Breaking news: WM acquired by private equity firm

[Bigsfish]

Senor RT

Not even a free copy? Really?

 

[RT Firefly]

Greetings,
Mr. B. Nope. I might if they paid me, say, $20 to do so...

 

[Bigsfish]

Senor RT

If the do offer you $20.00 let me know so I can get behind you in that line. LMAO

 

[dhays]

Greetings,
Mr. OC. "The biggest problem with companies that buy successful businesses is that most never understand what the original owner did to make the company successful." Exactly what happened to PMM (Passagemaker magazine) IMO. I was a subscriber from day one until Bill P. sold out to ?? (I can't even remember who) and the emphasis changed from boats like ours to the biggest, the best?? and the newest. I wouldn't even take a free copy now...

I have no idea but I would guess that the reason for the change in Passagemaker is that, except for a very few publications, their most significant income source is advertisers not subscribers. Who is going to be paying for advertising?

 

[O C Diver]

I have no idea but I would guess that the reason for the change in Passagemaker is that, except for a very few publications, their most significant income source is advertisers not subscribers. Who is going to be paying for advertising?

It was a very successful business model. They had all sorts of advertisers as they had a much larger clientel that could afford the boats they were featuring in their articles.

Ted

 

[BruceK]

Greetings,
Mr. B. Nope. I might if they paid me, say, $20 to do so...

Our version of WM, Whitworths, gave out a credit for the next purchase for signing up to receive their catalogue(sometimes referred to here as a cattledog, but that`s a story in itself).
Oddly enough, I used the credit, but they don`t send the catalogue(I get a paper one instore)and I don`t get spammed with offers etc either.

 

[CaptTom]

After a time if I want a quality product it won't be availible. No one will stock anything but the cheapest merchandise.

There is some truth to that, especially for mass-market items. But for specialty items there are often only a few, sometimes only one, manufacturer. It really doesn't matter to me which retailer I buy it from; it's the same quality.

In that case price is a huge factor, as is convenience. Sometimes the ability to see and touch the item before buying is important, but sometimes not. Occasionally I'll worry about being able to return it, but if you know what you want in advance that's not often an issue.

 

[Bigsfish]

Nomad wrote "No one will stock anything but the cheapest merchandise."

I disagree because when that time approaches that vacuum will be filled by a company that sees the need to offer quality merchandise they won't havecas many sales but may very be profitable selling to those looking for quality. Think Shula's or Ruth Chris vs McDonalds or, since we had a watch thread a short time ago, Rolex vs Casio.

Just my SSO.

 

[NolaBama]

I have never seen a good takeover by a hedge fund. It is never good

 

[Bigsfish]

Staples comes to mind.

 

[BandB]

I have never seen a good takeover by a hedge fund. It is never good

They're rare but I have seen good takeovers by venture capital firms. In the boating industry, Platinum did a great job with Rec Holdings which came from the Genmar Bankruptcy and included Glastron, Four Winns, Ranger, Stratos and Champion. Their motive was the same as most but they did it by building the companies, not tearing them down, and they turned a bankrupt business into a very successful company and prepared Glastron, Four Winns, Wellcraft, and Scarab for a nice acquisition by Beneteau about five years later.

While I didn't like Versa stopping the production of Cabo, they've turned Hatteras around and they are now doing extremely well.

I would say that Berkshire Hathaway has done quite well by the companies they've taken over although they are a unique investment company in it for the long haul, not short term flips.

If one cares about the future of a company they better be selective as to whom takes over. There are some notoriously horrible venture capital firms. I barely dodged a couple of them many years ago and steered the acquisition of my employer to a safe home. The worst is Greenmail where they start buying and then tell you either buy them out or they'll take control. You lose either way. Some notorious for just tearing companies apart and selling off the remaining splinters.

The company buying West Marine is not one I'm that familiar with but they appear to turn and resell companies on the average in about four years. What is to be seen is do they build value by downsizing or by building.

There are individual investors just as bad. Look at the history of Irwin Jacobs who built Genmar. Long before that he was known as "Irv the Liquidator". Look at Henry Luken who took over Christiansen and took it to bankruptcy. He build Luken Communications the same way leading to a $47 million jury verdict for fraudulent transfer which he then dodged through filing bankruptcy, then ultimately won the appeal.

Guess we'll just have to wait and see what becomes of West Marine. Five years from now they'll be better than ever or they'll be a memory of what they once were versus what is left.

 

[South of Heaven]

Totally agree. Im in Massachusetts. Very overpriced and the employees usually don't know anything about their products.

 

[dhays]

Totally agree. Im in Massachusetts. Very overpriced and the employees usually don't know anything about their products.

Many here on TF have extensive backgrounds in business. A few have a background in retail business. A very few, like HopCar, have that experience in the marine industry. I have some experience with retail, but these days my profession is centered on providing professional services.

