Throughout the next month, SNEWS will recap its coverage of Outdoor Retailer Summer Market 2013 with select stories from the O.R. Daily we published at the show July 31 – Aug. 3. It’s an opportunity for you to catch up on stories you might have missed in O.R.D., and for us to update and upload the articles to our searchable archives.
In the 1960s and ’70s, a generation of young outdoor entrepreneurs found a way to make a living off the activities they loved.
They opened specialty outdoor stores across the nation, and names like Dave Baker at Summit Hut (Arizona, 1967), Tom Valone at Great Outdoor Provision Co. (North Carolina, 1972) and Gary Neptune at Neptune Mountaineering (Colorado, 1973) became icons of an industry that owes much of its success to knowledgeable and friendly retailers on the front lines with the consumer.
There is no shortage of outdoor, economic and life lessons to learn from these men, but their journey isn’t quite complete. Today, they are all pioneers in a different sense: All three of these retailers, and many others who founded their local outdoor shops some 40 years ago, are retiring and selling their businesses to the next generation of stewards.
It will change the face of outdoor retail and Outdoor Retailer. While we could wax poetic about the past, O.R. Daily looks ahead to the future leaders of the space, along with the methods of transition and the challenges that lie ahead.
Time to sell
In selling his store earlier this year at age 67, Neptune said he kept a promise he made to his wife several years ago: That “by the time I was 70, I’d have sold the store or have it in the works, because we’ve got to have a few good years together.”
Neptune put the word out that he was willing to sell the store, and, by luck, he said, another family-owned outdoor specialty store, Texas-based Backwoods, was interested in expanding into the Rockies.
Backwoods, with eight locations in Texas, Nebraska, Kansas and Oklahoma, provided the perfect fit, he said, and its CEO Jennifer Mull was no stranger to transitions. Her father founded, stepped away, and then came back to Backwoods to re-energize it. And in 2005, she bought her father’s shares to begin a second-generation of family leadership of the business.
Mull helped usher in a greater embrace of technology at Backwoods, and the store launched its e-commerce business in 2008. It will help do the same at Neptune, along with integrating and improving some back-end operations.
But a lot won’t change, Mull said, including the Neptune name. “You’re either buying the store or the location — in this case we’re buying the store, its history and culture. I think this is important for many founders who are selling — they want to see their legacy continue.”
The generational shift combined with low interest rates provides an opportunity for more acquisitions, Mull said, but only if the fit is right. There isn’t a magic formula that will plug and play everywhere, she said. “You have to be aware and respectful of the nuances and the culture of each store. You might be surprised at what’s important to the customer.”
After the Neptune sale was announced, she received several inquires from other long-time retailers about selling — “some direct, some not-so-direct.” Overall, the selling business has to be a healthy one, she said. Another possibility is that Backwoods might expand the Neptune brand to additional locations in Colorado.
It’s likely that one aspect of the next generation of specialty outdoor retail will involve a greater family of stores that leverage economies of scale to not only serve within the community, but also on a national and global scale online. There are already plenty of good examples in growing local and national retail brands such as Moosejaw and Rock/Creek.
And there’s no ignoring the 800-pound gorilla in outdoor retail. In the past five years, REI has added 24 new stores to up its count to 129 locations in 32 states. It has at least another four stores coming within the next year, including locations in Silverdale, Wash., Overland Park, Kan., Flagstaff, Ariz., and Columbus, Ohio.
Establishing value for potential buyers
Selling to a larger outdoor retail group is just one option for retiring founders, said Michael Phillips, a partner with Davis Wright Tremaine LLP, who helped lead a seminar on the topic at Summer Market.
He sees many other owners selling to long-time employees — typically managers who have been there more than a decade and know the ins and outs of the local business. Selling to several employees or setting up an Employee Stock Ownership Plan (ESOP) are other options.
Valuing these transactions is perhaps the toughest aspect of the sale, he said. The core question: “What is it about the specialty outdoor retailer that is valuable beyond the inventory?”
For most, it’s the store’s community standing as a central place for outdoor expertise, Phillips said. Real estate can also play a role, especially “if it’s the last shop before you head into the Grand Canyon.” Those who can convince buyers of value will be able to sell, but some others could struggle, he said.
Despite several recent successful deals in outdoor retail, there have been those who have been forced to liquidate and sell. In March 2012, for example, two long-time stores — Marmot Mountain Works in Berkeley, Calif., and North Cove Outfitters in Old Saybrook, Conn. — closed after 25 and 35 years of business, respectively.
