Going for the Green
Roger Maxwell's museum-like golf shop may draw sightseers by the busload -- but will anybody buy?
The First Tee. In the world of golf, the 18th hole at Pebble Beach is hallowed ground. One of the most challenging final holes in U.S. golf, the 525-yard, par-5 18th cuts a dogleg around an inlet of Carmel Bay and typically requires three well-struck shots to reach the green. The venturesome golfer, on the other hand, may be tempted to pull out a three wood and play the second shot across the water. But doing so requires the ball to carry 230 yards through a stiff sea breeze. It makes for demanding and risky golf.
Figuratively speaking, last September Roger Maxwell found himself on the 18th fairway at Pebble Beach, reaching for his three wood. He had just opened his specialty store, In Celebration of Golf (ICOG). Five bankers had already turned Maxwell down, telling him that retailing in this economic climate was too risky. They also told him he lacked retail experience, even though as director of golf development for Marriott, he had overseen course and pro-shop operations at 23 resorts. Maxwell thereupon plowed $1 million of his own money into the shop. That sum amounted to his total net worth.* * *
The Drive. At a mall in Scottsdale, Ariz., ICOG's sun-splashed entry, beneath a soaring arched facade, creates the sense that what is being offered here is not access to a shop but passage to a shrine. Inside, the space is huge -- 13,000 square feet divided into nine areas, each area a different treatment of some aspect of the game. Maxwell calls each area, with its category of merchandise -- gifts, art, equipment, apparel, antiques -- a "celebration." The theme unifying them all is the rich and storied game of golf. "We are trying," he explains, "to protect and enhance the traditions of the game in a retail setting."
Each visitor to ICOG is greeted by a clerk wearing white coveralls, identical to those worn by caddies at the fabled Masters Golf Tournament -- and even supplied by the same uniform maker. (No shortcuts here.) A glass case nearby holds, among other things, the silver trophy won by Tom Weiskopf at the British Open in 1973. The "claret jug," about 11 inches high, is unpretentious as prizes go, yet to cognoscenti it is one of the most coveted in the world. Around the corner sits the store's in-house artist, rendering in watercolor a famous golf scene. Down the way a wood-paneled antiquities room features old trophies and wood-shaft clubs.
ICOG is rooted in Scottsdale, in the midst of golf heaven. Surrounding Maricopa County is home to 244 golf courses, with another 33 currently under development. Last year 9 million people visited the Phoenix-Scottsdale area, and 2.2 million of them brought their clubs. In a sense, Maxwell might as well be peddling nicotine. People who know the game invariably admit to its addictive nature. Visitors to ICOG typically spend an hour or more there. Erik Pedersen, vice-president of sales for the western division of Izod Club, says, "To some people, golf is a religion." And through ICOG, Maxwell aims to be the high priest to such folk.* * *
The Player. ICOG's proprietor grew up within an easy six iron of a public course in Oklahoma City, where he caddied and subsequently learned the game. He went to Oklahoma State on a golf scholarship and became a teaching pro. Maxwell landed the job as head pro at Marriott's Camelback Golf Club, in Scottsdale, and from there went on to become a vice-president for Marriott Golf, responsible for the development and operation of Marriott's 23 golf facilities in the United States, a $65-million business.
Maxwell is well known in his circle. In 1993 Golf Digest named him one of the 36 most powerful people in the golf industry. Four times in the past 17 years the Professional Golfers' Association has named Maxwell its "merchandiser of the year" for the Southwest section.
While Maxwell considers merchandiser a complimentary term, he also has purer motives. "I've been collecting memorabilia from the game for 25 years," he says. He has a good eye and good sources, and he knows how to get his hands on unusual golfing items. It's that skill as a buyer that Maxwell seeks to forge into a competitive edge for ICOG.
