When we started down this path, we asked ourselves a hypothetical question. Can mom & pop retail work in the world of Amazon?
The High Level Business Model?
The overall model consists of our website, which sales both products and services (snowboard/snow ski rentals and jet skis rentals) and the retail store, selling both products and services (including additional services of heat molding boots, snow ski waxing/tuning/binding mountings) as well. Businesses, for the most part, have 3 major cost legs:
1. Location/Utilities/Insurance
2. Labor
3. Product costs
If you can cut out one of those legs, the likelihood is higher that you can successfully operate it.
Companies like a restaurant, have all 3 of those cost legs making it difficult to succeed. Our consulting company has 1 of those legs (labor), making it the easiest to manage. Real Estate Rentals have 2 of the legs (location and property management for labor), making the difficulty to cash flow positive, a bit more difficult but possible.
So, now we’re attempting retail. A business that does have all 3 legs of cost. Combine those costs with the competition in retail from online retailers and it seems like it would have been a rational decision to run! So, we convinced ourselves as follows:
- Winter specialty. People that buy snow skis, usually want to try on the boots for comfort and fit. Boots are also heat molded so the buyer needs to be at a retail shop for them to heat mold to the foot. Once the boots are chosen, the bindings need to be mounted to the skis based on the chosen boot. Again, not something easily done via online only sales.
- Winter Services. (no product cost, ignoring wax cost) People that snowboard or snow ski also need their equipment waxed and tuned annually. It doesn’t make sense to ship that off to have done.
- Winter Equipment Rentals. (minor product cost) Yes, you can rent equipment at the slopes but there are definitely crowds to deal with and you’re moved through like cattle. Easier to handle this at a non-slope adjacent facility. The equipment has a long life so the cost is spread over the life.
- Summer Specialty. When we needed a new wakeboard, something good, we would have to drive an hour. In our store, we can talk about the differences between continuous, hybrid and 3 stage boards. The differences between a skimmer and a wake surf. In-Store product knowledge is rare for this category. Certainly nice to have local options with meaningful conversations.
- Summer Equipment Rentals. (minor product cost) Jet Skis include the equipment cost, fuel and maintenance but the equipment tends to have a long life so the cost is spread over the life.
- MAP Pricing enforcement. MAP is Manufacturer Advertised Pricing. It’s the minimum that we can advertise a product for. You can’t undermine this price through gifts, loyalty programs or anything else that attempts to circumvent the intent. In these specialty industries, if we break the rules, we cannot purchase products from the supplier next year. They don’t kick you out the on the first mistake but if you’re intently doing it, better find some different suppliers for next year. This enforcement means that Amazon and other retailers are not advertising anything we carry, for a lower price. It’s a safety mechanism that keeps small retailers relevant. Without this, we would have never ventured down this path.
With the web site and retail store both driving products and services, we are attempting to drive the same sales from different sales channels. We felt the model of services from a retailer was unique. After all, how many retail stores offer services. Yes, there is Best Buy with the Geek Squad and it’s probably what saved them from the path Borders Books took (yes, an old reference).
At this point, we are profitable but still experimenting. For example, Spring and Fall are weak points for us. There is a skate park down the road so we thought it may be an interesting category to help close the gap. It’s been an underperforming product line so far so the experiment continues. We are looking at a couple of options and view this as a never ending process of improvement.
