I believe there remains a place for brick and mortar. As a disclaimer and to show prejudice, we own quite a few brick and mortar stores. So, how do they survive? What's that place?
Service. Service. Service.
That's where it starts, but that can take a variety of forms and must for different products. In the case of West Marine, I think it's a strong integration between their stores and their web site. They can offer some things that those with web only can't offer. For instance, easy return of anything you buy online to the local store. There are still many things we want to see, touch and feel before buying and other things we want to walk out of the store with on that day, although with good salesmanship, it's amazing how often you'll accept next day. Integrating inventory systems so if they don't have what you need in the store, they can find it quickly at another store or through their web distribution and immediately get it on the way to you and if you're in the store, they should never send you to the web. They should find it themselves and order for you right then.
It's also determining what they can be best at and what they can't. I've seen a lot of them looking at the leader in what they feel is their segment, Cabela's, and looking at Bass Pro. Well, the news flash for them is that neither of those is in their segment, nor their competition. They can't copy those. If they add things, like they have with clothing, they can't take away the basics of their business. They can't dummy down their staff either to reduce costs. If anything they need to elevate the staff so that anytime you visit you'll find someone knowledgeable available. They need to add some things that will enhance profits. They may have some online only type things. But also they need to find something to add to the stores without taking away. Some of this may get more of a younger shopper in as well. I'm not that familiar with their stores, but SUP's are easier to make a profit on than apparel is, Kayak's are easier. Bass Pro really exploded when they got into the boat business big time and suddenly became the largest boat dealer in the country and Tracker became the number one selling brand of boats.
The most common tactic of private equity firms and of new management in takeovers is to cut back and save money. I prefer an opposite approach and that is how to increase volume and margin with the same overhead as today or incrementally very little addition. This is an area I see where West Marine has failed. They haven't increased their overall volume of sales, they've just struggled to remain much the same. A strong web presence should allow for more. There's a magic in retailing with brick and mortar today and that is to maintain the same sales at the brick and mortar store but add on sales from the web site. Defender never should have had a chance against West Marine, but they were web oriented. Same reason Amazon shouldn't have had a chance against Barnes and Noble, but Barnes and Noble didn't believe people would buy books online so failed to take advantage of their head start.
They need to decide which items they must have always in inventory, that you can depend on being there when you go and which ones they can only provide next day or in two days. Their web site does show you store availability but I don't know how many people utilize that or how accurate it is. A good web site doesn't have to take away from store sales, but can enhance them. How many of you have used their website to look for things and then checked to see store availability?
I think they need to reexamine not carrying other brands in things like inflatables. It's fine to sell your own label if you can do so cheaper, but Defender sells private label plus six brands. There is no reason that defender should be able to offer more than West Marine.
I believe in building up, rather than tearing down. I know this isn't the nature of most investment firms. I follow the Warren Buffett approach, not the others. Our retail stores were all operating stores we purchased and in no case have we ever cut back, but we've found ways to increase sales and margin in the existing stores. Most businesses Berkshire Hathaway has purchased have grown.
West Marine has the opportunity to be the best of both worlds, to be your local mom and pop type store with personal service and to be the largest supplier of marine products through a combination of their stores and the internet. Leverage what they have.
Brick and mortar isn't dead. Amazon doesn't believe it is as they're opening stores and just agreed to spend $13.7 billion on brick and mortar stores. Brick and mortar must leverage their business with the internet. West Marine has a huge base on which to leverage business. They should examine how Wal-mart if fighting back against Amazon. It's working for them. One of my favorite stores is Bed, Bath and Beyond. If they don't have the item you're after they will honor store coupons, order it immediately for you online, and ship it for free. They don't allow you to leave the store dissatisfied.
I hope the purchasers see the real opportunity is in strengthening and building. I doubt they will. There's hope though. Perhaps they're already looking at an acquisition to couple with West Marine and enhance them. I don't know. I wish they were a firm known for keeping and operating companies rather than reselling them in two to four years.
