Multi-store retailers showing dramatic growth despite challenges
Cinde Ingram -- Casual Living, May 15, 2006
Multi-store specialty retailers who are growing in a time when others are closing or downsizing consider their expansions more a result of careful planning than risky business.
"Sometimes because some are failing, it leaves an opening for others to grow," said Ken Ehrlich, president of Harrow's, with 11 stores in the New York/New Jersey market. For example, Porch & Patio, a former six-store outdoor furniture retailer based in Orange, Conn., closed shortly before Harrow's newest store opened in November in Riverhead, N.Y.
Since then, Ehrlich watched as Seasonal Specialties and Treasure Island closed stores. Although it's too early to tell whether Harrow's benefited from the closings, "it creates an opportunity in the area nearby or in that same store," Ehrlich said. "We're hoping within the next year to be adding another location. The real answer is you look at five or six different areas because you've got to look for the best possible location."
Dean Luckino, president/CEO of Georgia Backyard, is taking well-planned steps toward his goal of developing American Backyard into a national brand consumers seek when buying products for outdoor rooms and kitchens. Choosing highly visible locations in growing markets, increasing direct mail campaigns while expanding TV and print advertising are all part of his push for the specialty retail chain that grew to eight stores last month and will include 10 by the end of the year.
In April, Luckino opened a 25,000-sq.-ft. American Backyard in Southlake, Texas, which he promises will set the footprint for other expansions to come. When customers enter the high-end store, they pass a waterfall flowing into a running stream over flagstone brick and complemented by outdoor furnishings from Laneventure. That water feature faces an outdoor fireplace area, also in flagstone brick, with a full vignette of outdoor furnishings. After customers pass those wow factors, they enter the store and veer toward a wall of gas log/heating products or an approximately 4,000-sq.-ft. Sundance Spas display.
Toward the back of the store, "we built our own version of a Bob Timberlake log cabin," Luckino said. While a solarium or screened porch look may replace the lodge façade to reflect interests of consumers in markets around other new stores, the water features and dedicated spa area will play leading roles.
"That's been a tremendous opportunity for us," Luckino said of his partnership with Sundance Spas. "I think it's an interesting time to be a retailer in America right now. At the same time, you've got to be up to the challenges."
Those challenges include being able to differentiate products from increasingly better ones offered by competitors, including mass merchants, membership clubs, catalogs or Internet retailers. Other challenges are due to import issues, shrinking profit margins and variables like the weather.
"Obviously in the Northeast, weather is a major factor," Luckino said. "Most have to have counter-seasonal products and it's hard to be successful in one direction much less in two."
Sustaining double-digit annual growth and having each of his stores generate $5 million are among Luckino's growth goals. "Even this year, we're up 26%" over the same period last year, he said. Only a few days into a soft opening of his second Texas store, Luckino said he found it "amazing how much business we've been writing." Ed Krisinger moved from being manager of American Backyard's Plano, Texas, store to the Southlake location. Keeping a high standard of training and retaining good employees is key to growth. Another key is balancing "art and science," operations of the front and back parts of the stores which require different strategies.
"All of my growth and whatever expansions I have accomplished have been made possible by the team we've been able to put into place," Luckino said. "Also, we've obviously done this with the blessings of all of our vendors. That's really what partnering is all about."
In fall 2006, Luckino plans to open his first Florida store in Jacksonville and add to his Georgia Backyard locations by opening a store in Fayetteville, Ga. Georgia Backyard's newest Atlanta location held its grand opening in mid-March at the Perimeter Mall, where its retail neighbors include Bloomingdale's, Dillard's, Nordstrom and Neiman Marcus.
Laneventure President Art Thompson recognized the passion of Georgia Backyard's management team in lifting the retailer higher. "When I walk through this store, I see that we are at the next level — not just the physical attributes of the store but the very location of the store and where the store fits into the whole growth plan," Thompson said. "It is a dramatic event in a period where people are downsizing."
Equally dramatic is the recent opening of Carls Patio's 12th location, an upscale 15,000-sq.-ft. addition to parent company Carls Furniture north of Palm Beach in Stuart, Fla., despite numerous challenges resulting from last fall's Hurricane Wilma. In early April, customers were already shopping although the store's grand opening had not been held. Gary Ecoff, president of Carls Patio, remained worried about when the tile roof would be completed. Three banks of floor-to-ceiling glass windows show off the store's high-end outdoor furniture, 40-sq.-ft. marble entranceway, peaked ceilings and four-tiered fountain inside the store.
"It's been a long time coming — over four years now," Ecoff said. "It's getting next to impossible to build these things today. In Florida, the costs of property are doubling and tripling. Construction costs have gone up a minimum of 30% in the last year. And it's a big predicament to find people you would want to work for you."
Florida had the nation's lowest unemployment rate in early April while many workers and homeowners still were busy rebuilding from destructive hurricane seasons during recent years. Knowing the expense of the construction climate in Florida, Ecoff is considering existing buildings that stores like Winn-Dixie, Walgreen's and CVS have abandoned. If costs prove too high in Florida, "we may have to look at going into areas that are not quite as hot," Ecoff said.
Because Carls Patio still seeks prime retail locations, Ecoff was juggling three deals that could quickly add more stores to the west coast of Florida.
In 2005, Carls Patio looked farther west and bought two well-established southern California casual retail stores, which are operated by Ecoff's brother Lyle, a 20-year veteran of the patio industry. Although a part of Carls Patio West, both Berk's in the Santa Monica/Los Angeles area and Saddleback in San Diego retained their names because of popularity within their markets. An expansion and renovation of the Saddleback store will be complete this month and interior/exterior work at Berk's should be finished soon after. "While they were leaders in their markets, they weren't what we do so we had to shake out the cobwebs and revamp it to what our vision is," Ecoff said.
A third California location in the Los Angeles Valley area will open in January 2007.
That Berk's store will be the patio part of a complex featuring high-end home furnishings from Ethan Allen, Drexel Heritage, Henredon, Stickley, Broyhill and a regional leather player.
"We're very excited because we'll get to be the only casual guy in a furniture power center," Ecoff said.
Ecoff mentioned two other possible southern California locations to come. "We fully expect that in five years, our presence in California could be bigger than Florida." When asked if that is his goal, Ecoff laughed and said, "That's Lyle's goal."
Paddock Pools, Patios & Spas kicked off its growth plans last fall by opening its 15,000-sq.-ft. outdoor living superstore in Chandler, Ariz. The smaller prototype from Paddock's usual 18,000-sq.-ft. store required reformatting to carry its full range of products for outdoor living and is proving successful, said David Ghiz, president of Paddock's retail division.
"What we've tried to do is size it down and make it more cost-effective," Ghiz said. Paddock opened several of its 12 stores in the late 1990s and observed how those areas developed before launching new growth.
Plans call for three stores to open later this year and two next year in the Phoenix and Las Vegas markets, he said.
"I think it's been such a robust market here for the past eight or 10 years so I would say we're cautiously optimistic," Ghiz said. "In our business, we believe it will continue to grow."
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