Maybe those with retail experience can explain to the rest of why can't every brick and mortar business provide:
- Extensive inventory so that anything I might happen to want or need is sitting on the shelf waiting for me.
- Convenient business hours, say 6:00am to 10:00pm 7 days/week.
- Have employees available full time during those business hours that are experts in all things related to that extensive inventory referenced above. I want to be able to get high level, professional advice and guidance for marine electronics, marine plumbing, diesel and gas engine repair, rigging, paint, etc.... whenever I happen to walk in. (This expertise needs to be provided free of course, whether I purchase from them or not)
- Provide all of the above at a price that is no higher than any other retailer, online or otherwise. Anything higher than that is simply overpriced and should be considered price gouging.

 

[Bigsfish]

Dave

Most of your questions can be answered by lack of capital or the bean counters can't get the rate of return on their investment they want, assuming the capital us available. Inventory sitting on the shelf for months and months, even years, cost money, turning your inventory is the goal of every retailer especially now that inflation is controlled. In the '60s and '70s you could afford to hold inventor are inflation was over ten percent per year. Extended open hours cost money (fixed cost are the same) because if open you need employees, air conditioning, lights, etc. Good employees can make of break a business but some owners don't want to pay for quality employees when you can get a kid out of high school cheap.

 

[CaptTom]

Maybe those with retail experience can explain to the rest of why can't every brick and mortar business provide:
- Extensive inventory so that anything I might happen to want or need is sitting on the shelf waiting for me.
- Convenient business hours, say 6:00am to 10:00pm 7 days/week.
- Have employees available full time during those business hours that are experts in all things related to that extensive inventory referenced above. I want to be able to get high level, professional advice and guidance for marine electronics, marine plumbing, diesel and gas engine repair, rigging, paint, etc.... whenever I happen to walk in. (This expertise needs to be provided free of course, whether I purchase from them or not)
- Provide all of the above at a price that is no higher than any other retailer, online or otherwise. Anything higher than that is simply overpriced and should be considered price gouging.

- If you don't have what I need, I won't be visiting your store.
- If you're not open when I need it, and other stores are, ditto.
- Having employees who are at least familiar with the merchandise is something I'd be willing to go out of my way for.
- If you can't sell your products for the same price as other stores, I'll look for other options.

You don't automatically have some sort of divine right to make xx% profit, regardless of the needs of your customers. Just as I'll go bankrupt if I make poor financial decisions, so will you.

I sympathize with the issues every retailer faces. On-line shopping has been a serious disruption, and nobody knows right now how it will end. It's hard to run a business when the future is so unclear.

But I never walked into my boss's office to complain about how inconvenient it was for me to meet the needs of the company I worked for. I never whined that I needed more pay because I had it so rough. And I always knew my livelihood was highly dependent on the decisions I made, even though I didn't have a crystal ball.

I hope WM succeeds. As a customer, I've found them very useful to me at times. And I have bought a lot of stuff there. Especially back when they actually stocked the stuff I needed.

 

[BandB]

M
- Extensive inventory so that anything I might happen to want or need is sitting on the shelf waiting for me.
- Convenient business hours, say 6:00am to 10:00pm 7 days/week.
- Have employees available full time during those business hours that are experts in all things related to that extensive inventory referenced above. I want to be able to get high level, professional advice and guidance for marine electronics, marine plumbing, diesel and gas engine repair, rigging, paint, etc.... whenever I happen to walk in. (This expertise needs to be provided free of course, whether I purchase from them or not)
- Provide all of the above at a price that is no higher than any other retailer, online or otherwise. Anything higher than that is simply overpriced and should be considered price gouging.

Because each of those items costs money and the consumer has shown over and over again they are not willing to pay.

As long as there are retailers not doing the things you ask about, then those retailers will have a lower cost structure and be able to to you for less. If you then buy from them because they're cheaper, then the retailer with the higher price will be forced to lower their costs too and the easiest way to do that is by reducing inventory, cutting hours, and employing fewer and less skilled workers.

It's the consumer who ran so many good retailers out of business as they first went to K-Mart, then to Wal-mart, and then to Amazon.

Now, is there still a place for the retailer who does all the things you mention. I believe so. Otherwise, we would not own the number of retail stores we do. There are two ways for a retailer to improve their bottom line. The easiest for many is to lower service and to cut costs in every way possible. I think that is a very dangerous approach. The small retailer or the brick and mortar retailer competing against online sellers is in the long run going to die if they try to be the low price retailer. No one can compete price wise with Amazon and continue to stay alive.

