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Hearth & Home September 2018

Erik Mueller, President.

Stopping the Clock (a bit)

By Tom Lassiter

Photos: ©2018 JOSH BEEMAN. WWW.JOSHBEEMANPHOTOGRAPHY.COM.

At Watson’s, Erik Mueller is succeeding by “just trying to give the consumer a little bit of their life back.”

Imagine gutting a relatively new, 50,000 sq. ft. store, only to rebuild it at twice the size.

Imagine scores of people lined up to enter that store before the doors open on a Saturday morning.

This is not an Apple store we’re talking about. This is a specialty retailer. Or, more precisely, a sharp retailer offering a number of specialty product lines.

We’re talking about Watson’s in Cincinnati, the flagship location of the multi-store business that is observing its 50th anniversary.

Watson’s has been a force in the hearth and outdoor living business for decades. It built a reputation with customers as well as vendors as a leader in fireplace, patio, swimming pool and spa products. Home recreation products, such as billiards and pool tables, also are in the mix.

The operation’s multi-state footprint extends westward to St. Louis, south across the Ohio River to Louisville, and northwest to Minnesota. Eight stores bear the Watson’s name. Four others are franchise partners that share in Watson’s buying power and merchandising.

An additional 11 small locations focus on pool and spa chemicals and accessories.

Watson’s current incarnation, under the second-generation leadership of Erik Mueller, builds upon that hearth and patio foundation. Watson’s of 2018 is all about “the gathering spaces in the home,” those places where people go to retreat, relax, rejuvenate, and restore.

Hanamint's Stratford five-piece fire pit chat set.

“We had a vision to grow the store, to continue to add product lines, still focusing on family, friends, entertaining and socializing,” Mueller says.

That vision has been evolving over the past decade, ever since Mueller purchased Watson’s from its founders, one of whom was his stepfather. Now, with 100,000 sq. ft. of carefully designed and merchandised showrooms, Watson’s flagship store makes a bold statement about Mueller’s faith in his company’s retail direction in this e-commerce age.

“Retail,” Mueller says, “doesn’t have to be dead.”

His philosophy is to give people a compelling reason to visit the store. Give them something (or lots of things) that they can’t get browsing online or at a competitor’s brick-and-mortar location.

“We were selling experience before it was such a cliché term,” he says. “We had one of the original, big-footprint home recreational products stores in the country. No one had done really what we did back when we first built this place.”

Watson’s has expanded its offerings to encompass a broader array of products suitable for all of a home’s gathering spaces. This means that Watson’s is now the place to go for recliners and sectionals from brands including Natuzzi, Kuka, and Bernhardt. Shoppers may choose from leather or upholstered goods.

You can’t buy a 72-inch flat screen television at Watson’s, but you can shop for luxurious home theater seating. Does your back ache? Perhaps a massage chair would help. Need more pampering? Check out the saunas and steam rooms.

High-end outdoor furniture is concentrated in what Mueller calls the store’s pavilion. Flooded with daylight, the space feels like a cross between a covered porch and a four-season room. Mueller describes it with one word: “Spectacular!”

Barlow Tyrie's Monterey seven-piece dining set.

Outdoor furniture vendors who attended the store’s grand opening in late May are equally effusive.

“It’s a wonderland for shopping,” says Brenda Pereyda, OW Lee’s Sales manager.

“Nobody else is doing anything like it,” says Bew White, founder and president of Summer Classics. Shoppers, he says, step into Watson’s and realize they don’t have to go elsewhere. “This guy has everything!”

Tom Murray, president of NorthCape International, has worked with Watson’s for more than a decade. He calls Mueller “a visionary dude.”

Watson’s, Murray says, “is the most impressive store I’ve ever been in. You haven’t seen anything like it.”

Patio furniture accounts for nearly half of the store’s retail footprint, taking up 45,000 sq.ft.

In its scale, depth, and breadth of product, execution of vision, and by any number of other measures, Watson’s apparently is without peers. But perhaps the most amazing thing is this: Watson’s declares it will not be beat on price.

“We guarantee the lowest price of anywhere in the United States,” Mueller says. “Period. Amen.”

That vow includes all comers, such as furniture stores that run closeout ads 52 weeks a year, and online merchants that have no storefront investment, no inventory, and drop-ship everything.

The spa is the X6L from Bullfrog.

