New England-based Russo Marine is “right-sizing” its business by selling its Boston area flagship store and relocating north to a smaller building on a larger plot of land that is closer to the water and has more highway visibility — and subsequently slashing operating costs by 40 percent.
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 devastated it.
With real estate selling at a premium in the region and at a time when dealers carry a fraction of the inventory they used to, Russo Marine no longer needs a 42,000-square-foot showroom, said Larry Russo Sr., who runs the operation with his wife, Bea, and two sons, Larry Jr., and Alex, after taking over the business from his parents decades ago.
The dealership will move to Danvers, Mass., which is on the north shore of the state, into a building that is 25 percent smaller than the current one, but on a chunk of land that is 25 percent larger. Russo says the land area for boats is more important than interior space.
“It’s right-sizing,” Russo Sr. told Trade Only Today. “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.”
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,” he said. “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 will construct a 6,400-square-foot addition and will have 32,500 square feet of showroom space when the work is completed.
“We’re losing 10,000 square feet of interior space, but we’re gaining it outdoors,” Russo said. “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 added.
The Russos will spend the next six months building out the new property and have plans to move into it late July and open for business about Aug. 1.
Russo, who said he was always an optimist who loved to invest and take business risks, said he is more conservative as a result of the most recent recession.
“This whole recovery has been tempered by the pain of the last recession,” Russo said. “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 the problems of the past.”
When another downturn hits — in three to five years, if economic history is correct — he plans to be ready.
“All of this since 2008 has been a constant readjustment to the new normal,” Russo said. “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.”