your answer says something about why tips-included doesn't work.
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.
This was an interesting postmortem, but nearly the first thought that struck me as it proceeded into the closure reasons was that many of the factors (to be fair, not all) seem to be industry knowledge easily gained through the market research about the industry.
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.
I don't really believe this postmortem. Moving does suck, it's difficult to know who to trust, and there is no modern trusted brand in the space. There is a need for a product like this.
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.
In SF I use Delancey Street movers. The experience has always been phenomenal. And they hire ex-cons who are trying to change their lives so it's win-win. Any tips that we give them is tax-deductible and goes towards programs for the employees and their families for outings, etc. Everyone works so hard, and they are extremely efficient, I have had no qualms giving 50% tips to these guys and I've used them 4 times now.
That's a challenge but they could have made it work. Casper is making it work (I think). They could have also tied it to storage service and found their recurring revenue.
Amazing write up, thanks for this. Question though - I always thought hiring movers was a higher-end service that targeted richer people? Most people I know rent a truck or U-haul and get their friends to help move for a case of beer...
How old are you? I think most people find the pool of friends willing to break their back all day for free beer gets pretty small once they're all starting families etc. I hired movers for the first time this year and I'll never go without again. I'm 29 and make a pretty modest professional salary, so it was a big expense for me, but paying a few hundred bucks was well worth it for getting something done in a couple hours that would have taken all days and left me with a sore back for the better part of a week otherwise.
I've moved 25 times. only once have I hired movers and they stole a TV. Having moved so many times I learned the key is to have absolutely everything packed in boxes and or in a state that's ready to move on moving day. if it's all packed it will take < 2 hrs to put it all on a truck and even less to unpack from the truck. If it's not ready to go and any kind of packing had to happen on the day it has always taken 3x to 5x the time.
Most of your friends probably aren't moving out of a 4 bedroom house with two small children under foot. The want for help changes on the far side of 30.
Well, U-Haul's business is fucking people. There's a long story, but briefly, they promised a truck would be available, it wasn't, we found another, the manager swore he could see it on the lot... and it wasn't actually there. Meanwhile we had hired people to put stuff in the truck and they were sitting at our apartment waiting for us while we were scrambling a third time to actually get a supposedly fully reserved truck from U-Haul. It turned a stressful move into an utter nightmare.
One of the under appreciated benefits of movers is they have their own truck.
We rented a u-haul to move cross country for $2k a few months in advance. Then a month or before we moved we changed plans, moved it by a week, we called u-haul and they said $3k. We asked around our friends and heard similar horror stories to yours, "reserved" trucks not available, having to drive to distant locations to get trucks, etc.
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.
Big difference for long moves or short moves, and large moves or small moves.
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.
In the bay area, last year, it was $70 an hour (2 movers, 90 for 3) with a 3 hour minimum. I just packed my clothes into suitcases, they grabbed everything else into boxes and left it roughly where I wanted them at the destination.
It was under $500 with tips; while not trivial, it wasn't a higher-end service for sure.
This was a beautiful post-mortem. Thank you for writing it.
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.
Perhaps a digression, but how does something like compare with individual movers like "Guy with a Van", "Girl with a Van", "Brothers with Van" type single person operation?
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?
Operating locally. I've made a couple of moves with these type of movers. They were local moves and that was the first question when I called them. It was $X an hour, for 2 people, with a minimum number of hours.
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.
IMO it's worth using these guys. Moving with even the best movers in the world is still pretty stressful. Moving with basic movers is only slightly more stressful, but a lot cheaper.
Moving is detail-oriented work. Ignoring the simple case and consider moving to multiple locations and not all boxes being unpacked. That requires: 1) Many moving pieces, 2) all labeled correctly, 3) all routed correctly, 4) undamaged, and 5) multi-object units delivered together [0]
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?'
This was a well written post mortem and I appreciate Nick's honesty, but it left me with the impression that Walnut closed because the team ran out of willpower.
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.
I disagree, and further, I think it's dismissive to think the naming was done by a bunch of programmers.
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.
-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/