Offering unbeatable deals is just one component of the Watson’s way. It’s only one facet of the Watson’s experience. “You’ve got to make it worth the consumer’s time to come visit you,” Mueller says. “That’s our job.”

The experience, of course, includes making the store interesting and inviting. It includes crafting a marketwide reputation that Watson’s in Cincinnati is worth driving to. Shoppers aren’t likely to drop in because they’re visiting nearby boutiques and gallerias on Sharon Road; there aren’t any. The store’s nearest landmark neighbor is a Ford transmission plant. A grain elevator dominates the skyline behind Watson’s.

The Watson’s experience, Mueller says, includes salespeople who know their merchandise coming and going. Many have worked for Watson’s for a decade or more and are, he says, “extremely well paid.”

And the experience includes standing behind the products sold, making sure that the first sale made to a consumer is never the last sale.

“We’re going to do all of that,” Mueller says. “That’s just our business model. We’re not out trying to justify our price. Our job is to compete.”

Watson’s sharp-pencil approach applies to any product, in any category, at any price range.

A Watson’s shopper may opt for a pint-size Weber charcoal grill priced at $49.99, or for a box truck full of furniture by Brown Jordan or Tommy Bahama. Either way, Watson’s vows that the same products can’t be found elsewhere for less.

“We have the ability to play at any price point and be competitive,” Mueller says. “We choose to play from just above the bottom, all the way to the highest. We don’t really chase the very bottom, grocery-store price points. We don’t because our customers expect too much of us.”

Watson’s is able to be price competitive because it partners with its vendors and buys deep to get the best prices possible.

“We’ve got a huge amount of inventory sitting in every one of our warehouses across the Midwest,” Mueller says. “We take very large positions with our vendors. We’re a high-volume, high-dollar-per-square-foot company.”

NorthCape’s Murray vouches for that. “If you do enough turns, you don’t need a Resto (Restoration Hardware) markup,” he says. Murray figures that Watson’s turns product at a pace three to five times more frequently than a “strong retailer in a regular retail environment.”

That level of volume makes highly competitive pricing feasible. “If you can turn product twice as often,” Murray says, “you can give a little bit back” to the shopper.

Achieving such high turns means keeping the retail floor fresh, setting and resetting. Changing the presentation, Mueller says, is “a constant, because we want to keep it fresh for the consumer. We’re kind of freaky about looking at the inventory and the floor on a weekly basis.”

The black set at left is from Plank & Hide; at center is the Barlow Tyrie dining set.

It’s About Time

Mueller makes a strong case that everything sold by Watson’s relates, one way or the other, to time.

 “What’s the most valuable commodity in the world? Time. None of us have enough of it. So when you think about that, what we really try to do here, what’s in our DNA, is we’re trying to just give the consumer a little bit of their life back.”

Mueller’s talking about those precious few moments that are not dedicated to the time-gobbling routines of daily life and earning a living. He’s talking about 10 minutes in a steam room, or a rowdy game of foosball with the kids. He’s talking about sitting in a motion chair, in solitude, watching the grass grow. He’s talking about an evening with friends in the Outdoor Room, with food, drinks, and good company.

 “Every single product we sell is about giving the consumer a little bit of their life back,” Mueller explains.  “And, when they have that time, making it as enjoyable as can be.”

The Grand Opening

Watson’s store renovation grand opening event started with a big splash over a late May weekend, and then it kept going and rippled throughout the Midwest. Every Saturday, for four weeks, Watson’s offered its first 50 shoppers a $150 gift card – at every Watson’s store. That’s why the lines formed.

But that’s not all. In each Watson’s market, the company in June offered a $50,000 home makeover promotion. “We gave away more than $400,000 worth of goods to our consumers,” Mueller says.

That sort of promotional effort usually is associated with the likes of a network television show or a company with hundreds, if not thousands, of storefronts and a national presence. It’s wild stuff for a furniture operation with eight named stores.

Bernhardt's Wellington Collection, with tufted sofa and Nathan high-back chairs.

“It’s pretty fun,” Mueller allows.

Mueller is the sparkplug behind Watson’s, but the company’s achievements are not the result of his single-handed efforts.

“We have a great team,” he says. “I’ve invested heavily in some new, senior management positions, and continue to have employees who have been with us for a long time. We have very little turnover.”

Many successful specialty retailers emphasize employee training as a key element in salespeople’s ability to anticipate and answer shopper questions and, ultimately, closing the sale. Watson’s is no different and may raise the bar.

