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A Beacon Shines in Minnesota

Diversifying has kept the future bright for The Light Depot

After diversifyingAfter diversifying from the core contract lighting category into rattan furniture, leather furniture, home accessories and wicker, The Light Depot added a midlevel upholstery line to round out its furniture mix and give customers even more reason to shop his store.
Rick Mileski used to be an unflinching optimist when it came to the economy in Baxter, Minn., where he owns and operates his ever-evolving store, The Light Depot. After all, he enjoyed double-digit annual growth for the first 20 years he owned the place.
     So it took him a few months to understand how bad the real estate nosedive was in 2008. At that point, the lakes around Baxter and Brainerd had become a haven for year-round residents and second home owners in Minneapolis-St. Paul, 135 miles to the south.
     "Even realtors and builders thought the lakefront property would be recession proof," Mileski said. "But that bubble burst big time. Other than high-end lake homes, everything came to a complete stop. I saw sales here drop about 50%."
     Mileski didn't panic. In fact, he thought the 2008 economy would bounce right back.
     "I remember sales plummeted in February that year, and I went another month without changing anything because I thought it wouldn't be that bad," he said. "Then March was just as bad, and I kept thinking things would get better. It wasn't until the fourth month of declines that I realized I had to react."
     Mileski not only streamlined his overhead, he shrewdly interpreted the buying behavior of his customers so he could tweak his product mix and survive whatever the economy had in store.
     "I think Rick exemplifies staying power," said Mike Anderson, the retail and contract sales representative with Telescope Casual, whose territory includes The Light Depot.
The LightThe Light Depot draws in customers by seasonally transforming into a holiday wonderland with a full complement of Department 56 sculptures.

     "Instead of sitting back and waiting until the economy recovered, he looked for things to drive people to the store."
Now, as conditions in Minnesota and elsewhere around the country slowly improve, The Light Depot is known for much more than lights.

EXPANDING INTO FURNITURE
     Residential and contract lighting still makes up 60% of annual sales. The fact that Mileski still commands that business is a testament to the hard work he put into building relationships with local builders, contractors and designers when he bought the business in 1985.
     The Light Depot was a small lighting showroom that had served residential and commercial customers since 1978. Mileski, a former chemist with Rosemount Aerospace, was simply looking for a new career. He had considered everything from running a one hour photo business to owning a liquor store.
     "[The Light Depot] wasn't making money at the time, but I thought it could," Mileski said. "I thought with hard work and the potential growth of the local market, it would be a healthy enterprise to get into."
     He was right, and six years later he built and moved to a larger location. When a Walmart store opened next door, he doubled the size of his store. And in 2000, he moved to his current, 20,000-sq.-ft. location behind his original store, which he converted into a strip mall he now leases to other businesses.
     As he cultivated a customer base for lighting, Mileski added other product categories. Almost immediately, he started buying wicker and rattan furniture, recognizing most new and existing homes in the area had sunrooms and three season porches. He also added a mid-level line of upholstered furniture.

Not long afterNot long after adding the Homecrest line in 1993 and Telescope Casual furniture in 1999, the patio furniture category grew to 20% of overall sales at The Light Depot.

     In 1993, reps from Homecrest, which is based about 35 miles from Baxter, approached Mileski about patio furniture. He tried it, did well with it, and added Telescope Casual furniture in 1999. Now, he also sells outdoor accessories from Alfresco Home and umbrellas from Galtech International. The outdoor category makes up 20% of his annual sales.
     "Both Telescope and Homecrest offer the same great advantages," Mileski said. "They're made in the U.S., the delivery is good and they have great designs."
     Beginning in mid-February, he dedicates 3,500 square feet of his 12,000-sq.-ft. showroom to seasonal furniture, leaving it on the floor until it sells out in August. Mileski does well with it because he knows his customers and the demands of the region well.
     "Slings are very important in Minnesota because we have a fairly wet summer and not really warm temperatures," he said. "They need furniture that will dry out quickly."
     And while he has dabbled in bright colors, Mileski understands his customers prefer earth tone shades.
     "Most patio sets I sell are going to lake homes with darker siding and log cabins," he said. "That drives color for the furniture."
     Despite his success in patio, Mileski knew it wasn't enough to sustain the business back in 2008. He cut costs, streamlining his inventory and laying off several employees in the process. His goal was to get the break-even point as low as possible.
The Light DepotThe Light Depot founder and owner Rick Mileski focused on selling smaller accessory items as the economy tightened in central Minnesota. The addition of jewelry last Christmas proved to be a boon.

     One of his most creative moves dealt with his electrical bill, a big expense for a store specializing in lighting.
     "We installed a switch in the showroom that, when no customers were there, we could flip to turn off 90% of the lights," he said. "In the warehouse, we regularly turned off 50% of the lighting. Both saved us about $1,000 a month."
     Meanwhile, Mileski searched for a new revenue stream, even as consumer spending tightened.
     "I guess it's a good thing I've always been an out-of-the-box thinker," he said.

JEWEL OF AN IDEA
     Anderson grew up in Minnesota, and his parents had a cabin on White Fish Lake just north of Baxter. He remembered passing through Baxter during winter weekend getaways to the cabin.
     "They'd practically roll up Main Street back then because there was nothing going on there," he recalled. "The landscape has changed a lot. It's now more of a year-round place and the real estate market has matured."
     Mileski noticed the shift during the Christmas season when The Light Depot becomes a holiday shopping destination, with decorated trees, Department 56 displays and other holiday décor. It took several years of watching how women shopped his store, but eventually he grasped their buying habits. Their spending was steady, he said. It had just shift ed to smaller ticket items.

Mileski’s previousMileski’s previous job shows just how much of an out-of-the-box thinker he is. Before taking over at The Light Depot, he was a chemical engineer in the aerospace industry.
Even as Mileski expands into new categories that broaden his store’s reputation, 60% of the business is still lighting.
Even as Mileski

     "I thought a nice complement to Christmas would be jewelry, scarves and purses," Mileski said. "We introduced those categories in the fall of 2011, and we turned our inventory three times by Christmas. It exceeded any of my expectations."
     Jewelry and fashion accessories are now everyday categories at The Light Depot, and Mileski already intends to expand in those areas. Fashion has drawn in new customers, who have become potential customers for patio furniture and lighting.
     Things are looking up in Baxter, but this time Mileski's optimism is tempered by what he's been through.
     "The recovery here is going to happen in baby steps," he said. "This year, we are taking a baby step in the right direction, and that's how I expect it to go for the next two to five years."
     Mileski has positioned The Light Depot to handle that kind of slow growth. And if anything changes, he'll certainly be able to respond. Out-of-the-box thinkers like him always do.

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