A Class Letter

I’m posting this letter from the House of Carrington to their customers as a blog entry for a number of different reasons. Their letter reflects the times as well as the state of business at the House of Carrington and is extremely well written. The principles who run the company, Andy Bell [President] and Jared Henzlik [Vice President], have become good friends and have great product. Their web site, http://www.houseofcarrington.com/, while not the typical tour through the catalog will suffice to impress upon the reader the level of marketing sophistication these gentlemen are attempting to bring to golf retail and I would like (as much as is possible on my part) to see them continue with their incredibly styled line and be a major force providing quality and class to the retail and golf industry through 2010.

June 1, 2009

Craig Kirchner
1610 Stonegate Blvd.
Elkton, MD 21921

Dear Craig,

I hope this letter finds you and your family in great health and your business finding some measure of success in this economy. I wanted to first say thank you for your support of House of Carrington. As a small, exclusively distributed luxury brand, it is only through strong relationships that we have found our early success. I take great pride in the efforts of our sales and customer service teams and the relationships they have built which have enabled our business to grow in extremely difficult conditions. Our success at retail, however, is entirely due to the belief of our retail partners, like you, in our brands and our products and sharing that belief and excitement with your customers. For that, I offer my deepest gratitude.

Over the past 12 to 18 months, we have all witnessed a challenging economic environment that only a few people have ever witnessed before. For me, once is enough. The business of wholesale and retail apparel has fundamentally changed right before our eyes. A business that was built on advance orders 5 to 8 months ahead of the start date is now gone. In its place we have a new business where both wholesalers and retailers alike, want to reduce inventory, buy what we need when we need it and avoid the advance commitments that backed up on all of us the last few seasons. The interesting thing about difficult times is that you learn a lot about yourself, your business and your business partners. We all must evaluate everything we do to ensure we have the right strategy going forward.

As much of a challenge as it represents for us as a wholesaler, when we put our retail hat on, we believe the new model of lower advance orders and stronger in-season orders is the right model for our customers. We also believe this model is here to stay and therefore we need to adapt how we do business. We must find a way to keep production minimums at the lowest possible levels and shorten lead times while offering a solid foundation of core items and small, but compelling fashion collections. We must also find ways to leverage technology to bring efficiencies to the order process, increase our speed to market, decrease costs and increase margins for ourselves and our retail partners. The challenge of adapting to this new market reality is a daunting one, but one we are excited to tackle. To quote a dear friend of HOC, we want to be the “idea guy” in the market and innovate with new products, new technology, and new ways of executing an old business model.

Our first step to adapt to the new reality is a complete evaluation of the coming fall season. In analyzing our advance orders for fall along with our production minimums and lead times, the most responsible business decision we can make is to not produce the fall collections. Based on production minimums, the amount of inventory required to fulfill the orders would create far too much excess. We would have made this decision sooner but we wanted to give the decision as much time as possible to look for signs of improvement. As you know all too well, retail has remained challenging on all fronts. Being a small, family owned business, our margin for error is small and we need to make sound financial decisions at every turn.

Our decision was a difficult one to make but probably no more difficult than decisions you have had to make in your own business. We are in a position with our current inventory to ensure flow of quality products throughout the fall season continuing to support you when you need us. We have beautiful sweaters, great colors and patterns in short sleeve and long sleeve knits and fleece, and amazing sport shirts made from the best fabrics in the world. Our mission as we move forward from today is to maximize the use of our existing inventory to service your needs as best we can for the fall season.

Our Spring 2010 collection is in the sample stage. We have already taken the steps necessary to ensure this collection is closely aligned with our strategy for the future. You can expect to see a solid foundation of great core items with small, but frequent fashion collections to maintain a consistent flow of product throughout the season. While we are cautious about the short term, we are optimistic about the future and excited by the challenge of adapting our business to the new market realities. We will certainly reach out to you when we are ready to present our line for Spring 10.

We sincerely appreciate your support both past and future. Extraordinary times call for extraordinary partnerships. Should you have any questions or suggestions about our product, our plan, our people or anything else, please feel free to call me directly at our corporate office.

Sincerely,


Andy Bell
President

The Freeze Mode

I was in a pro shop recently on a bad weather day at a fairly high-end club. There was no play and one assistant pro [Jim] behind the counter when a member walked in and announced that he needed a rain-suit and that he was leaving for Scotland in two days. I saw Jim frown but offer to help the member see if they had what he needed; they didn’t have the large he needed. When the member left Jim looked at me and said, “I know what you are thinking, but we are in a freeze mode and haven’t been able to order anything for about a month now. That rain-suit is not the only thing we don’t have”.

Of course I’m thinking of all the obvious business implications, not the least of which is the $500 sale the shop just lost. The member who still has the need will find a rain-suit and at the same time a new place to shop. His attitude about his home base taking care of his needs has diminished considerably.

Unfortunately for everyone in the business this has become a mantra, ‘we do not have open to buy’. This message usually comes down from the head bean counter and for obvious financial reasons. Inventory may be higher than he prefers and sales generated so far this season do not seem to justify it. There is also the scenario where the shop's business is healthy but the club or facility doesn’t have capital, owns the shop and continues to look for expenses to cut.

At this point however we are no longer running a retail business, no longer are we trying to provide top of the line service, no longer are we providing the basics that are needed daily in order to be considered by regulars or members as a full service shop. Instead we are putting up a banner of negative marketing about our troubled waters and the question for the member becomes not just one of where to buy a rain-suit but where to be a member or a regular, where best to play and have the entire experience. Where will they be able to tend to my guest's needs?

Inventorying a rain-suit in the basic sizes and replacing one when it’s sold is not an ‘open to buy’ issue, it’s simply minding the store. A solid shirt section that is counted and filled every Tuesday morning to a par level of a week’s worth of shirt sales with a vendor who has the right solid shirt for your facility as an in-stock program with a 7 day turn-around is the most economical way to be in the solid shirt business. Not long ago I visited a shop that had pre-booked eight skus of men’s shorts for the season but were out of 38’s. They weren’t buying any more shorts as they were told to sell the ones they had and it isn’t even Father’s Day. Again, no one minding the store, lost revenue, members needing to buy elsewhere. A staff member should have been part of the strategic planning as regards each of these categories and responsible for keeping up the par levels to insure no loss of sales. Doing this effectively per all pertinent categories is the best way to lower inventories and increase turns which, of course, should be the goal.

If Wally Uihlein doesn't call, something's wrong