“We have disciplined Tuesday, Thursday, Saturday training,” he explains. “Nobody misses it.”

Training encompasses the sales process for specific product types and information on specific vendors and items. Saturday training is focused on attitude, motivation, salesmanship, and the customer experience. This training is conducted internally by staff. Training by vendors and sales representatives is additional.

Some product lines, Mueller says, require knowing a six-page presentation, word for word, “before we’ll even allow you to sell the product.” It typically takes two years of training before a new hire is considered ready to sell all products.

Training, Mueller emphasizes, is part of investing in the business. He preaches that investing in the business is necessary to grow the business and to stay in business. A retailer (or vendor) that doesn’t invest in doing things better, smarter, and more efficiently to maintain a competitive edge shouldn’t plan to be in business much longer.

“You’ve just got to reinvest in the business,” Mueller says. “The world’s changing. You’ve got to keep recreating experiences. If you’re trying to have a company with some longevity, this is the way you’ve got to think.”

The size of the store doesn’t matter so much as having that competitive, reinvestment attitude. “I’m not saying everybody has to have 100,000 feet,” he says. “You could have 5,000 feet. It’s all about how you think.”

Plank & Hide 2018 update

Plank & Hide, a designer and importer of casual furniture made in Asia, debuted at the 2014 Casual Market with a half-dozen collections. Some stood out with their distinctive looks and unusual materials, such as a heavy composite that could be finished to resemble massive timbers.

Plank & Hide’s founder, Erik Mueller, said at the time that he had a vision to offer something different and “not give in to what everybody else has.”

In more recent seasons, the products in Plank & Hide’s Merchandise Mart showroom have tended to look less unique. That apparently is what the market wanted, rather than outdoor furniture that looked quite a bit different and employed unusual materials.

Nowadays Plank & Hide’s products look more conventional and largely rely upon aluminum, resin wicker, and other standard materials.

Design differences tend to be more subtle than radical. A fire pit with a unique sliding top that closes to create a coffee table, introduced as a prototype at that first Casual Market, remains in the catalog and is featured on Plank & Hide’s website.

By adapting to the market, Plank & Hide remains a player in the crowded field of outdoor furniture manufacturers.

Plank & Hide also makes recreational products, such as pool tables, shuffleboards, and game tables. Those products have not been emphasized in the company’s Casual Market showrooms, but they’ve always been part of the lineup.

Now, Mueller says, “We’re in the billiard business in a big way.”

Mueller runs Plank & Hide and Watson’s as separate businesses. Plank & Hide competes for space on the floor at Watson’s with every other vendor of Outdoor Room products. A Plank & Hide product has to meet the same test as any other product in Watson’s showroom.

“Does this product compete?” Mueller asks. “Do I believe in my soul that this product is going to retail? And can I get the margins I need, compared to what everyone else is selling?”

If the answer is maybe, the product probably will get a chance. If the answer is no, Mueller says, that floor space is available for another item.

Watson’s patio furniture vendors have viewed Plank & Hide like any other competitor, Mueller says. There’s been little comment from them about Watson’s retailing furniture products made by another Erik Mueller company.

Criticism from makers of home recreational products has been more vocal, he says. They apparently feel Plank & Hide’s presence as a competitor a bit more acutely.

Although Plank & Hide maintains permanent furniture showrooms in Chicago and Las Vegas, billiard tables and shuffleboard tables are “our core business,” Mueller says.


Rethinking the Grill Business

A grill shopper at Watson’s may choose from products by Weber, Bull, Saber, and Primo. Wood-fired pizza ovens also are available. But there was a time about 15 years ago when the store changed course and offered no outdoor cooking products.

Mueller simply quit the grill business. “I was tired of no margin, of not making any money,” he says, “so I just got out of it.”

Shoppers who called to inquire if the store carried grills were told no. That “no” eventually started to bug Mueller.

“What happens when we say no? They’re not coming to the store. We’re turning down the consumer.”

A lost grill sale might mean additional lost sales. The customer who buys a grill at a home improvement or Big Box store, or a competing specialty retailer, might be tempted to purchase outdoor furniture, or an umbrella, or who knows what.

Declining store traffic is a universal concern. “So,” Mueller reasoned, “why do we want to tell someone, ‘Don’t come to our store?’”

A couple of years after ditching the grill business, Mueller reversed course.

