Springfield, MO

Bryan Simpson and Jeff Baird face increased competition from online retailers.
Bryan Simpson and Jeff Baird face increased competition from online retailers.

CEO Roundtable: Retail

Posted online
Is Small Business Saturday really a big deal? What’s the impact of Amazon locally? To find out, Springfield Business Journal Editor Eric Olson sat down with local retail owners Jeff Baird of Database Systems Springfield Inc., Nancy Dornan of Maschino’s Hardware Inc. and Bryan Simpson of Five Pound Apparel LLC.

Eric Olson: If you could describe the retail industry in one word, what would it be?
Nancy Dornan: Changing.
Jeff Baird: Challenging.
Bryan Simpson: Evolving.

Olson: First, let’s set the table with what we have represented here in terms of retail.
Dornan: Our primary focus is outdoor living and home, barbecue, fireplaces and wood stoves.
Simpson: Slow fashion, T-shirts, women’s clothes, children’s clothes. You could call it fashion, it’s just not very fashionable.
Baird: How many locations?
Simpson: Just two.
Baird: And one of them is down by Farmers Park.
Simpson: Yeah, we’ve been there two and a half years and downtown about six years.

Olson: And computers?
Baird: Yeah, we’re an Apple Premiere Partner, which is the highest designation Apple will give a reseller. We sell, we support, we train on everything Apple.

Olson: What are some of the ways you stay current with products and on top of the trends in your sectors?
Dornan: We have to change. We are in a sense a fashion, part of our business is the fashion industry. Our products for furnishings have changed dramatically in the past few years and continue to change. It is just a matter of keeping up.

Olson: How do you find those?
Dornan: We go to market in September for the outdoor furnishings and then there’s a corresponding barbecue/fireplace market in March. We obviously have really good reps that help us keep up on trends.

Olson: Is the market at play for you guys or is it more ongoing?
Baird: It’s pretty ongoing in the technology business. Dealing specifically with Apple, they release new machines every year. It’s just a matter of keeping people in-house trained on those things. Establishing relationships with the manufacturer, vendor, distributor, all those things are huge and those people change all the time. That’s kind of an ongoing thing as well. I mean its technology; it’s changed a lot since 1984. That’s the year the Macintosh was released, and that’s the year we started business.
Simpson: We go to market twice a year, but then we design and manufacture about half of what we sell. For us, we’re pretty quick. If we wanted a new product we could have it in seven days, give or take. So that lends us the ability to do the Royals when the World Series happens and make a “Dreams Come True in KC” shirt in three days. Fashion is ever-changing and it’s somewhat exhausting sometimes. The market is interesting; it’s not my favorite place.

Olson: You have to be there, right?
Simpson: Unfortunately.
Baird: Do you buy directly from manufacturers or do you buy through distribution?
Simpson: Yeah, we do both. The other 50 percent is through buying other brands, so probably very similar to what you guys do. We go to other brands and purchase wholesale. On the stuff we make, we buy directly from a T-shirt manufacturer and then print it ourselves. Now, we’re starting to get into direct manufacturing. Things like sew shops and overseas manufacturers and that’s a whole other game.
Dornan: Do you see keeping that balance?
Simpson: I would love to see us at as close to 100 percent of our own stuff as possible. Just across the fashion industry, I don’t see any way you could have a retail store without having at least part of your product base being your own. For us, it’s better margins and lends us the ability to actually give back with our sales. It allows us to, when times are slow, wholesale our products to other retailers.
Baird: Do you find that you’re dealing more with business overseas?
Simpson: Well, in terms of us buying from overseas, we haven’t yet. The only thing we buy from overseas are our reusable bags; we buy like 10,000 of those every year or two. And that’s just because the company we buy them from in the U.S. gets them from overseas and marks them up a ridiculous amount. Right now, we’re starting to really invest time and money into our wholesale business, and that’s the biggest challenge for us. Do we manufacture locally or do we go abroad? There are pros and cons to both. It’s drastically more expensive to stay local.

Olson: What do you do to keep up with consumer demands?
Dornan: For a while we would change products drastically over the years, and that was a response to a consumer-driven market. For a while, we would bring in some really contemporary things – East Coast, West Coast type things. They wouldn’t sell until four years. There was a big lag. Over the years, we hope we have developed a mental formula for what our customer wants and what the market provides.

Olson: Does that put pressure on your inventory?
Dornan: You look at the current, today’s hot thing, which is mainly a lot of contemporary things, and you just dial back. You know it’s available if you have a customer, a designer who really wants that style.

Olson: In 2015, Amazon accounted for almost 60 percent of all online sales. What is that doing to small-business retailers?
Baird: There definitely is a dent. The days of just dealing with competitors who are brick and mortar are out. The digital footprint has gotten so huge in the retail market. I don’t know if I would elect to start a business in the computer industry right now, but having been around as long as we have, we’ve put together a pretty loyal customer base. A lot of folks want the tangible thing, which you can’t do on Amazon.
Dornan: It’s interesting because I could say exactly what you said. We’ve established a good reputation for knowledge and service, a loyal customer base. People are not going to buy furniture they haven’t actually physically sat in. We also have an e-commerce side and that is interesting because the type of product that sells there is more of the maintenance type product. That sells across the country. How they find us – I have no idea.

