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Hearth & Home October 2014

Above Photo Courtesy: ©2014 Times Colonist.
Mike Black, owner.
*Alice’s Restaurant by Arlo Guthrie.

Canadian Leaf One-Stop-Shop

By Tom Lassiter

You can get anything you want (remember that song?*) at Capital Iron, in Victoria, on the island of Vancouver, in Canada.

One-stop shopping takes on a whole new meaning at Capital Iron. A customer with an empty SUV and a robust credit card might return home with the following:

Hiking boots, a ceramic grill, a GPS, gardening tools, an electric fireplace, an espresso machine, toilet paper, Christmas lights, a market umbrella, a leather sofa, a fishing rod and reel, womens’ wear, a table saw, a Union suit, a propane fire pit, an electric toothbrush, a paddleboard, nails, canning jars, and perhaps a bird feeder. A set of outdoor wicker furniture and a hot tub big enough for six would exceed the SUV’s capacity and have to be delivered.

This may seem like a far-ranging shopping list, but it barely scratches the surface. Capital Iron – an 80-year-old enterprise with three locations on Vancouver Island, British Columbia – tracks 63,000 SKUs.

Capital Iron’s motto – “There’s no store like it!” – would ring true with most of the 750,000 residents of Vancouver Island. The business enjoys name recognition with more than 90 percent of the population.

Mike Black, a former Canadian naval officer who married into the family business in the 1980s and became sole proprietor in 2011, appreciates that he has greater responsibilities than the average business owner.

“Capital Iron,” he says, “is an institution.”

A Little History

Capital Iron’s flagship location is on Store Street in Victoria, the capital of British Columbia. To the rear of the store is a body of water known as Upper Harbour. In the 1930s, the waterway provided access to the business’s stock-in-trade: aging ships for dismantling and salvage. Hence the name – Capital Iron.

That line of work sustained the company for several decades. Eventually, however, regular hardware products and other merchandise as far ranging as fabric by the yard were added to supplement the unpredictable nature of the salvage business. A little over 40 years ago, and after dismantling nearly 100 ships, the business exited the salvage trade to focus on retail. But it kept its iconic name and beloved location in a historic building downtown.

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.com
With 11 different brands, clearly the barbecue business is an important component of Capital Iron’s offering.

Black, who married the granddaughter of Capital Iron founder Morris L. Greene, joined the business in 1988. At that time, he says, the store had been selling barbecue grills and patio furniture for a few years, but hadn’t developed those categories into significant profit centers.

Black, who joined with two senior managers to buy the company in 1997, saw opportunity. “Somewhere around 18 years ago, I started to look at better quality stuff,” he says. He first focused his attention on grills, and patio furniture followed.

Mass merchants were ramping up their patio furniture offerings at the same time, making competition intense. Capital Iron entered the category by concentrating on unbranded casual furniture products, purchased from middlemen who negotiated with offshore factories. The company’s outdoor furniture, and the retail prices it had to charge, lacked a distinctive edge.

“It became increasingly clear that it was going to be difficult to compete with like product if we were buying from distributors,” Black recalls. “We decided to buy direct” from the manufacturers.

Individual retailers don’t often do business directly with factories in China and Vietnam. But Capital Iron forged ahead, perhaps emboldened by decades of meeting the many other challenges of doing business on an island. It’s also noteworthy that British Columbia is Canada’s gateway to Asia. The province has a large Asian population and enjoys many cultural ties to China and other Southeast Asian nations.

Black and other Capital Iron staffers headed to the Far East, sought out manufacturers, and cut deals to have containers of goods shipped directly, bypassing the distributors and middlemen.

One immediate benefit: “Our pricing dropped significantly,” Black says. But cutting out the middlemen meant losing payment options; factories want their money up front. Another issue involved storing the containers, or cans, as Black calls them.

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.comThe huge back lot provides an interesting outdoor display of patio furnishings, outdoor kitchens, planters and other products.

Storage turned out to have an easy solution. The waterfront area behind Capital Iron’s iconic building, once a boneyard for maritime iron, offered plenty of room for steel cans of outdoor furniture.

That storage strategy still applies today. Containers of furniture and other goods decorate Capital Iron’s back lot, which also serves as its outdoor showroom for casual furniture, outdoor kitchens, umbrellas, planters and other products.

