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."
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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.
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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."
