Downsizing? Call it ‘right-sizing’ - Trade Only Today

Downsizing? Call it ‘right-sizing’

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Businesses were so focused on survival after the recession that few have looked ahead to anticipate the next one. But Russo Marine is cutting its overhead by 40 percent by “right-sizing” the dealership, which means selling the flagship store in Medford, Mass., and moving into a smaller one — on a bigger piece of land — in Danvers on the state’s North Shore.

The move for the family business, which celebrates its 75th anniversary this year, might be a sign of the times in what the industry still refers to as the “new normal” six years after the Great Recession. With real estate selling at a premium in the region and when dealers carry a fraction of the inventory they used to, Russo Marine no longer needs a 42,000-square-foot showroom, says Larry Russo Sr., who runs the operation with his wife, Bee, and two sons, Larry Jr. and Alex. Russo took over the business from his parents decades ago.

He says he has always been an optimist who loved to invest and take business risks, but he is now more conservative as a result of the most recent recession. And when another one hits — in three to five years, if economic history is correct, he says — he plans to be ready.

“All of this since 2008 has been a constant readjustment to the new normal,” Russo says. “Maybe it comes with age, or maybe with more experience, but I think we’re better focused on what might occur. I think conservative, moderate growth is the new normal. The business model is different now than it was 10 years ago.”

“This whole recovery has been tempered by the pain of the last recession,” Russo says. “The entire world is moving slower and much more cautiously through the recovery because they don’t want to see any growth spikes that lead to problems of the past.”

The dealership will move into a building in Danvers that is 25 percent smaller than the current one, but on a chunk of land 25 percent larger. Russo says the land area for boats is more important than the interior space.

“It’s right-sizing,” Russo Sr. says. “Our inventory backup is significantly less than it was 10 years ago. When we moved into the Medford property we had 100 more new boats in stock than we do today.”

Russo sees the move as a growth opportunity. “The Danvers property has nearly an additional acre of open space,” he says. “It will allow us to adjust to having more inventory or having more boats in storage or more service boats on site.”

For the past few years, bidders were knocking on the door of the Medford business, offering more money for it than its appraised value, Russo says. So last year the family decided to evaluate where to move or even whether it made sense to move.

“We as a family started to do the research, using a lot of different data points,” Russo says. They looked at where their customer base was, where opportunities existed and at the demographic in some up-and-coming communities. They also listened to a customer base that was hesitant to tow a boat for service to an area so close to Boston proper.

“We also wanted a piece of property with highway visibility,” he says. “And we wanted something that was closer to the water and larger in footprint.”

By assembling all of the data points and physically mapping them, the Russos decided to begin searching in Danvers and found the perfect place right away. Settling in Danvers also means more access to potential customers in southern New Hampshire and Maine.

The family struck a deal to sell the Medford location to the Herb Chambers chain of car dealerships at a premium as soon as they found the new location, which began as a furniture store and went out of business as a gym in 2009.

“By moving, we’re going to lower our fixed operating costs by about 40 percent because we’re able to take advantage of a property that has been empty since the recession,” Russo says. “The landlord and the community were anxious to get a tenant in that property to revitalize it. So we were able to make a very favorable deal.”

The building — which has 25,000 square feet — will be completely gutted and renovated. The Russos also will build a 6,400-square-foot addition and will have 32,500 square feet of showroom space when it is completed.

“We’re losing 10,000 square feet of interior space, but we’re gaining it outdoors,” says Russo. “It doesn’t mean we’re reducing our business or planning for smaller revenue. We’re just admitting we don’t need as much showroom space as we’ve had the luxury of having for the last 10 years. We can get by with less as long as we have more outdoor space for planned growth.”

“It’s still going to be the largest showroom in the Northeast, so we’re OK with that,” Russo adds.

The Russos will spend the next six months building out the new property. They plan to move into it in late July and open for business about Aug. 1. The showroom will mimic the one at the Medford store, which customers often compare with a boat show in terms of presentation. It will have a larger service area, perhaps another sign of the times. Dealers have grown the service arm of their business as new-boat sales declined.

“That’s important for our business. There’s a little more emphasis on service buildout than there was when we built the Medford location 10 years ago.”

Russo says he plans to be ready when the next recession strikes.

“Five years from now, I contend there’s going to be another recession — not a big panic, like the last one, but enough to put a little damper on business growth. I’m not predicting doom and gloom. I’m just looking at history and saying, ‘It’s a fact.’ Just be prepared. Don’t panic.”

This article originally appeared in the April 2015 issue.

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