Capital Iron’s casual furniture offerings today include a mix of product purchased direct from Asian manufacturers; furniture purchased through Casual Classics, a buying group based in California; and name-brand vendors, including Lloyd Flanders, NorthCape International, and OW Lee. The store purchased its first container of umbrellas from Treasure Garden this year.

Buzz Homsy, managing director of Casual Classics, can’t help but chuckle when he discusses Capital Iron and it’s something-for-everyone style of business.

“Their approach is such an anomaly that people flock to it,” he says. “Mike Black is an A-1 merchant. He’s a digger and asks the right questions. He’s ahead of the curve.”

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.com
A Napoleon fireplace is surrounded by “stuff” – high chairs, low chairs, pillows, lighting, armoires, etc.

‘Backyard Magic’

Inside the store, maritime artifacts pay homage to Capital Iron’s past. A ship’s wheel, brass lanterns, propellers and models of vessels add visual interest and complement the architectural details. Note cards (also for sale) chronicle the building’s history, going all the way back to the late 19th century, when the timber and stone structure was a flour and rice mill. Updated for the 21st century, the building today offers 45,000 sq. ft. of eclectic shopping.

A sign hanging prominently in the grill department ensures that shoppers know where certain products originate, e.g., “Napoleon Fireplaces & Grills – Proudly Made in Canada.” Barbecue grills and hot tubs are merchandised in an area the store calls “Backyard Magic.”

Capital Iron does an impressive grill business. Black estimates that his barbecue category (including outdoor kitchens and heaters) will generate about $2.4 million this year, which is up nearly 20 percent over 2013.

A significant part of the increase comes from barbecue sales at the company’s newest location in Langford, about 13 kilometers (eight miles) from the flagship store. Barbecue sales at the 23,000 sq. ft. Langford store, which opened in April, brought in around $250,000 in just five months.

“We carry all the major brands, from Broil King to Weber to Napoleon, Kamado Joe, and Bull,” Black says.“The vast majority (of sales) are Napoleon and Weber, between $1,000 and $1,500.”

The grill business on Vancouver Island, which enjoys a temperate climate, knows no season. Black expects to do around $100,000 in grill sales with year-end holiday shoppers.

The strength of Capital Iron’s barbecue grill business might surprise specialty retailers who have experienced slow sales growth in recent seasons. Competition, especially from mass merchants and home improvement stores, is intense everywhere.

Black attributes strong sales in grills costing more than $1,000 to a growing awareness that inexpensive grills frequently must be replaced. “We are finding that people are tired of the disposable (nature) of barbecues,” he says. “Even with a Broil King, if you take care of it, you’re going to get a solid six to eight years out of it – maybe 10.”

Capital Iron’s other answer to grill competition is service.

Any purchase of a barbecue grill priced at $400 or above includes a free protective cover. The store delivers and sets up the new grill at no extra charge. The homeowner’s old grill is carted away and its salvageable materials are recycled. Later on, owners who don’t want to fuss with a messy grill may call Capital Iron to have their grills cleaned and serviced.

Black says Capital Iron was probably the first store in Canada to offer such a comprehensive grill program, which is now 15 years old. Customers like it for the service aspect, he says, and because the program speaks to environmental stewardship.

“People are trying to be more Green on their purchases these days,” Black says. The Green approach also enhances Capital Iron’s already solid reputation. “Because we’ve been an institution in this town, people trust us.”

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.com
The company carries two lines of spas – Hot Spring and Caldera – and will sell about 120 units this year.

The store expanded into hot tubs and spas about five years ago with the Beachcomber brand (another product made in British Columbia). The Hot Spring brand followed.

Black expects the store to sell around 120 hot tubs and spas this year, generating revenues of “almost seven figures.”

Capital Iron has carried fireplace tools and electric fireplaces for years. Gas fireplaces, however, are a new category, joining the hearth lineup just this season. The main store has 10 functioning fireplaces that went online in June. With no advertising and during the peak summer season, Capital Iron sold about seven units within 90 days.

Black is looking forward to cool weather and the potential offered by the gas fireplace business. “We’re excited about that,” he says.

Environmental regulations severely limit burning wood, even in British Columbia’s campgrounds, Black says. As a result, fire pits that use propane or natural gas are quite popular – especially fire pits that offer more than just eye appeal.

“My folks want a fire pit that’s going to generate heat,” he says.

The company in recent seasons supplemented its container-direct and buying group furniture products with branded items. OW Lee, with its extensive lineup of fire pits and deep seating, was added this year. One early sale included a dining set, chaise lounges and chairs to surround a custom-made fire pit. The shopper’s tab came to about $13,000 just for the furniture.