Erik Pedersen says Tom Weiskopf's claret jug is "really impressive," the sort of touch that would draw serious customers into the store, earn their trust, and then loosen their grip on their wallets. Arranging such details requires not only a feel for and knowledge of the game but good contacts and a lot of shoe leather. Maxwell travels to five large gift shows a year, looking for the one golf-related gift item a vendor might produce. He is regularly in touch with various galleries and brokers that deal in old golf prints. He sells one-of-a-kind golf bags, supplying unusual fabrics to bag makers. The store's gift certificate is a replica of the gallery tag issued to fans at the 100th U.S. Open, to which Maxwell bought the exclusive rights. "That felt and smelled 'golf' to me," says Maxwell. "I can't believe they let that go."* * *
On the Course. These are boom times for the game of golf. According to the National Golf Foundation, a 6,000-member industry trade group headquartered in Jupiter, Fla., in each of the last three years more than 350 new courses have been built in the United States -- versus an annual average of 110 from 1983 to 1985. According to Alan Crittenden, whose company publishes 25 specialized trade journals dealing with topics such as golf, real estate, and banking, prices for existing courses have risen by 25% in the past couple of years, and a number of pension funds and real estate investment trusts are pouring money into golf-course acquisition and construction. "There's an excess of cash chasing these properties right now," notes Crittenden.
While he sees the pace of course construction slowing in the next few years, he believes the growth in the golfing population will not slacken. A 1994 survey done by the National Golf Foundation revealed that golfers over the age of 50 play an average of 38 rounds a year, versus just 15 for younger golfers. Golfers over 50 also spend at least 50% more on equipment and apparel than younger players do. Furthermore, in the United States today someone turns 50 every 8.4 seconds. By the year 2000, that will happen every 6.8 seconds. Equipment sales at the wholesale level have soared 45% in five years, while apparel sales have risen 30%, according to industry sources.
Changes at the retail level have been equally profound. Today just 20% to 25% of golf clubs and apparel are sold at so-called green-grass sites -- in pro shops connected to courses. Most of the rest are sold out on the highway between the Burger King and the Blockbuster by aggressive discount chains like Nevada Bob's. Mainstream retailers like Kmart and Target have also jumped into the fray, accounting for 20% of equipment and clothing sales.
Pro shops, meanwhile, have been swamped by vendors feeding the growth of the game. Maxwell notes that some 85 manufacturers now make golf shirts. Most golf pros could never afford to carry such breadth; at the same time they lack the inclination to sort through it to see which lines they should carry. The pros still make most of their money giving lessons and booking greens fees.* * *
A Gap in the Trees. It was in that maelstrom of industry change that Maxwell glimpsed an opening. Being a merchandiser at heart, with no course to tend and no tee times to schedule, he could stock an inventory broad enough to overwhelm the average pro shop. Indeed, he carries 20 lines of golf shirts and 40 varieties of shoes. He breaks his apparel lines down into "short stories" within the larger celebration. One of them celebrates four labels that bear the names of legendary golfers: Byron Nelson, Greg Norman, Bobby Jones, and Jack Nicklaus. Maxwell spices up that merchandising tale with visual references to two superhuman golfing events. The first is a collection of news accounts from 1945 that chronicle the 11 straight PGA events won by Nelson. The other is a half-size replica of the roadster that carried Bobby Jones through a New York City ticker-tape parade after he won golf's grand slam in 1930. (Since then, no other golfer has won more than two of the four grand-slam events in one season.)
Elsewhere in the store, Maxwell has devoted another celebration to Polo golfwear. Initially, Polo turned Maxwell down. "They told me they wanted to see me with a couple years under my belt," he recalls. "I told them they'd better come down here and see what they were missing." The president of Polo Golf came. Soon thereafter, Polo asked Maxwell for more space than he wanted to grant and offered him favorable terms on payment. Meanwhile, the presidents of such department stores as Dillard's and Robinson May have also been to visit and take notes. Scarcely a week goes by when someone with a camera, often someone in the trade, doesn't drop in to snap pictures of the layout. Maxwell also receives inquiries from investors wanting to franchise ICOG or otherwise invest in the company. One such visitor to ICOG recently was Ted Cohn, an investment banker from Livingston, N.J., who says he was struck by "the panache that went into this endeavor. I had never seen anything like it before." Cohn adds that if Maxwell "can hit his numbers," he would like to put him in touch with private investors.
