Sunday, 31 December 2006 19:00

Leading with passion

Patty Brisben’s career in adult relationship enhancers began in 1983 when she saw a show about women who sold the products through home parties.

Brisben, a divorced mother of four, was so intrigued with the concept that she quit her job as a medical assistant to pursue this new career.

During her first year selling for Fun Parties, she was named top salesperson out of 3,000 consultants.

“I knew from the start that this was the perfect position for me,” Brisben says. “I did my homework and carefully observed the women attending the home shows. They represented all walks of life but had one thing in common — a genuine desire to learn more about intimacy and their own bodies. I knew the home party settings provided the ideal forum.”

Ten years later, Fun Parties folded, and Brisben opened the doors to Slumber Parties, which she later rebranded as Pure Romance Inc. “I decided (Slumber Parties) did not represent what we were about,” Brisben says. “It left the impression of a bunch of girls instead of mature women. The company name is a critical first impression.”

The company had retail sales of more than $60 million last year.

Smart Business spoke with Brisben about why training is vital and the importance of surrounding yourself with good people.

Q: How important is training to growing a business?

Successful businesses go below the surface and do not simply sell a product. It is about the entire experience, which involved more than sales. Uneducated consultants can do a lot of harm to our business, so we focus on training.

Untrained consultants can easily make the buyers uncomfortable, which is the last thing we want to do. Training is a challenge but not one we can afford to shortchange.

Q: How important is it to consult with others?

Owning a company does not mean you must have all the answers. It’s wise to maintain close ties with experts and really listen to them. I have advisers at many levels, including medical doctors and experts on the trends that affect our business.

Don’t be afraid to surround yourself with great people.

Q: What qualities do you look for when hiring?

There has to be a shared vision. We consider negative stories about former employers to be a big red flag.

We look for hungry, ambitious employees who are passionate about what our company stands for. They have done their homework and truly believe in the concept of promoting women’s sexual health and knowledge.

Q: What can bring a company down and/or prevent growth?

It starts at the top. I never underestimate the impact my passion and vision have through the entire operation. I am always positive and continually work with the company’s president and other key managers on where we are moving next. They need to grow along with me because I will one day pass the torch to them.

CEOs need to believe in their dreams, take risks and delegate. They also need to get their hands dirty. I am by no means an expert at every aspect of the business, but I have been exposed to each function. I have ordered products, packed them and shipped them.

There are times when every leader becomes discouraged and experiences a dip in confidence, along with sleepless nights. The key is to push through these low times and remind yourself that your company is making a positive difference.

Q: How do you measure success?

Your employees need to be growing and maintaining their enthusiasm and commitment in your product at all times. That is one indicator of success. It cannot be defined solely in material terms.

I consider one of my greatest accomplishments to be empowering women to be more successful both professionally and in their personal lives. Giving back to the community needs to be part of the success formula.

HOW TO REACH: Pure Romance Inc., (866) ROMANCE or www.pureromance.com

Published in Cincinnati
Friday, 24 November 2006 19:00

Dave Reder

Dave Reder found out the hard way that moving your business to a new location is never easy, but it was worth the effort. When Reder recently moved his company, OKI Systems Inc., into a larger facility, it created a hectic environment in the short-term, but he says the investment will pay off in the long-term. In addition to the company’s physical location, he also invests in his workers — the 400-employee company has 173 service technicians, all of whom are coached by an organizational development director. The materials handling company had 2005 revenue of $80 million and is poised for further growth at its new facility. Smart Business spoke with Reder, president and CEO of OKI Systems, about how he helps his employees improve themselves and gets them more involved in the business.

Hire leaders and delegate to them. I have a hands-off style; I’m definitely not a micro-manager. What I try to do is hire good people, train them and get out of their way.

You get a lot more done that way, and people develop a lot quicker because they are making decisions and learning from their mistakes. Plus, you attract good people because good people don’t want to be micromanaged. They want to have the freedom to be creative and try different things.

CEOs have to be aware of what’s going on and have a pulse on what’s going on, but I don’t think they need to be involved in day-to-day happenings. We look at trends, and if we start seeing any trends going the wrong way, we may have to get involved more than we were. But if things are going as they should, a leader doesn’t need to be involved on a day-to-day basis in-depth.