Olson: It doesn’t sound like you’re building up a robust e-commerce space.
Baird: We’re not. We haven’t had to.
Dornan: I’d sure hate to FedEx seven pieces of furniture.
Simpson: The clothing industry is crazy. I mean, there’s probably a million clothing stores online, so we look at it like there’s pros and cons to that whole movement. It’s crazy to think Amazon goes into their clothing sales knowing they’re going to lose money for 10 years. How do you compete with someone who can afford to lose money and somehow be worth millions of dollars? That’s a daunting task. It doesn’t seem fair, but I think for us it’s definitely a reality of our business.

Olson: In the current economy, where is there money to be made?
Baird: Service and training are the two bigger places. There are plenty of computer accessories out there that (have) decent margins – iPhone cases, computer cases, those sorts of things. It’s the hardware itself that’s so thin, so you have to make up in other places. One of the things we did is put in a real nice state-of-the-art training room. That’s helped tremendously.

Olson: So you have to look for stuff outside of your core product?
Baird: Absolutely.
Dornan: You do have a nice training room. I’ve taken advantage of it. To answer the question, service, training, the type of things that we do is fireplace inspections. We send out an annual letter to our past customers reminding them that we offer service for fireplace inspections. We also have an outdoor designer who can go out and help you select what products you want, but also provide the whole package. She goes out when the delivery is made, (to) set it up so it’s done well. You alluded to the recession, which was the toughest part of business I have ever seen in the years I’ve been in business by far. I think there’s somebody who said that you’re successful if you kept your doors open during that time. There were sleepless nights.
Baird: The walk-in retail, I mean it was just crazy how that fell off. We’re kind of a hybrid reseller as far as Apple’s concerned, in that we’re not just walk-in retail or just commercial. We are about 50-50. So (commercial) didn’t take a big hit, but walk-in did.
Dornan: Yeah, we had to trim. We really went through expenses line item by line item. We had to cut a couple people. We also were able to really modify our products and review them. We had 50 percent fireplace and 50 percent patio sales. The fireplace part was bad because the construction industry was hit so hard. That was a big hit. We have an outside sales person now, so that’s building back to where it was.
Baird: Now Bryan, you started Five Pound on the tail end.
Simpson: Yeah, 2010.
Baird: So you have no idea.
Simpson: The thing for me was that I was clueless to anything business or economy. So when somebody came in and bought a T-shirt, it was a good day. It was scary though because we opened for business in December of 2010, so you have three weeks of just, “Oh my gosh! People are buying things.” Then you’ve got January where it’s like snow on the ground. I remember days where I would stay in the office from 10 a.m. to 7 p.m. and no one would buy anything, but also nobody would even come in. It was scary to say that you risked everything you had built.

Olson: You mentioned Christmas sales. What do you think will be hot this holiday season?
Baird: Apple is announcing some new products tomorrow [the day iPhone 7 was released], but it’s going to be phones and I think a new watch. It’s funny because Apple’s so stealthy. They don’t tell us what we’re going to do. They used to, but then they found that we would tell all of our customers, “Hey, wait 30 days because there’s a new machine coming.”

Olson: What about you guys? Anything holidaywise?
Dornan: I’ve yet to see a major patio furniture set under a Christmas tree.
The product mix we currently have does not lend itself well to gifting. We do have a lot of gift products that are Christmas related or holiday related, but it’s not a big season for us.
Simpson: I believe we have Christmas sweaters.
Baird: Both of my sons are very into that for Christmas.
Simpson: Two years ago, we started carrying this ugly Christmas sweater brand, and it just blows you away.
Dornan: Is that the actual name of the brand?
Simpson: No, there’s one called Tipsy Elves and then there’s another we just picked up at market that’s DIY Ugly Christmas Sweater Kit.
Baird: So that started just recently?
Simpson: I mean, I remember in college that people would do an ugly Christmas sweater party and would go to Goodwill and buy old Christmas sweaters. Now it’s nice, ugly Christmas sweaters and it’s the weirdest thing. It’s expensive ugly sweaters. That will be a big hit this year.

Olson: Is Black Friday a big deal for you all?
Baird: We have found with all of the specials going on with the big box stores opening at four in the morning or staying open all night, we don’t commit a lot of resources for a big deal on Black Friday. We let that thing go and kick it up on Saturday.

Olson: So that Small Business Saturday is a big deal?
Dornan: It is.
Baird: Oh yeah. The small-business thing, like I said, I think the general populace here is very in tune with that locally. They are aware that so much more of every dollar does stay in the community.
Dornan: The millennials have a much better sense of that and keeping things local. I think that and quality.
Simpson: For us, Black Friday is big. I think in the beginning we got too caught up in volume over margin. We’ll shift away from opening at six the night before and probably do less sales, but then, for us, Small Business Saturday is twice as big as Black Friday. That’s the day we have everybody on staff and lines out the door. It’s fun. Stressful, but fun.

Interview excerpts by Features Editor Emily Letterman, and editorial assistant Barrett Young.


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