Watson’s once again is in the grill business “in a significant way.” Margins, Mueller says, “are terrible. But it’s important to tell the consumer, ‘Yes, we have that. Come on in the store.’”

One thing you won’t find at Watson’s is a turnkey outdoor kitchen. Watson’s offers various outdoor kitchen components, such as under-counter access doors and refrigerators and drawer units. But a consumer must engage a contractor or landscape company (or be a solid DIY person) to turn all those individual components into an outdoor kitchen.

Mueller says Watson’s tried to develop the outdoor kitchen market years ago, “really ahead of everybody else,” and built up some significant volume. The category choked when Watson’s was unable “to find suppliers that could scale.

“We couldn’t find the supply chain for pre-fabricated kitchens at a cost that was affordable for the mass majority of consumers,” he explains. “And that’s where we failed.”

Outdoor kitchens “just aren’t a great fit for our business model.”

KUKA's Jenessa set with leather sofa and velvet arm chairs.

Custom Orders

Watson’s high-volume, deep-inventory approach means that special orders for outdoor furniture, while important, don’t generate the same percentage of sales as they might at a smaller retailer. A more typical retailer, with one or two stores and maybe 10,000 sq. ft. of showroom, might report that special orders account for 40% or more of outdoor furniture sales.

“We’re not a lower-volume business model,” Mueller says, so “it wouldn’t be a fair comparison” to look for an apples-to-apples relationship in special orders.

Outdoor furniture may account for nearly half of Watson’s retail showroom, but the store’s sales by category are not over-weighted in any particular area.

“We’re extremely well diversified,” Mueller says. No single product category accounts for more than about 25% of sales.

“The indoor addition to our business model will continue to diversify our products,” Mueller says. “It will continue to diversify our selling season and balance it out more.”

The Midwest may appear to be a homogenous region to East and West coasters, but Mueller and his team understand the finer distinctions, market by market.

Columbus is younger, hipper, and more fashion forward than Cincinnati, Mueller says. St. Louis and Louisville tend to be more conservative than Cincinnati. Market by market, Watson’s attempts to be “fairly aggressive from a style standpoint.” That approach can risk getting ahead of the market, he says, but that’s retailing.

“That’s what our customers come here for,” he says. “They come here because we’re not boring.”

Privately-held Watson’s doesn’t disclose financial data, and Mueller discounts suppositions that his company is the nation’s largest outdoor furniture retailer. “In the grand scheme of things,” he says, “we do a bunch of business. I think we’re a significant player in the world of outdoor furniture, nationally. But I think there’s bigger guys.”

The most important lesson to take away from Watson’s, Mueller says, is this: “It’s important for retailers to understand that there’s business to be had out there. You just have to work at it.”

His company’s actions back up his words.

“The store we had was one of the nicest home recreational products stores in the country. And I just leveled it. That should tell you,” he says, “how passionate I am about continuing to reinvest in the customer and show that we care.”

Because, he says, the new, eye-popping, audacious, coffee bar-equipped store is not about inflating Watson’s business ego. It’s about shoppers and consumers. “It’s about them and the type of environment we want to give them to come shop.”

As Mueller said, retail isn’t dead. But it does risk being starved to death by not serving up what changing consumer tastes long for.

A retailer today is either “aggressive and forward-thinking, or you’re not,” Mueller says. “The world isn’t the same as it was 20 years ago. There’s not as much room in the world for the nots.”

SNAPSHOT

Store Name: Watson’s

Address: 2721 E. Sharon Road, Cincinnati, OH 45241

Number of Stores: 23
12 Super Stores
11 Accessory Stores

Corporate Locations: Cincinnati, OH
(NEW as of 6/18); Florence, KY; St. Louis, MO

Franchise Locations: Dayton, OH;
Louisville, KY;
Clarksville, IN;
Grand Rapids, MI;
Kalamzaoo, MI;
Flushing, MI;
Saginaw, MI (NEW as of 8/18);
Hilliard, OH;
Rochester, NY

State: Ohio

Owner: Erik Mueller, CEO

Year Established: 1968

Web Site: www.watsons.com

E-mail: info@watsons.com

Phone: (513) 326-1100

Number of Employees: 535

Sq. Ft. of Building Space:
Showroom: 500,000
Warehouse: 300,000

Lines Carried: See Website below.
www.watsons.com/shop-all-brands

Annual Revenues: $100M+

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