Get to know your mayor, and pay close attention to your inventory. These were just a couple of the messages offered up by an inspiring and often entertaining panel of retail owners at this year's Outdoor Industry Association Rendezvous in Chattanooga, Tenn.
A session titled "Sustaining Specialty Retail through Start-up, Buyout and Acquisitions" included panelists Fred Martin, vice president of operations for Mast General Store Inc., Joe Hyer, owner of Alpine Experience, and Jeff Weidman, co-owner of Rutabaga Paddlesports.
The successful retailers discussed a wide range of key moves that they have used over the years to boost their businesses. From the hour-plus session, we've plucked some key points that we found especially interesting.
Bold moves can set you apart
Joe Hyer founded Alpine Experience 11 years ago in Olympia, Wash. The family owned retail business, which employs 25 people, has moved from a strip mall into a 10,000-square-foot space in an old downtown area.
Hyer said the move was important, though it was risky -- the downtown location was more difficult to reach than the mall, and it offered less convenient parking. "But we decided to give up the convenient parking because it was more important to be in an interesting location," Hyer said. "The experience is more important. If you can create a great retail atmosphere that people want to come back to, people will overcome obstacles to get to you." Now, Alpine Experience is recognized as one of best retail environments in the city.
Hyer also decided to strengthen the store's ties to the local community. Three years ago, he took 25 percent of his marketing budget and put it into the community with sponsorships and outreach. Three years later, nearly 50 percent of the marketing budget goes to community outreach, and Hyer said that this shift toward outreach "was the single greatest decision we've made in the company." It has established Alpine Experience as a community icon and also generated customer loyalty. "When we had no snow all winter, our holiday sales were not even down 1 percent," said Hyer. "Folks came in and said, 'What can we buy from you if we can't buy skis?' Well, we sold a lot of socks."
An Employee Stock Ownership Plan (ESOP) has its challenges
The North Carolina-based Mast General Store, which is more than 100 years old and has nine locations, launched an ESOP program 12 years ago. Fred Martin said the company chose the ESOP route because it was looking for ways to manage growth, but store owners "couldn't find an investor who could take over our culture, and the culture is very important." Martin likened the stores to a family and each is like a hub for its community. (The main store still has 185 post office boxes in it.) "You can't come in and run a community store for the bottom line," said Martin. "It has to be a commitment to generations down the road."
Martin said the ESOP is running very well now -- Mast General now has 350 employees, and 140 are employee/owners -- but there were challenges in the beginning. For example, they didn't realize the great effort it would take to educate employees on how an ESOP functions and educate them on the details of running a retail business. "In all our preparation to be an ESOP, no one rang that bell and said, 'You have to disseminate all this information.' You have to have a commitment to engage each employee in who you are and what their role is as an employee/owner," Martin said.
He also emphasized that the role of the owner has to be identified at the beginning. Just because you start an ESOP, you shouldn't have a collective decision-making process. "You still rely on the leadership of the company to make the decisions," he said. "We bought a vehicle. Well, we had staff members who liked Ford more than Chevrolet, and people were mad because they weren't part of the decision-making process to get that Chevrolet."
But he said the ESOP's greatest advantage is that it motivates employees to make a bigger commitment to their investment each day. "You find yourself on the salesfloor hearing people saying they have an idea to save thousands of dollars. People who never had a comment about the business before instantly have a different mindset," he said.
Another advantage is that the ESOP really helped Mast General understand the culture of the business, its employees and customers. "You think you have a culture, but you really learn about it when you have to share your focus with everyone on staff," said Martin.
He did warn that a company should do an ESOP only if the business is dedicated to growth. "If stock value doesn't grow and employee/owners don't see advancement, they become discouraged," he said.
Know your mayor!
Jeff Weidman told the Rendezvous crowd that one of his friends who had owned a business since 1960s almost lost it because he almost lost his real estate. "He told me you have to be in line with the city," said Weidman. But Weidman was not only disengaged from local government -- he didn't even know the mayor's name. But he looked it up, and invited the mayor to tour Rutabaga. And that move would pay off big-time.
Weidman said that prior to the tour the mayor had no idea what Rutabga did, but the tour really impressed him. After that, Weidman attended city council meetings and became more familiar with the city government. "Fast forward, and the store's property owner is incarcerated," said Weidman. (In 2005, former Rutabaga owner Gordy Sussman was sentenced to13 years in prison for sexual assault and possession of child pornography.) "When he was incarcerated, the property went into a trust, and the property immediately went to the highest bidder who was a developer," said Weidman.
He said he went to a city meeting and saw a plan that showed three high rises on the Rutabaga property. "I went to the mayor and said there was no way we could compete (with the developer's offer). We're done; we're outta here.
"The mayor said, 'No, you're not done,' and then told the developer, 'By the way, you're not going to bid on the Rutabaga property.' The developer said, 'Why not?' The mayor said, 'Because I won't approve your build.' " The Mayor encouraged the developer and Rutabaga to work out some sort of agreement, but the developer walked out. "So, being in line with the city is absolutely imperative," said Weidman. "Whether you own your property or not, those people are in control. "
Inventory management is key
Hyer said that in 2002/2003, he started realizing that Alpine Experience couldn't sustain its level of inventory with the sales it was generating. So, he started to educate himself more on inventory management, and since then he has cut inventory by more than a third. "That has been huge for our profitability," he said. "Inventory control is the single biggest thing an independent retailer needs to watch, and something I just didn't clue into until we had an experience with a mild winter. "
Martin said that Mast General has staff members who focus on systems to better manage inventory. "It sounds real simple, but we were never profitable until we looked at turnover of items," Martin said. "Tom Valone (owner of Great Outdoor Provision Co.) once told me that he'd had a lot of buyers who were good at selecting product, but he wasn't profitable until he could find people who could manage inventory after it arrived. We put a lot of focus on transitional goods between seasons and keeping goods fresh and in stock."
As for Rutabaga, Weidman said, "One of the most valuable things we ever did was put in a state-of-the-art POS system." He added that one of the company's most valuable assets is its ongoing count of inventory. "We don't shut down two times a year to count everything," said Weidman. "We have automated more than 50 percent of our vendors. We have a group that decides what we're buying -- we set the re-order point with the rep, and then push the button every Monday. I know a lot people would say, 'Well, what if they can't deliver?' Well, then we don't do business with them. I'm not going to finance their problems.
"In the case of rack systems that are SKU-intensive, we lowered the inventory 25 percent and sales are up 12 percent. I would trade margin for turns any day of the week. I just want to have the right stuff in the right place at the right time."