NEW YORK — West Marine has undergone numerous changes in recent months, having been sold to private equity firm Monomoy Capital Partners, and taken from public to private last fall.
It also has made sweeping changes internally, including a 20 percent staff reduction at headquarters in Watsonville, Calif., so it could invest in areas like aggressive price matching.
“The organization, over the years as a public company, had become very top heavy in terms of senior leadership,” West Marine CEO Doug Robinson told Soundings Trade Only at the Monomoy offices in Manhattan.
While personnel cuts were made at the top, West Marine has invested at the local-store level. It has hired employees at locations that had been understaffed, and allowed store managers to make merchandising decisions.
The brand is also ditching its national marketing campaign and providing funds for store personnel to attend local boat shows and yacht club events, or hold their own events, as the company refocuses on core boaters and wholesale customers.
While it will keep some of the merchandise brought online in recent years as West Marine tried to position itself as a “waterlife store,” much of it will disappear in favor of core boating customers and West Marine Pro wholesale customers, Robinson says.
And, as many people have requested for years, the product book is coming back.
“Yes, we’re going to figure out how to do it,” Robinson says. “The only thing I would say is, be patient with us. You’re going to see us come back with a book and make that book better year after year. I am a sailor. I just sold my boat last spring. I kept a book on my boat, so if I’m offshore and something breaks, I can look it up right then. Firsthand, I understand the value of having that physical book that allows me to look things up.”
Staff reduction, local decision-making
Refocusing the company meant some tough decisions, particularly in staff reduction.
“For the people who we had to let go in Watsonville, I feel very badly that the organization made some of the bad decisions it made in its history,” Robinson says. “But I have a choice: Either I have to fix it for the other several thousand people so they aren’t impacted, or the business struggles for the longer term. Which is the right thing to do? We had to get cost structure in place so we can be successful or we could keep everybody. We can’t do that. Businesses change, particularly in retail.”
Since the now-private company no longer spends time doing Security Exchange Commission filings, or reporting to shareholders and boards of directors, the layers were redundant.
“We had a very deep decision-making management team — many layers,” Robinson says. “Our mandate is to be best in individual market that we can be in that marketplace. We expect each of our stores to be best boat suppliers in their town. In order to do that, we had to shift a lot of that responsibility from Watsonville to our local stores.”
The company flattened the organization from five levels of executives to two.
“We took costs out of our Watsonville office so the stores could do more of the decision making, and took a fairly large part of that savings out of the corporate office and added more payroll dollars in local stores,” Robinson says. “We put more staff in stores that had traditionally been understaffed.”
Managers have largely been excited about the shift, Robinson says. They feel empowered to make decisions for their clientele that had previously been out of their hands.
“Inside our business, the four walls of our stores, people have no anxiety about whether or not we’re going to be successful,” Robinson says. “I think where there’s anxiety is in wondering what other changes they have to make.”
There is, however, anxiety at headquarters, he said, because decision-making responsibilities have shifted.
“When you had an organization that historically had been top heavy with a lot of layers of executives and leadership, then decision-making was not just inefficient at times, but there wasn’t a personal responsibility for having made a decision,” he says. “When you get an organization that’s more lean, then there’s more personal responsibility for decisions you make.”
Decisions made locally
The previous decision-making process had caused the marine supply chain to lose its focus on core boaters and wholesale customers, offering products that could be obtained in many other locations and using a one-size-fits-all-stores concept from merchandising to advertising, Robinson says.
For instance, stores in coastal Rhode Island would carry the same things as a store serving inland Texas lakes.
“The poor store managers in Texas had been telling Watsonville, ‘We don’t sell these offshore flares. We need engine parts because we always run out,’” Robinson says. “We’ve changed systems and processes so the stores can be responsible for local inventories.”
West Marine is providing new training and tools for store employees, and plans to focus marketing locally, Robinson says.
“Our ads in Providence in March were the same ads we ran in Key West, Fla., in March,” Robinson says. “Those are two very different markets. Even the seasonality — people in Rhode Island in March are thinking of commissioning their boats for spring; Florida is already well into the boating season. It wound up creating marketing pieces that weren’t relevant to any market.”
Now local stores can participate in local boat shows, something that had been halted in recent years, local marina events, and local charity events.