Delegation is something anybody can use. Business is business; it doesn’t matter what business you’re in.

Look for employees with a strong work ethic.

The two things I look at most, one is attitude and the other is work ethic. If you have a good attitude and a strong work ethic, you can be successful at anything you do.

We can teach you the business, but if you don’t have a work ethic, or you don’t want to work toward it, or you don’t have a good attitude toward it, you don’t have a chance.

Focus on training. Training is critical. You have a lot of people who want to grow in an organization, but they’re not sure how to do it or what they lack. What our organizational development director does is say, ‘Here’s where you are, here’s where you want to go, here’s the things we need to do.’

Some of the things they help them with, you need to do on your own. But you find out quick who really wants to grow and who just talks about it, because there is some effort involved on the individual’s part as well as the company if they want to grow.

Training and development can’t just be something you do when you have time. It has to be a constant focus for somebody. That’s why the organizational development director has been phenomenal for us. People are excited that they have an opportunity to grow.

They sit down with him and say, ‘Here’s where I am, and that’s what I want to be. Help me get the things I need to get there.’

Lead with integrity. Don’t be afraid to make the tough decisions. I think a CEO can learn how to do that. You don’t want to take too long to learn it, but it is learnable.

Integrity is the most important thing you can have. If you don’t have integrity, you will never be successful as a CEO or in many other places, especially with what’s going on today. If your employees don’t have confidence in you and the way you’re leading the company, you’re not going to be able to get the good people we’re talking about. And without the good people, you’re not going to be able to grow or sustain the business.

People do not want to work for someone who doesn’t have high integrity.

Show employees they’re important. We’ve implemented a gain-sharing program, so if the company does well, the employees share in the successes. It keeps everybody involved and a part of the business, and shows what they can do to have an impact on the business.

It’s about trying to show them how they’re important to the company. I meet with employees in open forum, no agendas. We talk about what’s on their mind and what concerns they have. People really feel good about the fact that I sit down with them hear what they have to say.

Then we’ll do what we can to address their concerns, so they feel like they have a voice on what goes on at the company.

Look within your existing customer base for growth. Try to look at areas where you can grow business without a lot of additional overhead or resources. We’ve tried to figure out how you can cross-sell or leverage a relationship in one area to gain business in another area.

We’re trying to cross-sell where we already have a relationship. We try to go in and sell everything we can do for them, because it’s a lot easier to sell to an existing customer than develop a brand-new customer. We try to do a lot of cross-selling in accounts where we may be doing business with them in one area and try to round out that account to do business with them in all the areas we can.

For CEOs in other industries, it would depend a bit on product mix. One of the things you do when talking about growth is look what areas they could grow into, and it might be areas that they can cross-pollinate — if that opportunity doesn’t already exist in their company.

They can find things to do that are in their customers’ plans that could tag along with what they are already doing and leverage those relationships.

HOW TO REACH: OKI Systems Inc., (513) 874-2600 or www.okisys.com

Published in Cincinnati
Monday, 30 January 2006 19:00

Designs on the market

Robert Levin was working in Washington, D.C., in the health policy field when his brother, Howard, died of a heart attack in 1992.

Just 40 years old and president of Levin Furniture for only three years, Howard Levin had been charging hard to build Levin Furniture Co. Inc. — then in its third generation of family ownership — into a major player in its home markets of Pittsburgh and Northeast Ohio. Then, just weeks after opening a store near Cleveland, he was dead.

Robert Levin, now president of Levin Furniture, says that some of the details of those first few months after his brother’s passing are fuzzy, clouded by the shock of Howard’s death and the steep learning curve Robert faced as he tried to acclimate himself to running a business that he had had previously had little involvement in.

“It was such a shock,” says Levin. “I remember feeling in that first year that I was just hanging onto the tail of the tiger and just trying to keep it together.”

But it couldn’t be clearer that Levin’s strategy since taking has been sound. At the start, Levin took over the marketing and advertising responsibilities, the portion of the business his brother had handled on his own.

Since then, he has continued to lead the company with an aggressive marketing and advertising program, leveraging technology to support it. He has pushed the company forward in stagnant markets by putting in place a bold store development plan, a wider product mix and two expansions of its distribution capabilities.