While ICOG carries 4,000 stock-keeping units (SKUs) -- roughly five times as broad an inventory as the typical pro shop -- it also provides a level of service that larger stores lack. Maxwell can afford to offer such service because he's not depending for his profits on sales of commodity items at discount prices. He is trading, rather, on the lore of the game. A third of the store is given over to art, gifts, and furniture, much of it one-of-a-kind and generating gross margins north of 60%. Some of it is found by special request. "You never see this stuff in other stores," marvels Erik Pedersen, who has been selling for Izod Club for 13 years and has seen the inside of many a golf shop. "I'm looking for some bookends," he muses as he gazes wide-eyed across the shop. He turns and finds a pair on a nearby shelf. "These will do fine," he says, undeterred by the $85 price tag. Golf, he explains, is "a game for a lifetime, in which people are willing to invest."
While ICOG may be seen as a store for the hard core, Maxwell estimates that just 70% of his customers actually play the game. The rest are friends and relatives of players, who buy them gifts and help feed their addiction. Some shoppers are trying to decorate whole rooms in a golf motif.* * *
Skirting the Rough. In Roger Maxwell you sense a gambler. He seems willing, eager even, to break the rules of retailing -- an impulse all the more remarkable given the current hard times in retail. In a world where sales per square foot and inventory turnover matter all the more, Maxwell seems dismissive of such considerations. Asked what rent he pays, he replies, "I don't know off the top of my head." Well, has he designed the store to flow in a certain way? "Nah, I just slapped some golf things together. It looks good, doesn't it?"
Maxwell peppers his speech with imprecise words like touch, feel, and smell. He talks often about "selling sizzle."
In fact, that notion underlies his strategy. Lure the committed golfer in, intrigue the nongolfer. John Maitre, one of Maxwell's managers, says: "People who come in here see golf and feel golf. That gets them into a buying mood."
Most astonishing, ICOG has floor space that other retailers might consider wasted. An area designed to look like a club maker's shop at the turn of the century grosses about $800 a month in low-margin club-regripping work. Pausing in front of the workbench there, Maxwell allows: "I've been told, 'Roger, close it up. That's unproductive space.' I say, 'No, no, no. This is a fun area. I don't want to lose it.' "
Even more improbable is "The Men's Locker Room." Complete with four showers and hand towels laid out neatly at a spotless sink, the space resembles a country-club locker room. Maxwell waves a hand at a rack of 15 green blazers hanging in the closet, each of them the size worn by one of the last 15 winners of the Masters Golf Tournament. Small brass plaques mounted over each jacket give the golfer's name and the year of his victory. Maxwell says, "We've sold maybe 11 or 12 of these Masters Greens jackets. That's not a lot, but what I'm really trying to convey is an aura." The autographed photo of Ben Crenshaw, the 1995 winner, has yet to sell at $800. There's a "Women's Locker Room" as well.
Maxwell admits that ICOG attracts "a lot of lookers," who don't always become spenders. (On the other hand, some items that aren't intended for sale wind up sold. Customers buy the prop bottles of hair tonic from the sink in the locker room. Someone bought one of the couches in the spike shop.) The prices at ICOG can be intimidating. Hefting a $1,900 hand-painted porcelain pitcher, Maxwell answers the begged question: Who does buy such an item? "Some country club will come along and buy it. I don't worry about that." And then, of course, there is the 415-pound 15-foot-long driver, which goes for $25,000. Maxwell, imparting a positive spin, says: "To tell you the truth, I hope it doesn't sell. It causes too much conversation."* * *
A Fair Lie. ICOG opened for business last September 23 and generated sales of $1.5 million in its first six months of operation, while more than 15,000 people visited the store. Once cash began to flow, Maxwell persuaded his banker to lend him $350,000 at a rate of 10% for working capital, bringing the total capitalization of the business to $1.4 million. The $810,000 Maxwell had sunk into inventory secured the note.