So, I believe in what I consider a better way. Rather than cutting your costs, you build your business. The way you do that is by providing better service. We don't start new stores but we purchase existing stores that are typically family owned and they are ready to sell. We have a very simple strategy that we generally use upon purchasing. We increase inventory and staffing and improve the shopping experience. We pay the staff more and train them and then have the least turnover of any retailer. In nearly all cases we do more business our first year than the store did the year before. Most business people do not believe a model like ours can work though. They believe brick and mortar are dead. I believe brick and mortar surrendered. They said we no longer are needed.

One other comment as you read about all the mall closings. We had too many malls. We had more malls per capita by far than any other country. The builders were in competition and new malls would come in lowering the traffic to the old malls. Ultimately we needed a reduction in the number of mall stores. The retailers in malls were being killed by feeling they had to be in so many. They would have major department stores a mile or two apart.

Now, my belief on West Marine. If they try to compete price wise with Amazon and others without stores, they'll ultimately lose the battle as they can never have consistently lower prices and provide good service. The strategy for them in my mind is simple.

1. Strategically located large well run stores. That means consolidating in some areas. It means stores in all the markets but not as many multiple stores in a single market. Instead of two, have one better store. As part of that come up with new ideas to make it easy for boaters to get to them.

2. Increase inventory to reduce outages of product. Have good solid inventory systems that automatically replenish (with human review as well) and have regional distribution centers with substantial backup inventory that can get to them quickly. Also increase inventory in high margin items they don't currently stock. SUP's are an example, since they've recently been a hot topic here. But don't decrease inventory in critical parts to do so.

3. Maintain well staffed stores. This means adequate staffing in numbers and knowledge. It probably means increasing the average pay and benefits, going against the grain. However, that can lead to increases sales per store and to employee retention. It doesn't mean every employee has to be expert in everything, but they must have someone working with that knowledge at each store at all times.

4. Integrate their web and store businesses. Use the internet to increase overall business and to increase ultimately the business of each store. Also, have the same knowledge available on web orders that they do in the stores. We actually route all internet orders through the store and the same salesperson who would help a customer in a store visit, handles their web order. This may not be practical for West Marine, but a more skilled and more personal approach on the web orders could be.

You don't beat Amazon at their own game. You beat them by targeting their weakness. Yes, they have a weakness. Ever try to call and get expertise from them?

Do I believe West Marine will follow the approach I've outlined? No. First, I don't believe they'll increase inventories. Second, I don't believe they'll get more knowledgeable staff and pay more. To venture capitalists those concepts are counter-intuitive. "Lean" is the word they live by. If the lean route is followed, they will hurt their business.

I don't know that I'd go as far as the 6:00 AM to 10:00 PM seven days a week. I'd probably go 8:00 AM to 9:00 PM in their business. However, I would have 24/7 phone lines monitored by someone who could access the inventory (and it would have to be accurate) of the store. If you tried to reach a store at off hours, you'd get a real person who would be knowledgeable and who would be able to tell you the item was in stock and what time the store opened and you'd be able to place an order which would be in the store's inbox when they opened.

To thrive, they need to establish themselves as the best resource, having the most inventory and the best service. You mentioned HopCar and his former store is a great example. They have a loyal following. Every item they sold could be found somewhere for less, but no one else would provide the service they did. If you're local to them, they're right there to help you. If you called, you wouldn't get an order taker in a huge phone room located who knows where, but you'd get knowledgeable store employees who knew the product. Also, if the employee you got wasn't knowledgeable about one of your questions, they'd quickly get someone who was.

Now, I think every West Marine store needs to operate half as a mom and pop store and half as a national chain, taking the best of both worlds. They need to provide the hands on, knowledgeable face to face or voice to voice service of a local store to the boating community. However, they need to also benefit from the buying power of a large national company and from the systems a large company can have, as well as from all the other stores. If they don't have something you need they should be able to locate it and get it to you the following day and they shouldn't leave you to search on your own.

They also need to be innovative. One thing I believe they should look at is delivery in the local market. Perhaps, they could use their pro division, formerly Port Supply to benefit there. If nothing else, use store employees or use Uber and Lyft. We deliver from any of our stores for free if an order is a certain size, a small charge otherwise and we'll even provide same day deliver for $5. We're nothing like the size of West Marine but we do it in a combination of ways. We use store employees. We use other company employees and we use Uber and Lyft.

To Dave's question, they can't provide all those things you mention and compete unless....unless they do something better. There will always be Amazon's. They can't compete with Amazon by trying to offer better prices. However, they can provide better service and definitely more personal service. You cannot get a person with knowledge in Amazon. You should be able to in West Marine if they did things properly.

There's been much discussion here about clothing in West Marine. Well, it's not just clothing, it's the non core items, such as clothing, paddleboards, kayaks, and other things not part of the core boating parts and accessories business. They now make up 25% of their sales. These items have been positive, but one huge mistake. They should have added these without reducing other inventories. However, they didn't do that. Also, they were under the impression these items provided better margin and they might, but I doubt in the long run they do. I'm not sure they grasped the closeout and price reductions involved in clothing.