“Everybody says those chairs are the most comfortable they’ve ever sat in,” Black says of the OW Lee deep seating.

Island Realities

Goods brought by container from the Far East usually are landed at the port of Vancouver. From there, cans headed for Capital Iron must be transferred by truck, loaded on a barge, and transported to Vancouver Island.

It’s a process fraught with uncertainty and additional expense.

The expense of moving a container from Vancouver to Victoria, a distance of about 50 miles as the crow flies, tacks on an extra $1,400 Canadian. Containers are returned to Vancouver empty, a factor that keeps costs high.

If a container is selected at random for a government customs inspection, Black says, “You get the privilege of paying $1,000 to have them unload it and inspect it.”

Containers that aren’t pushed through the shipping terminal in a timely fashion can be slapped with additional fees, called demurrage. The fee starts at $350 per day, per container, and can rise over time.

One particular container got stuck in port thanks to a strike, recalls Capital Iron director of Purchasing Terry Behro. The container then was rerouted far inland to Calgary before eventually making its way to Victoria. The additional costs associated with that demurrage episode exceeded $15,000, Behro says. “There’s no way we could mark that up and stay competitive,” he says. “So we ate that.”

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.com
The gardening area features ornaments and tools.

Capital Iron maintains a warehouse near the downtown Victoria location to supplement containers of furniture stored on its back lot. Furniture unsold at the end of the patio season will be stored until next year, as there is no patio merchandised indoors.

Black estimates that casual furniture will generate about $1 million in sales this year, a healthy contribution to overall revenues projected to reach $20 million.

The business takes seriously its responsibility to give back to the community that has allowed it to prosper. The store sponsors two annual charity events. The Celebrity Slider Cook-Off benefits a local food bank, while proceeds from Fashion Inferno go to the Victoria Firefighters Charitable Foundation. Both events are on the store’s back lot, where guests are treated to current trends in outdoor cooking equipment and furniture as well as a good time.

The company’s charitable efforts will return about $40,000 to the community this year. Capital Iron also donates merchandise to charity events. One recent donation was a $13,000 outdoor kitchen to an auction to benefit children who are ill.

Companies that do good works eventually earn recognition for those efforts, and that’s been the case with Capital Iron.

The company was recognized in 2013 with the Greater Victoria Chamber of Commerce Business Leadership Award. This year Capital Iron received national acclaim, winning the Family Enterprise of the Year Achievement Award from the Canadian Association of Family Enterprise.

Even though he has three thriving locations and about 100 full-time associates to occupy his attention, Black has made time to plan Capital Iron’s path for decades to come.

His youngest daughter recently graduated from Toronto’s Ryerson University, where she earned a degree in commerce and retail management. She’s honing her business skills at Target Canada, with eventual plans to return to Victoria and take the reins at Capital Iron.

At some point down the road, she’ll become the public face of Capital Iron, the one who closes TV commercials with “Capital Iron – There’s no store like it!”

Snapshot

Photos: ©2014 Bob Matheson Photography. www.bobmathesonphotography.com
Capital Iron, Victoria, British Columbia.

Store Name: Capital Iron

Location: Victoria, British Columbia; Sidney, BC; Langford, BC

Owners: Michael & Eveline Black

Key Executives: Michael Black, president; Terry Behro, director of Purchasing; Bill Brent, general manager

Year Established: 1934

Web Site: www.capitaliron.net

E-mail: mblack@capitaliron.net

Phone: (250) 978-2200

Number of Stores: 3

Number of Employees:
Full Time: 100
Part Time: 10

Gross Annual Sales: N/A

Av. Sq. Ft. of Building Space: Flagship store 43,000
Showroom: 38,000
Warehouse: 8,000
Outside Area: 25,000

Brands Carried:
Patio: NorthCape International, OW Lee, CCG, Own Direct Import
Hearth: Regency, Dimplex
Barbecue: Napoleon, Weber, Broil King, Alfresco, Lynx, Twin Eagles, Bull, Kalamazoo, Jackson Grills, Kamado Joe, Primo
Other: Hot Spring and Caldera Spas, Own Direct Import Fountains and Ceramic Garden Pots

Advertising % of Gross Revenues: 3%

Advertising: Radio 50%, Newspapers 25%, Magazines 5%, TV 5%, Other 15%

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