After a series of robberies, a recent bankruptcy and a change of ownership, longtime alternative lifestyle retailer Purple East hopes to find a buyer to revive the business as it heads into its fifth decade in operation.
President and co-owner Drew Phillippy said the summer-long road construction project on Plainfield Avenue that has diverted traffic from area businesses was “the final thing” in a list of unfortunate knocks for Purple East, a Grand Rapids staple selling smoking accessories and paraphernalia for the consumption of tobacco and cannabis products.
Phillippy originally took over the business as general manager in 2019, becoming president the following year. He said his goal was to help get Purple East back on track, filing for Chapter 11 bankruptcy to help reassess and consolidate $270,000 in unsecured debt and loans stemming from an overexpansion that had been weighing heavily on the business.
In 2020, he consolidated Purple East from four locations into one at 2221 Plainfield Ave. NE, Suite 105. And, with the help of the bankruptcy process, he started to get the business out of the red, despite the COVID-19 pandemic keeping customers at home.
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Phillippy and business partner Jerell Smith purchased the business in 2022.
“I thought at that point I’d already done the hardest part,” Phillippy told Crain’s Grand Rapids Business. “The debt was manageable under the bankruptcy and I ran (Purple East) successfully for a year and a half.”
Despite navigating the business through bankruptcy and the COVID pandemic, Phillipy and his business partner face an array of challenges in getting Purple East back on track.
The storefront has been the victim of three robberies, resulting in the loss of inventory and cash that insurance hasn’t covered, Phillipy said. The first robbery, occuring in December 2020, was an armed robbery that resulted in around $750 in cash stolen from the shop. The store was broken into and robbed two more times, in early 2021 and again in July 2022.
Phillippy said inflation also hit the business hard since he took over during the restructuring process.
“(Inflation) started to affect sales, but it wasn’t as dramatic until this year,” he said. “It was pretty dramatic how slow we’ve been. Then with the construction, there was no chance to catch up from the slow times. Normally in retail, you’re slow in January and February (and in) March you start catching back up. Construction started in May and basically took our busy season away from us this year.”
At the same time, Purple East has had to contend with increasing competition as cannabis retailers and smoke shops pop up across the city since the legalization of recreational-use marijuana. As a one-location business in Creston, Purple East has struggled to compete against other chain retailers.
Ben Wrigley, an attorney at Wrigley Hoffman P.C. who specializes in marijuana business law, said paraphernalia retailers like Purple East have struggled after Michigan’s cannabis legalization because they sell items also readily available in cannabis shops. As larger cannabis retailers expand their footprint in Michigan, often with their own selection of glassware and merchandise, independent shops fight to retain a foothold.
Wrigley also added that retailers need to pay attention to projections and trends to stay relevant in what’s still a relatively young industry like cannabis.
“The projections are that edibles will eventually be the way to go; many people are reluctant to smoke. What are you going to sell to accommodate edibles?” Wrigley said. “It’s a business that requires somebody to be vigilant, both with the operation itself and with the economics and financial situation, paying attention to the trends.”
At Purple East, Phillippy said the company has about $35,000 in debt left to pay off. He’s hoping to find someone to buy Purple East and take the business into the future ahead of its looming 50th anniversary.
“Celebrating a 50th anniversary while you’re in the middle of fighting off a bankruptcy that you’re behind payments on, it’s not the best way to celebrate a 50th anniversary,” Phillippy said. “Right now, it’s not in the shape to make it to that 50th anniversary, or properly celebrate it even if we do. I don’t want to do that. I don’t think that’s the right way to go.”
Phillippy thinks with some new energy and ideas and additional capital, Purple East has strong potential to remain a going concern and be successful in the local market.
“We’ve got a 50-year-old company here that could be expanded and or evolve into a cannabis business where you’re going to make up that $35,000 really quick if you play your cards right,” he said. “We’re in an up-and-coming neighborhood. There’s something to work with here, even though the company is currently in a bad spot.”
More from Crain’s Grand Rapids Business:
Bagel shop plans second location on Grand Rapids’ west side
Caledonia health care products maker acquires N.Y. firm
Flower, natural wine shop on track to replace vacant Creston ‘eyesore’
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Crain’s Grand Rapids Business launched in 2023, bringing together MiBiz, the Grand Rapids Business Journal and Crain Communications to create the top source of business news, analysis and information in West Michigan.
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