And he’s managed that growth in markets where population centers have shifted away from the cities’ core business districts, and overall growth remains flat or sluggish.

“The challenge is that you have aging populations, fewer people who are new homebuyers, and you’re doing more of a replacement business,” Levin says. “So it’s really getting a larger percentage of the pie that’s the goal.”

In the face of a pie that isn’t growing much, Levin Furniture has managed substantial growth. Even with some flat or negative years for the industry overall, Levin says the company has historically managed year-over-year sales increases. Sales at the 700-employee company were $57 million in 1997 and reached $140 million by 2004.

Levin expects to hit $150 million in sales this year.

Expanding potential
Levin is setting his sights on continuing the company’s growth with a plan to continue to remodel and expand or replace existing showrooms and bolster distribution capabilities. This year, Levin Furniture is investing $5 million in a 110,000-square-foot addition to its distribution facility in Smithton, boosting its space by about half and its head count by nearly 50. The expansion will support an estimated $75 million to $100 million in additional sales.

Levin acknowledges that there is some risk involved in building bigger stores with higher break-even levels and adding distribution and warehouse space, but says that standing still isn’t an option, either. The lessons of failed competitors have not been lost on him.

“There’s equal risk, certainly risk of some kind, in not improving your operation and trying to expand as well,” says Levin. “The companies that have stood pat in our markets — you can generalize about this and there are always exceptions — but there are specific examples in both the Northeast Ohio market and Pittsburgh market that did not reinvest in the company or at least in locations, and because of that, it hurt their business.”

The demise of independent furniture retailers and the successful emergence of a few strong chains has meant a consolidation of market share. That tends to keep potential newcomers out, says Levin, leaving the market to those strong enough to have survived.

“The one benefit is that they become less desirable markets for competing retailers. I suspect people think twice about coming into a market that already has well-established businesses,” says Levin. “That’s a positive.”

The task then becomes getting the biggest piece possible of the existing market. Key to his company’s growth, says Levin, is the ongoing change-out of older existing locations, replacing them with larger stores that feature wider selections, brand-name products and, unlike the neighborhood independent dealers, the power to draw from larger geographic areas.

In Monroeville, for instance, it replaced a 28,000-square-foot store with a two-story, 75,000-square-foot unit. Its newest store, in Akron, Ohio, occupies 70,000 square feet. And several other stores, almost all of those in the Pittsburgh market, have been upgraded or replaced in recent years. On the boards are improvements to four other stores, as well as plans for a new location in the bustling Route 19 corridor in the North Hills.

Replacing small stores with larger ones can produce significant results. Levin Furniture’s North Fayette store, which replaced a smaller location doing about $3.5 million annually in sales, now rings up about $15 million a year.

“We’re trying to put up very attractive stores in good locations that will have a bigger selection story, so it will be more things to more people,” says Levin.

To broaden its appeal and its customer base, Levin Furniture has added designer brands to its offerings to attract a more upscale buyer, while also including less expensive products for more price-conscious customers.

Aggressive marketing
Attractive stores and a wide product mix aren’t enough in themselves to drive sales. Levin, who serves as spokesman in some of the company’s television and radio ads, relies on extensive marketing and advertising, including broadcast and direct mail, to draw customers.

When it comes to marketing costs, size becomes a lever to lower the per-unit cost of advertising. Furniture manufacturers offer cooperative money for retailers’ advertising, and the bigger fish are going to attract the most dollars. That makes growth critical not only to profits but to driving down costs.

“Marketing is a very important part of the business,” says Levin. “You have to be aggressive marketers. We’re heavy users of television and direct mail. That certainly drives business. We get cooperative advertising dollars, so it has a snowball effect; the more you sell ,the more you get from manufacturers.

“It’s a clich, but the larger you are, the more valuable you are to the wholesaler, who has a limited number of outlets to sell to. The partnership becomes more valuable to them, therefore advertising support becomes more significant. That’s one way you can build your business, by increasing your advertising, but having the net cost of advertising actually drops. That’s been very important in growing the top line.”