A last thing I'd study is the demographics of their shopper. Something tells me their customer is aging. Well, you better bring in younger customers too to replace those who age out. Kayaks and paddleboards do so, but then don't neglect your existing base. But the paddleboard purchaser today may be the boat owner ten years from now.

You compete by being creative and innovative, but the only way to win is through service.

 

[dhays]

I guess I fail at irony.

 

[BandB]

I guess I fail at irony.

No, you did it well. A lot expect what you said and don't grasp that it's impossible. I failed initially at realizing you were using irony but when I did, I felt like it still merited answering. While you expressed irony at the customer's desires, you also hit at an issue the retailer falls into the same problem with. There are too many customers who do expect what you said and too many retailers who don't face the obvious and just throw up their hands in defeat.

I imagine the purchasers of West Marine are going through far more calculations of how to reduce costs and inventories than how to grow the business and that's sad.

 

[Portage_Bay]

BnB in post #106 nails it starting with

It's the consumer who ran so many good retailers out of business as they first went to K-Mart, then to Wal-mart, and then to Amazon.

When we, the larger royal we, not individuals here, focus primarily on price we get what we ask for. Then bemoan the loss we helped cause.

A bit of a rant....
If you think WM was a good chandlery you've never experience a good chandlery, well stocked and staffed by knowledgeable people. If you think today's hardware is good quality, well I dunno what to say.
.... end rant.

 

[Bigsfish]

I believe the one thing that has hurt most small retailers is government regulation and paperwork. Hopefully that may be changing u der Trump. Time will tell.

 

[dhays]

I guess I fail at irony.

No, you did it well. A lot expect what you said and don't grasp that it's impossible. I failed initially at realizing you were using irony but when I did, I felt like it still merited answering.

Yeah, I posted at the same time you did. My concern about my irony not being clear preceded your excellent reply. The description of your retail strategy is exactly what I like to see at the stores that I frequent.

The point I was trying to make is that while we as consumers love to whine and complain about a retailers short-comings, we don't seem to be willing to give up the lure of the absolute lowest price. Unless we are willing to support retailers that provide the service we want, they will disappear.

 

[twistedtree]

I believe the one thing that has hurt most small retailers is government regulation and paperwork. Hopefully that may be changing u der Trump. Time will tell.

Exactly what regulations and paperwork are hurting small retailers vs any other business? What regulations would you change? Or are you just parroting a slogan?

 

[BandB]

I believe the one thing that has hurt most small retailers is government regulation and paperwork. .

As a small retailer I disagree with you completely.

 

[BandB]

The point I was trying to make is that while we as consumers love to whine and complain about a retailers short-comings, we don't seem to be willing to give up the lure of the absolute lowest price. Unless we are willing to support retailers that provide the service we want, they will disappear.

Or as some would put it, we're getting what we deserve.

 

[dhays]

As a small retailer I disagree with you completely.

+1 from a true small, small business owner.

 

[Xsbank]

It is an interesting conundrum, I am currently looking for solar for my boat. I can get it all online at the cheapest prices but if I buy it locally, I get the expertise that fills all the gaps in my knowledge but at a significant increase in cost. However, should a device fail, I'm better off with the local guy. How much is that worth? I wouldn't buy any product if I KNEW it would fail.

I never shopped at West Marine when they were in Canada because they cost too much for everything they sold, except for the giant sale they put on when they closed and left Canada...

 

[Wxx3]

Simply put. The people on TF are NOT the market that keeps West Marine in business.
We know better than to pay $25 for a $3 part.

The WM market are those folks that use their boat so infrequently that they don't know/ care the price of products they buy.

 

[sunchaser]

I guess I fail at irony.

No you don't. Some really believe what you posted is how the world works.

 

[mbevins]

I'm looking for a new bilge pump, thinking of a whale. Went to Defender it was $160ish went to WM it was $245ish. Who in their right mind can justify the difference. Both online, both charging freight, tomorrow I'll go to my local Chandler and get his price, then more than likely ORDER it as he won't have it in stock. His price will probably be in the middle. Pick it up Tuesday with no shipping charges.

 

[CDreamer]

This is why CostCo is so interesting to me. A typical large grocery store might carry 35,000 SKU's. CostCo carries around 4000. Their claim is that they've "vetted" all the brands for quality. So if you want Peter Pan, you're out of luck. (Jif is the best anyway and they have it). But CostCo has that pesky membership fee and that's why it works.
It would be hard for WM to carry a "grocery store level" of SKU's because many of their products are so expensive. Could they carry 6 different brands of dock line? All the various VHF's? Maybe online but tough to do in every store.
At the same time they'd have a hard time following the CostCo model. Although I remember when I paid an annual membership fee to BOAT US.