For 1996 Maxwell initially projected revenues of $2.4 million, or about $200,000 a month. But sales in January and February totaled $496,100, and in March they accelerated further, to more than $14,000 a day, causing Maxwell to raise his projection to $3 million. He had originally estimated his gross margin for 1996 at 45.5%, but that, too, at 47.5%, was running higher than projected. (See "The Financials," below.)
On the other hand, operating expenses were also higher. Wages, salaries, and benefits, projected at $415,000, were actually running about 8% above projection. What Maxwell called his "controllables," all his variable expenses from insurance to cleaning supplies, begged for more control. They were about 10% more than the $408,000 he projected. Thus, while Maxwell had originally projected a pretax profit of $81,000 on sales of $2.4 million in 1996, he now foresaw earning $298,000 on $3 million.* * *
Water Hazards. Higher sales and higher expenses somehow fit Maxwell's go-for-broke modus operandi. "I'd rather sacrifice profit up front for sizzle," he says, adding, "people are bored by the malls. They're looking for something different." That Maxwell has given them something different one can't dispute.
"Roger is a great merchandiser," says Izod's Pedersen. Whether that means he's a great merchant is another question. One frequent comment among knowledgeable ICOG shoppers is "He's got a lot of inventory." That, Maxwell insists, is part of the strategy. "It's important to establish the right momentum and look. A smaller inventory wouldn't convey what I'm trying to do. It would say 'small shop.' We need the extra space, the extra sizzle."
Maxwell also acknowledges that his biggest inventory item, apparel, which accounts for 54% of sales at a 50% gross margin, "doesn't age well." He immediately reduces slow-moving clothing by 50% to get it off the shelves.
Another issue confronting Maxwell is price. At ICOG you don't have to look far to find $140 Bobby Jones golf shirts and $600 cashmere sweaters. On the other hand, Scottsdale is not exactly the South Bronx. The typical visitor to Maxwell's store appears to be a 60-year-old male golf fanatic, eager to drop as much as $140 on daily greens fees at one of the local resort courses.
In the next six months, Maxwell confesses, he must bring greater discipline to the business. He has started by grooming three key employees, each of whom will oversee a different section of the store. Next he needs to upgrade inventory control. "We have to computerize the back end of the business to get a firmer grasp on what's selling and when," he says. Since ICOG carries many expensive, one-of-a-kind items that might wait a long time for the right buyer, Maxwell insists that managing inventory will always be an art as well as a science. Therefore, he focuses as much on increasing sales and raising gross margin as he does on selling items that will move quickly. "I'm willing to sacrifice some profit for sizzle and uniqueness," he says. "If we take away the sizzle, then we really lose something."
In fact, Maxwell sees the uniqueness of his inventory as a competitive barrier to entry. He gathered unusual items for almost two years before opening the store, which has given him a head start on finding sources that competitors would have to cultivate. Would specialty retailers be prone to knock him off? Maxwell sees ICOG's emphasis on presentation and atmosphere coupling with his own knowledge of the game to create a unique asset. Potential competitors, he claims, would be better off doing a licensing deal with him. Besides, he thinks there are only about five other golf-intensive parts of the country where such a concept would work at the same scale: Myrtle Beach, S.C.; Carmel, Calif.; Dallas; Atlanta; and Naples, Fla. Once ICOG becomes profitable in Scottsdale, Maxwell will consider opening in one or more of them.
With his visitors' log of 15,000 names, Maxwell has a mailing list. He intends to produce and mail a catalog this fall, a $200,000-plus investment.
Maxwell is starting to see the same people in his store every month or so; many of them have become steady buyers. He makes them ICOG "members," which gets them their own membership card along with special invitations to preview new merchandise.
Maxwell casts his retailer's eye across the store. "The merchandise has to move around a lot," he says. "It has to look different each time a person comes in. If we can do that, we'll be OK because we're already catering to a clientele that's attracted to the unusual."