One of the traditional hallmarks of Levin Furniture’s marketing program is the attractive financing arrangements it has offered its customers, offers that Levin says the company strive to make the best available in its markets. Levin Furniture has been able to offer customers who qualify long-term plans that defer interest or even payments for extended periods.

“It’s been a really popular offer and has driven a lot of sales volume over the years,” says Levin.

Getting customers into its stores with advertising and attractive financing incentives is a good first step but not good enough if the visit doesn’t convert into a sale. To make it easier for customers to make a purchase, Levin Furniture has virtually eliminated paper credit applications, replacing them with an automated process where customers can enter their credit information via touchscreens at an in-store kiosk and get a quick approval.

“The kiosk program has been effective in getting customers’ credit approved,” says Levin.

The system has reduced man-hours at each store, doubled credit applications and increased average ticket sales by about 10 percent. Nearly all customers use the kiosk to apply for credit, and with the credit application at the beginning of the sales process instead of near the end, it’s also converted a higher percentage of foot traffic to purchases.

While Levin is at the helm, he says he relies substantially on the advice of others, both internally and externally, to help him set strategy and decide how the company should move forward.

“We have a senior management team made up of folks who have been with us for a long time,” says Levin. “In addition to that, I have an advisory board of outside people who have had business experience.”

By nearly every measure, it can be argued, the strategy has worked well. In two markets where growth is tough to come by, and in an industry that doesn’t allow much margin for error, Levin has managed steady growth in sales and in the company’s share of the pie.

“We’ve been growing at a consistent rate of about 10 percent top line,” says Levin. “That’s nice growth, even when the economy’s been flat in both markets, so market share continues to increase.”

How to reach: Levin Furniture Co., www.levinfurniture.com

Published in Pittsburgh
Tuesday, 25 May 2004 07:03

Another Ace up his sleeve

Fifty percent of Americans live within five miles of "the place with the helpful hardware man."
But that's not good enough for Ace Hardware President and CEO David Hodnik. With stores in all 50 states and 72 countries on six continents, Hodnik plans to keep growing the business by making it even more convenient -- and more relevent -- to the do-it-yourself market.
For most chief executives, that would comprise an aggressive strategic plan approved by the company's board of directors. But Hodnik, who was named president and CEO in 1996, is in a unique situation. Ace's 3,700 independent owner/operators form a cooperative, which owns 100 percent of the company. That means the CEO, normally a position at the top of the organizational chain, is just an employee of the people of whom he is in charge.
That is one major difference between the large public companies that are Ace's competitors and the collection of independent operators that make up Ace.
"We have some similarities -- envisioning the future and directing the organization toward that future -- but our requirements in a cooperative are more of a communication and leadership challenge than what I believe is the case in a for-profit retailer like the Home Depot," says Hodnik. "They have more authority, a lot more control over what happens in retail. They go about it differently."
There are other differences, says Hodnik.
"We have one less public to address," he says. "That would be the stock market, making my role a lot simpler from that perspective."
While answering to the independent owners has unique challenges, Hodnik says not making decisions based on the price of the stock gives Ace an advantage.
"If you looked at the organization that I do have control over and have authority to take action, we're basically a broad-based, fully service-oriented distributor," he says. "We're not a retailer. I think that does give us value and benefit. The reality of it is, it is a role or responsibility that leaders have to engage in and spend time with that I personally do not have to. There is a time responsibility here that does not exist with the CEO of a cooperative but does exist with (a public company). That is important."
Hodnik's role is to mold and lead a band of independent business owners -- all flying under the same Ace Hardware banner -- each with his or her own opinion about how to run a business. For Hodnik, that challenge might mean convincing an independent operator that having consistent signage and honoring the national sales campaign are keys to the company's overall success. Or it might encompass signing a deal with a foreign firm to open new Ace stores.
While his challenges are diverse, one thing is consistent -- Hodnik's ability to adapt within the cooperative structure has allowed him to grow Ace into a significant player. Last year, revenue exceeded $3 billion for the first time in the company's history, with $100 million in net profit -- up 22 percent over the previous year -- and Ace exceeded its goal of adding 1 million square feet of new retail space by more than 10 percent.
This year, Hodnik has aggressive plans to add 150 new stores, with more than 1.6 million square footage of new retail space.
 
