Cornwell Pool & Patio Michigan retailer uses value to offset down economy
Chris Gigley -- Casual Living, May 1, 2010
Gerald Visel and his brother, David, opened Cornwell Pool & Patio in Ann Arbor six years before one of the deadliest and most destructive riots in U.S. history broke out less than 50 miles from their business.
The 1967 Detroit race riots sent the whole area into an economic tailspin, yet Visel says it was easier to sell patio furniture then than it is now. The recent domestic auto industry collapse produced the worst retail environment Visel has ever seen in Michigan.
"We started the downturn five years ago, about a year before the media started talking about the recession," said Visel, who opened a second store in the Detroit suburb of Plymouth in 1981. "That first year, we had a cold summer and blamed it on the weather. The next summer was nice and business went down more. We knew it wasn't weather then."
Visel, and every other retailer in the state, knew unemployment and an accompanying nosedive in consumer confidence were to blame.
In 2005, General Motors CEO Rick Wagoner told his employees the company's hourly workforce would be cut by about 25% over the next three years. A year later, Chrysler announced it intended to lay off 13,000 employees. Visel said his wealthiest customers started feeling pinched for money, even if they were fine.
This year, Michigan's unemployment rate is set to reach 15.8%, a 40-year high after about 283,000 jobs were lost in 2009. Never before have that many jobs been lost in a single year. Since 2000, about one in five jobs in the state have been lost and average wages have fallen by about a tenth to 11% below the U.S. average.
Even Ann Arbor, usually a pocket of economic stability thanks to the University of Michigan, hasn't been immune. The closing of Pfizer's research facility in 2007 affected more than 2,100 employees. For Visel, all the layoffs have created a consumer base that simply spends less.
"If they spent $2,000 in the past, they're spending $1,000 now," Visel said. "They're way more value conscious. We had to re-merchandise and buy goods we could sell at lower price points. It's tough to sell something right now if customers think it's not a good value."
That kind of consumer behavior devastated many casual retailers around the state. Visel has far fewer competitors than he faced five years ago, and he expects more to go before Detroit's economy fully rebounds. Why? He has watched many of them pull back on inventory, advertising and marketing to save money, which only hastened their demise.
On the other hand, Visel is aggressively marketing his business to challenge a formidable set of competitors.
"We've bought goods to compete with mass merchants, which we didn't pay any attention to before," he said. "We let them pick up half the business, and now we need that business back."
By going toe-to-toe with mass merchants on price points, Visel has succeeded at reclaiming some of that business. Visel said not every vendor he buys from has helped him win the battle of price points, but some have.
"At least half of them were real price conscious and tightened their margins if they could," he said. "They looked for ways to produce their product at a lower cost. Those vendors will come out the strongest in the long run. They realize if we don't make sales, they don't make sales."
Meanwhile, Visel said local mass merchants in Michigan are suffering right along with everyone else. "They are hurting as much as we are and probably more because they have way more overhead than we do," he said. "They rely on the masses buying and they're not getting that business anymore."
Don't get Visel wrong. Business is not booming at Cornwell Patio yet. But both stores are certainly on the rebound thanks to his aggressive strategy with the mass merchants and the addition of several product categories. The store has reintroduced spas, which it quit selling a decade ago, but Visel said the results so far are inconclusive. The addition of grills two years ago, however, has had a definite impact, filling the void left by the declines in high-end product.
That has Visel's outlook for his business and his city warming up along with the weather.
"I can feel that things are improving, but there are also other signs," he said. "Last year, we didn't sell any patio or pool goods over the winter. We sold stuff this winter. Not a lot, but we had activity, which meant customers were thinking ahead."
Visel said he also noticed a different buying behavior. Last year, Ann Arbor and Plymouth customers came in to buy something and basically talked themselves out of the purchase. In the last few months, he's watched customers buy items because they want them.
One thing that hasn't changed, however, is consumers' level of price sensitivity. Value is the key word, which is why Visel's strategy of competing head-on with mass merchants has been a success. He insists it could take a while longer before customers care less about price.
But, he added, positive market forces must be sustainable in order to cause that kind of mood swing. It's not there yet. That means 2010 could be another tough year for Visel and his fellow specialty retailers in the Detroit area. Not as tough as 2009, but tough nonetheless. Visel said he's ready.
"Whatever the economy or the times have called for, we've adapted," Visel said. "I don't know how long it'll take to get back to where things were, but people are feeling better. I can sense it just from talking to them."