Company: In Celebration of Golf, in Scottsdale, Ariz., a specialty retailer with one 13,000-square-foot location.
Concept: Build a one-of-a-kind, high-end store to attract golf addicts as well as their gift-seeking families and friends.
Projections: Revenues of $3 million in 1996, with a pretax profit of $298,000; revenues of $3.6 million in 1997, with a pretax profit of $774,000.
Competitive advantage: A high level of service and the owner's ability to source hard-to-find merchandise
Hurdles: Tracking -- and moving -- a varied and extensive inventory containing some high-ticket items that will wait a long time for the right buyer.
Family: Married, one daughter
Education: B.A. in marketing, Oklahoma State University, 1967
Personal funds invested: $1 million
Equity held: 100%
Previous job: Vice-president, Marriott Golf; oversaw 23 U.S. golf facilities grossing $65 million a year.
Affiliation: Member, Professional Golfers' Association
|Labor and benefits||$450||$469||$490|
TEEING UP TO A GROWING MARKET
Golfers over 50 years old play an average of 38 times a year.
Golfers under 50 years old play an average of 15 times a year.
Golfers over 50 years old spend at least 50% more on equipment and apparel.
Someone turns 50 every 8.4 seconds; by 2000 that will happen every 6.8 seconds.
What's So Special About This Store?
SELECTION: A glance at the store's interior suggests that if it has to do with golf, it's somewhere in here.
MUSEUM EXPERIENCE: Fifteen green Masters blazers hang in the faux locker room.
OFFTHECOURSE: The store offers golf-themed home and office furnishings for die-hard golfers.
UNUSUAL GIFTS: The typical golf pro shop won't carry items like this 'History of Golf' chess set.
WHAT THE EXPERTS SAY
Founder of Boston Links Golf Shop, a golf retailer with two locations in Boston
With such a broad inventory, you end up with too much stuff that can't be sold at good margins. Maxwell has to get to know his customers so he can carry less but carry the prime beef. He also has to be conscious of what he really sells his goods for. Selling art, for example, eats up a lot of your time. You end up being like a design consultant -- but not getting paid for it. He's also not in the entertainment business, but people will come to see his large museum-quality rooms and hang out there. Someone has to pay the air-conditioning bill. If he's not charging admission, then he has to be conscious of being a retailer. That means valuing every square inch of space in the store. Right now, he has got all these extra little costs, but I don't see the extra profits that will pay for them.
President and CEO of Golf America Stores, a retail chain selling golf apparel, equipment, and memorabilia, based in Rosedale, Md.
It's a great concept, but it needs fine-tuning. Maxwell needs to computerize the back end of the business as soon as he can. He needs to have his computer system track sales by color, by style, and by size on a real-time basis. Max- well needs to have good tangible evidence through his computer system of what the customer is telling him, so he knows which vendors shouldn't be in the store and which should have more space. The other question is how he will expand a concept like this. He's built a one-of-a-kind destination store, and that's a constraint.
Business editor of Golfweek, a leading industry trade publication in Orlando
Maxwell's strategy is fascinating because he's combined a tourist destination with an upscale retail operation in a location that clearly lends itself to the right kind of traffic. What concerns me is his affection for terms like sizzle and feel. The novelty will wear off. Good repeat customers are not looking for that. Furthermore, I wonder whether he can roll out smaller versions of the store with the same intensity and feeling he's achieved in Scottsdale.
Walter F. Loeb
President of Loeb Associates Inc., a retail consulting firm in New York City
To grow beyond one location will be hard because Maxwell needs to replicate himself and his salespeople, who presumably have unique talents. He must concentrate on stocking more of what customers are buying than on having the broadest assortment possible. He should also focus on doing one thing well rather than having many things under one roof. And, unlike a sporting-goods store, which can sell skis in the winter and swimwear in the summer, ICOG has no seasonality built into it. Maxwell must find some way to attract the same customers again and again. Retail concepts survive on a sense of novelty and surprise.