A successful blueprint
"Our cooperative structure -- our basic mission to help -- has been a significant factor in attracting entrepreneurs (to our) business, which is clearly a significant, positive advantage for our organization," Hodnik says. "Managers of retail stores are not (as dedicated). It's hard to get them (to be) as passionate as entrepreneurs who own and operate the business rather than just operate it.
"The approach the founders took has helped us attract entrepreneurs."
That entrepreneurial spirit has pervaded the company from its inception eight decades ago when, in 1924, four Chicago-area hardware store owners -- Richard Hesse, E. Gunnard Lindquist, Frank Burke and Oscar Fisher -- banded together to increase their buying power and profits. The venture was the seed of what was to become Ace Hardware, and within four years, 11 retailers had joined the young enterprise, called Ace Stores Inc.
Today, with more than 4,800 retail locations, Ace has formulated a strategy designed to build the Ace brand among consumers, build retailers' businesses and deliver a consistent, helpful experience with every customer visit, according to the company's annual report. Hodnik says it's clear that strategy to strengthen its retailers' position in the convenience sector of the home improvement industry is working. But there's still a lot of growth potential to capitalize on.
According to a December 2003 survey by Roper Reports, half of all Americans plan to buy or do "at least one of 19 things related to their homes in the next year or two, ranging from buying new furniture to painting a room to major renovations." And with total retail sales of $210 billion by home improvement retailers last year, according to the National Hardware Association, Hodnik wants to make sure Ace gets its fair share.
"Homeowners continue to create a better lifestyle environment for themselves, whether they are moving or staying put," he says. "As that trend grows, Ace will continue to benefit."
 
Building the structure
Today, every Ace store has proper signage, but 30 years ago, that consistency among the stores didn't exist. The company now maintains minimum standards for all its stores, so how does Hodnik convince thousands of independent dealer/owners that the decisions made at headquarters are the right ones?
"Most of it is good communication, leadership, envisioning the future and getting them to understand that and want to follow that direction," he says. "We also have some opportunities for retailers to attain much higher levels of quality and participation in the program."
But no matter how good the communication is, Hodnik knows it can take a bit more than a pat on the back to align every dealer's philosophy with the organization's overall plan. Built-in standards and award opportunities -- including monetary incentives to operators who meet certain goals -- motivate independent retailers and keep them interested.
While the cooperative structure is now an integral part of the operation, it hasn't always been that way. When founders Richard Hesse resigned as company president in 1973, he agreed to sell the company to its retailers for $6 million. The transition to making Ace a retailer-owned cooperative was completed in 1976.
Since then, the company has grown beyond the United States. In 1975, Ace expanded into Guam and since there has flourished in the international market. And Hodnik recently signed a deal with Hardware Enterprises de Mexico, a home center retailer and paint manufacturer, to establish a strategic alliance in the Mexican hardware market.
Ace has had stores in Mexico for 10 years, with 28 retailers operating 84 retail outlets/points of sale. For Hodnik, this is another method of accelerated growth.
"What we're looking for here is more international brand building -- a fine company from Mexico that the banners on their stores will be Ace," he says. "There will be buying power built by them buying through us."
Hodnik has also targeted ways to organically expand the existing business. Ace offers the Ace Helpful Hardware Club, a loyalty program which allows customers to earn points toward reward certificates and offers discounts, and some stores have a rental section, the Ace Rental Place for customers who don't want to buy tools they won't use on a regular basis. There are 386 Ace Rental Places in 61 countries.
"We continue to grow that part of our business," says Hodnik. "It's a nice tangent category of merchandise."
 