Each had its reasons for closing — the lack of winter in 2011 played a big role — but retail overall is bound to hit some bumps in the road as it gets redefined.
Making the transition
Passing the outdoor retail baton from one generation to the next isn’t clean cut.
Many selling founders agree to stick around for at least a year or two to provide advice and guidance. Neptune is staying on to own and manage his mountaineering and ski museum in the store, for example.
After selling Summit Hut in Tucson, Ariz., to long-time employees Dana and Jeremy Davis in February 2011, founder Dave Baker agreed to stay on for 18 months. It was a big help, Jeremy Davis said.
“Dave is amazing,” he said. “He has always been the type to give guidance and support, but allow you to put your spin on it. That made for a smooth transition. I think a person has to be encouraging and patient, and even allow for mistakes to happen. That’s a good thing.”
From the buyer’s perspective, it’s very important to keep asking questions, Davis said. “You move from thinking like a manager to thinking like an owner.” The buyer must not only understand why the previous owner was successful for 40 years, but also have the energy to take on new challenges, such as e-commerce, he added.
Davis also said Baker made sure that the couple had extra capital beyond the sale. That’s key in those first few years, Davis said, to allow for some changes, whether they are expected or not.
At Great Outdoor Provision Co., founder Tom Valone recently sold the business to several long-time employees, including Molly Cherry, Travis Zarins, Bill Mauney and Chuck Millsaps. Similar to his peers, Valone will remain accessible to the new owners, serving as chairman of the board for the business that has seven locations throughout North Carolina.
What lies ahead
Even with guidance from outdoor retail’s founding fathers, plenty of challenges are ahead for the new crop of owners.
“Just five years ago, brands and retailers could set the trends. Today, the consumer is in the driver’s seat,” Outdoor Industry Association President Frank Hugelemeyer said.
At Summer Market, OIA launched its Outdoor Retail of the Future Project, where it will work to share market insights of the future consumer, new technologies and new strategies to redefine the business.
“A new definition of outdoor is emerging and it’s very different from how the industry has traditionally viewed it,” said Christie Hickman, OIA’s vice president of market insights, who is overseeing the project. “It is a much broader audience, particularly in urban environments.”
Michael Phillips echoed the sentiment that the next few years will not only mark a significant shift in ownership, but also a shift in the way retail works.
“I think a lot will be vetted out in social media, and there will be a rise of the 20-something, tech-savvy entrepreneurs who shake up the market. Whether our generation thinks social media and e-commerce is important, the future customer definitely does and the money is going to go where the customer goes.”
Changing the face of outdoor retail
Here’s a look at just a couple of recent deals passing the baton from one generation to the next.
- Specialty Sports Venture, the retail arm of Vail Resorts, buys Hoigaard’s Sporting Goods near Minneapolis and St. Paul, Minn., adding to its growing collection of specialty snow, ski and outdoor retailers — more than 170 — mostly located near its resorts in Colorado, Utah and California.
- Great Outdoor Provision Co. founder/owner Tom Valone sells majority ownership of the seven-store outdoor specialty retailer in North Carolina to a group of four long-time employees: Molly Cherry, Travis Zarins, Bill Mauney and Chuck Millsaps.
- Backwoods, a family-owned specialty outdoor retailer with eight locations in Texas, Nebraska, Kansas and Oklahoma, buys Neptune Mountaineering in Boulder, Colo., from founder/owner Gary Neptune. Backwoods CEO Jennifer Mull, who marks the second-generation of her family’s ownership of the business, sees opportunity to expand the Neptune business in Colorado.
- TJX Companies, the parent company of TJ Maxx, Marshalls and HomeGoods, buys Sierra Trading Post and its significant e-commerce operation and four retail locations in Idaho, Nevada and Wyoming for $200 million.
- Versa Capital Management buys Eastern Mountain Sports and its 68 stores mostly in the Northeast. EMS joins Bob’s Stores in the newly formed Vestis Retail Group. Former EMS CEO/co-owner Will Manzer steps down; Bob’s Stores CEO Mark Walsh takes over.
- Burke and Stephanie Herron purchase Benchmark Outdoor Outfitters in Cincinnati, Ohio, a deal that also includes Phillip Gall’s Outdoor and Ski in Lexington, Ohio, which later takes on the Benchmark name.
- Founder/owner Dave Baker sells Summit Hut, with two locations in Tucson, Ariz., and a thriving e-commerce business, to long-time employees Dana and Jeremy Davis.
Know of any other specialty outdoor retail shops recently exchanging hands? Let us know at: firstname.lastname@example.org