The company has also changed its vendor terms to resolve complaints about having moved from 30 days to 90 days on inventoried items. The new term change was necessary to keep the new cost structure in line with the price-match guarantee that West Marine announced in March, Robinson says.
“We live in a world of price transparency that has never been seen in the retail world,” he says. “We price-match anyone and everyone, including Amazon. What we’re trying to do is make sure our customers know they can get as fair a price with us as anyone else, and can buy from their local supplier.”
Research shows that consumer loyalty dissipates when shoppers can find better prices elsewhere, Robinson says. But to accomplish price-matching, the company had to look at business costs at its two distribution centers and 250 stores across the country.
“When you look at our market position of the amount of inventory we carry so it’s available to the consumer immediately, it far eclipses anyone in the industry,” Robinson says. “We do that so we can immediately meet the needs of customers. In order to do that, we have to work with vendors to have the right payment terms to make that happen.”
Robinson says 90-day terms are standard in hard goods when businesses stock inventory, and are consistent with the terms that publicly traded companies like Lowe’s and Walmart offer their vendors.
“We carry inventory 180 days,” he says. “We’re asking vendors to cost-share the inventory. Now, there are some vendors we do business with that we pay in 30 days or less because we don’t stock their inventory. It’s a business decision around, how do we share the burden of costs for products we hold in inventory so they’re available to the customer right away? That’s beneficial to both the manufacturer and to us because they get the inventory closer to the customer.”
Pro customers and core boaters
The three segments that Robinson sees as critically important to West Marine are retail stores, West Marine Pro (the wholesale business) and e-commerce.
“I think over the last few years, one area we have not made some of the right investments and decisions is in our Pro business,” Robinson says. “We’re starting to put more emphasis in supporting our Pro customer. I think as boat ownership changes over time, many owners who are customers are going to rely on Pros to service boats.”
The company also sees opportunity in inland areas.
“Today we are largely saltwater coastal stores,” Robinson says. “I think over time there will be opportunities for inland waterways and lakes to be more important parts of our businesses. Those segments require even better execution for inventory assortment. All lakes and waterways have their own nuances. Is it a lake with a lot of skiing? Or sailing? We need to learn that and execute lake by lake, and river by river. As we do this local market approach, it will help us build knowledge and competency to do more growth in these markets.”
West Marine is asking its Pro customers to “forgive us for sins of the past and give us another try,” Robinson said.
“I think we have a really good offer to give them, which is give competitive pricing,” Robinson says. “I think we can help them be better recognized in the local markets. We’re doing customer appreciation breakfasts and … events in stores to have Pros promote their businesses.”
He adds, “I would also say the Pro customer has every right to be frustrated. We have had some challenges in our order system; we made mistakes and continue to make mistakes; and we’re going back and working on finding where they exist and why they exist. There are a lot of initiatives going on inside the supply chain to manage customer experiences. I don’t want to say to any of your readers that we’ve fixed all the problems in the supply chain, but we’re getting closer.”
West Marine has no plans to close or expand individual stores, he said.
Store operators have not expressed nervousness about West Marine being owned by a private equity firm, Robinson said — but they can become nervous knowing a sale is likely in the coming three to seven years, and that investment dollars will evaporate.
“Private equity manages a business more conservatively than public equity does. That’s true,” he says. “So do private owners. I think the thing that people associate with private equity is that there’s not a lot of budget, and not a lot of flexibility. When you’re managing a business to be successful and be well structured for the long term, you need to manage it that way because what happens when the market turns down? Business leaders have an obligation. There are thousands of people who rely on West Marine to be successful and provide a future, and we can’t do that if we don’t manage expense.”
Still, Robinson prefers to operate a business owned by a private equity firm, and he said that Monomoy is excited about owning West Marine.
“It’s the first retail business they’ve put into their portfolio,” he says. “However, they have a lot of experience and expertise in manufacturing, aftermarket, distribution, and parts and accessories. They understand that whole piece of supplying boaters because they’re used to having businesses that would support enthusiasts in other businesses.”
It’s impossible to know how long Monomoy, or any private equity firm, will hold onto a company it buys, Robinson says.
“There are investments they’ve held for five years plus, and businesses they’ve held less than five years,” Robinson says. “I think people should focus on the fact that Monomoy, myself and the executive team are focused on making the company successful and positioning it so it’s successful for the next 50 years.”
This article originally appeared in the June 2018 issue.