Assembling a strong community
Hodnik recognizes that Ace is only as strong as the communities in which it does business. Its independent operators are involved in their communities, which is a key component to retaining and attracting customers. It's also part of Hodnik's plan for expanding deeper within the company's existing bases.
The company as a whole focuses on specific programs -- the Children's Miracle Network, the American Red Cross, City of Hope Cancer Center -- but the money raised by each store stays in its community.
In 1991, the Ace Hardware Foundation was established to serve as an umbrella over the charitable fund-raising efforts of Ace Hardware retailers, Ace Hardware Corp. and Ace vendor partners. In addition, Ace serves as the official hardware provider to Little League Baseball, and the Ace Scholarship Program, along with GE Sealants and Adhesives, provides 20 $2,000 scholarships in five areas, including child of an Ace store employee and a high school senior store employee.
Because the company's core business helps families physically improve their homes, the scholarships are yet another way Hodnik aims to strengthen Ace's relationships with its clients. And, as he says, "We look at it as being consistent with our overall culture. It's hard to argue with children." How to reach: Ace Hardware, (630) 990-6600 or www.acehardware.com

Published in Chicago
Thursday, 26 February 2004 09:28

Using their lids

In 1995, when Glenn Campbell and Scott Molander developed the concept for Hat World, their dream was to have, at most, five stores. And although skeptics said their idea would fail, they were confident they had identified a business opportunity with great potential.

"We had a lot of retail experience with Foot Locker," says Campbell, executive vice president and general merchandise manager of the nearly 3,000-employee company. "We noticed a lot of people came in and asked for hats. But we never envisioned what we have now."

What Campbell and Molander, executive vice president of real estate, have is a 468-store chain that has achieved an amazing 1,312 percent growth rate over the past five years. They have been so successful that on Feb. 5, Hat World announced it had signed a definitive agreement for Genesco Inc., a marketer of branded footwear and accessories based in Nashville, to acquire Hat World for $165 million.

It's a far cry from the company's humble beginnings nine years ago, when the two recognized that carrying a small selection of hats was not profitable for specialty sporting goods stores such as Foot Locker.

That Christmas season, they took a chance. They rented floor space at a local mall and stocked it with hats. When the mall's management heard they had sold more than 6,000 hats in six weeks, it offered them permanent retail space.

Within a year, Campbell and Molander had launched five Hat World stores.

"All of them were within a three-hour drive of us," says Campbell.

The pair kept costs in check by managing the stores from Campbell's home, where his garage became the company warehouse. And he delivered the inventory himself.

"The managers would meet me halfway (between the stores and my house), and I'd buy them McDonald's," he says.

Looking back, Campbell admits their "fly by the seat of their pants" style was a little too casual. "We didn't think of the dangers," he says. "We didn't have time. We should've been more selective where we located, but we just kept opening stores. Many things could've happened, but didn't. It's a small miracle that we pulled it off. What we did right was surround ourselves with good people."

One of those was Bob Dennis -- who, along with Campbell and Molander, will stay on following the sale to Genesco. He joined Hat World after it acquired its financially troubled competitor LIDS Corp. in the spring of 2001. At the time of the acquisition, LIDS had 266 stores -- Hat World had 157 -- and had just filed for Chapter 11 bankruptcy protection to reorganize. Campbell admits the purchase was risky.

"It was the scariest decision I ever made," he says. "I knew I was putting the company on the line. We were either going to make it happen or go down in flames."

More important, with the acquisition and the corporate expansion that accompanied it -- the size of Hat World more than doubled with that one transaction -- Campbell and Molander knew it was imperative to bring someone in to strategically lead the larger organization. "We knew we needed someone that had a different skill set than we had," Campbell says. "Bob (Dennis) had a great background and was a fit for our culture. Bob is Wall Street savvy -- he's dealt with boards and investors."

Dennis arrived with restraint, Campbell says, refusing to step in on Day One and begin spouting orders. "He didn't come in with an iron fist," Campbell says. "He listened. We made the right decision. Thank God we made the right decision."

The hire allowed Campbell and Molander to manage Hat World's day-to-day operations, while Dennis focuses on developing and implementing long- and short-term corporate strategy.

Inside Bob Dennis's world

When Dennis, a Harvard Business School grad, stepped in as Hat World's chairman and CEO, his first order of business was to integrate the stores and employees of LIDS into the Hat World family.

Dennis brought with him a strong leadership background, including stints with Asbury Automotive, a $4.5 billion retail auto group that he helped build, and McKinsey and Co., an international consulting firm. This experience helped him through the process of merging two companies, and by January 2003, the integration was complete.

They cut the fat from the LIDS organization, closing 100 unprofitable stores, and developed a more organized plan for growth than Campbell and Molander had previously been able to envision.

In November 2002, Hat World acquired Hat Zone Inc., and last February, it acquired Cap Factory Inc.

"We have a very ambitious plan for growth," Dennis says. "(It) calls for adding 50 stores a year in the next five years."

To do this, they've identified more than 400 potential locations.

"A lot of the growth is in nontraditional spaces," Dennis says. "We are targeting airports, which are underpenetrated, college campuses and tourist destinations."

Tourist destinations are a relatively new -- and successful -- market for Hat World. The company's five locations in Hawaii are doing well, says Dennis, and "the tourist angle is one we really want to develop."

This expansion is the result of in-depth market research, which identified who Hat World's best prospective customers are and where they're located.

"Most are between 15 and 25 years of age," Dennis says. "Another big segment of our business is the dedicated sports fans. Their ages vary widely."

But even with the targeted marking, the company's aggressive growth plan is tempered with caution.

"What we don't want to do is lose our discipline," Dennis says. "We have a very disciplined approach, and we watch trends carefully -- what's working and what isn't. When a store isn't working, we get out."

Because Hat World's fortunes are dependent on its locations, store placement within malls, airports or shopping centers is crucial.

"We know that when we get our desired location, we are successful," Dennis says. "All stores opened in the last 18 months under our location guidelines outperformed our expectations."

And because the company does not invest heavily in advertising and marketing, its desired locations -- close to heavy customer traffic and usually close to food and beverage outlets -- carry even more weight in the company's formula for success.

"The most highly trafficked areas of a mall or airport are off the food court or anywhere there is food and drink, with the emphasis on drink," says Dennis.

Buying into the dream

Hat World's next goal is to build an international brand; it established the first of five locations in South Korea in September, and has a licensing agreement to open at least 75 more in the next five years.

"We chose Korea because it is a country that embraces U.S. fashions and has a good economy," Dennis says. "We've been approached to do other Asian locations, but we are keeping them on hold. We're using Korea as a test lab to see how it (international expansion) works."

In the meantime, Dennis, Campbell and Molander are working to further define the corporate culture. And a big part of that are the people who work at Hat World.

"At the end of the day, it's the people working here that have made the difference," says Campbell.

In the beginning, he and Molander were able to hire high-quality people, even though they couldn't pay them much. "We sold them on a dream," Campbell says.

That dream has come true, even more so than the sales pitch offered. But the company's leaders still remember where they began, how far they've come and the importance of maintaining a sense of humor.

"Every time we start getting too serious, I say, 'Hey, we sell hats,'" Campbell says. "Let's keep it simple. Let's keep it fun."

And don't look for other sporting goods or accessories to show up in the stores any time soon. "Never say never," Dennis says. "But we're sticking to the name. Headwear is our category, and we will maintain that focus." HOW TO REACH: Hat World Inc., (888) 564-HATS or www.hatworld.com

Published in Indianapolis
Monday, 29 April 2002 18:52

Thinking big

The last few years have not been kind to the retail industry.

Ames Department Stores Inc. filed for Chapter 11 in August 2001. In January 2002, Service Merchandise announced it will cease operations after operating in bankruptcy for nearly three years. Kmart filed for Chapter 11 protection in January 2002 and closed nearly 300 stores.

With so many retail and discount stores closing or struggling to stay in business, it may seem the companies that remain competitive just need to dig in and ride out the recession. But that's not what Big Lots is doing.

Instead, the Columbus-based company has chosen to reinvent itself in an effort to focus its branding message on a national level.

The company was founded in 1967 by Sol Shenk, who had a background in auto parts manufacturing. Shenk chose to stick with what he knew, and opened an auto parts store under the Big Lots name in Ohio. In 1970, the company began operating as Consolidated Stores; by 1982, annual revenue grew to $24 million.

That same year, the company launched the Odd Lots/Big Lots closeout retail chain, locating the first Odd Lots in Columbus. These were among the first broadline, closeout stores in the country. It works this way: When Heinz makes too much ketchup, you can find the overrun at Big Lots and buy a bottle at substantial savings. Closeout retailers also take merchandise that has been discontinued, undergone package changes or that are test market products.

By 2000, the company had several years of acquisitions, growth and changes in leadership under its belt, and Michael Potter stepped in as chairman and CEO of the $3.2 billion company with nearly 1,300 stores. Consolidated had five chains at that time: Mac Frugals, Odd Lots, Big Lots, Pic 'N' Save and K*B Toys; each with its own marketing and advertising needs.

Quarterly comparable sales numbers boasted some very modest increases, but also some decreases, and with stock prices dropping, it appeared this hodge podge of regionally branded stores needed unity to gather momentum.

A "new" company is born

Potter announced major restructuring changes in March 2001, included divesting the company of K*B Toys, changing the names of all its stores -- as well as that of the company -- to Big Lots, and placing a new focus on the customer.

That meant cleaning up less than spotless stores, refurbishing them with better lighting and equipment, revamping the merchandising supply system and improving customer service.

More than a year later, many of the changes are complete; others are still in the works.

"We have about 240 stores left to convert (to the Big Lots name) by this Christmas," says Potter, who is excited by the marketing prospects of one national identity. "It is easier to be known nationally, and we can leverage our advertising, especially television."

Potter says the company has been doing its marketing homework and determined there are more long-term benefits in television advertising than in its current means of advertising, store circulars.

"Studies show that television creates a brand more efficiently," he says. "Especially three, four years down the road."

Potter says only about 15 percent of the nation recognizes the Big Lots name, compared to a 90 percent recognition rate for Wal-Mart. That is why the company is turning to more television advertising with its spokesperson, Jerry Van Dyke.

"We want to increase brand awareness," says Potter. "We've had very good response from the television ads we've already done, so we'll continue to move in that direction."

Give them what they want To make the stores more attractive to current and prospective customers, the company asked people why they shopped there -- or, more important, why they didn't.

"We did a multiyear analysis based on detailed customer studies," says Potter. "We asked what they liked and what they didn't. Our noncustomers said there were too many barriers in place."

Customers felt many of their expectations would not be met -- expectations for customer service, product inventory and physical store standards -- which the company is working feverishly to change. When it comes to inventory, Potter says consumers cannot expect the range of products offered by Target or Wal-Mart; that is simply not its mode of business or its target market.

"We are not ever going to offer as broad an assortment (as retail discount chains like Wal-Mart) from a selection standpoint," he says.

However, the company has put together a list of more than 500 items guaranteed to stay in stock.

"Customers expect to find items like bathroom tissue, light bulbs, diapers and cleaning supplies," he says.

By working with suppliers, the company has found a way to meet that expectation, although the brands may not always be the same.

"We wanted to find a way to satisfy our customers," he says.

That's not all Big Lots has done to improve its merchandise flow.

"Day after day we are relevant in our product offering mix," says Potter. "Our flow is more consistent, and our front-end buying and distribution improvements have had the most important impact on our sales."

And converted stores that were below the new, higher standards of cleanliness and service have undergone a substantial facelift. The result, says Potter, is not just happier customers, but happier employees, since employee break rooms were part of the redo.

"We have begun customer service initiatives, and our customers are noticing a significant difference in service," he says. "And we are producing a wonderful environment to work in. The stores are cleaner, brighter and safer, and our associates are doing a better job."

So what about the bottom line? The "after" Big Lots definitely appears better than the "before." But have these changes had the desired impact on the bottom line? If comparable store sales are an indication, the answer is a definite "yes."

For the first time in nearly two years, the company experienced a sales increase in the double digits, reporting an increase of 14 percent for February. And Potter says new sales figures indicate the double-digit trend will continue.

Brad McGill, a financial analyst with Banc of America Securities in New York City, agrees the company's restructuring initiatives appear to be paying off.

"We are beginning to see some signs of traction," he says. "Comparable store sales are impressive, and fourth quarter numbers are in line with expectations. It appears they are heading in the right direction."

But the company does not plan to rest on its laurels or remain satisfied with the status quo. Potter says it's full steam ahead when it comes to expansion and growth.

"We are adding 90 stores this year, and will add a similar number every year for the next 10 years," he says. "We plan to have a total of 2,500 stores at the end of 10 years." How to reach: Big Lots Inc., (614) 278-6800 or www.biglots.com

Published in Columbus
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