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Hearth & Home October 2018

Warren Yadlowski.

Creating Lifetime Customers

By Tom Lassiter

©2018 MACRI PHOTOGRAPHY. WWW.MACRIPHOTO.COM.

After 25 years with Beachcomber, Warren Yadlowski surely knows hot tubs; he also knows retailing and marketing very well.

Q. How many bar stools does it take to equal one hot tub?
A: Too many.

The math is simple. One must sell a . . . load of bar stools to equal the financial infusion a specialty retailer gets by selling one $11,000 CN hot tub.

That explains Warren Yadlowski’s reasoning. The general manager at Beachcomber Hot Tubs & Patio in Edmonton, Alberta, has opted to concentrate on his store’s core product lines year ’round. He has resolved not to bring in auxiliary products in hopes of generating additional sales over the slower chilly months.

He and his predecessors have attempted that strategy and found it lacking. In his 25 years at Beachcomber, the store has tried Christmas trees, massage chairs, mattresses, and case goods to see it through the lean months.

And in each case, the math was similar. One must sell a boatload (gotcha!) of Yule greenery or bedside tables to equal a single hot tub.

“We are not in the indoor business,” Yadlowski says.

Most casual furniture retailers share his concerns about the off-season. Unless one is blessed with a particularly warm Sun Belt location, there comes a time each year when people just aren’t thinking about up-fitting the Outdoor Room with a new chat group or installing a new hot tub.

The fear is real. “All of a sudden, the tap could shut off and you don’t get any traffic,” he says.

Yadlowski, who oversees the three Beachcomber stores serving Edmonton, came up with a uniquely Canadian promotion to jumpstart sales when the province is knee deep in white stuff.

Snowblowers.

Buy a hot tub when the earth is hard frozen, and Beachcomber will throw in a snowblower for free.

“What do you think the consumer said? They thought it was fantastic. ‘Boy, you guys are geniuses! My wife’s wanted a snowblower for 20 years!’”

(Is it possible there are homeowners in northern Alberta who don’t already own a snowblower? Maybe that wife wanted one of her own.)

“If you sell an extra five or six hot tubs a month, that’s a lot of bar stools,” Yadlowski says. “We know what we’re doing in the hot tub business. Let’s just sell more hot tubs in the winter. How does that sound?”

Beachcomber Hot Tubs.

Beachcomber Hot Tubs & Patio knows what its doing, period. Yadlowski, who has run things since the store’s founders sold the business to an investment company in 2011, isn’t afraid to experiment and break away from the pack mentality. Under his leadership, the business has opened a third location and physically expanded another.

In a move that some specialty retailers might consider to be consorting with the enemy, Beachcomber participates in an intensive hot tub promotion with Costco.

Yadlowski and his team have skipped Casual Market Chicago in recent years. Like some other casual furniture retailers, they do what they need to do at Premarket, followed by a visit to the Las Vegas Market to see if there’s anything interesting in the temporary showrooms.

This year, Yadlowski’s team made a new September buying trip. Destination: Spoga+Gafa, the massive garden trade fair in Cologne, Germany.

Beachcomber already buys direct from a couple of casual furniture factories based in China. By attending Spoga, Yadlowski expected to see more of their offerings and perhaps make connections with new vendors.

Economic necessity drove Yadlowski to Spoga.

Buying direct “and I hate to say, cutting out the middleman, is the only way we can get prices down to where we can still (move product) and make profits,” he says. “It’s unfortunate, but that’s just the way it’s happening. And if we don’t, we’re going to be in big trouble.”

Beachcomber positions itself as a middle- to high-end dealer in one of the larger metro areas in North America with a population of more than one million. U.S.-based manufacturers OW Lee, Ebel, and Homecrest are long-time vendors. Beachcomber buys deep and sells from stock, with sales from inventory accounting for 90% of sales.

Manufacturers encourage developing the special-order business, but it’s a tough sell in northern Alberta. The lengthy time to fill an order, plus shipping, plus the added expense of a less-than-trailerload shipment takes away much of the appeal of special orders.

Premium brands face additional hurdles. The currently unfavorable U.S./Canadian currency exchange rate and rising shipping expenses push up the prices that must be charged for those brands. The general rule of thumb is that wholesale costs for U.S. products must be tripled at retail in Canada. The current trade war with the U.S. and the possibility of additional tariffs add more uncertainty as Beachcomber plans for 2019.

Yadlowski must exploit every opportunity to constrain Beachcomber’s costs. That means buying direct, which gets him the best prices on product and shipping. It also means placing orders early. He makes his Homecrest buy in August. He also strives to make his direct purchases before September.

“If you’re going to get anything shipped before Chinese New Year, those orders have to be in by August,” he says. Six to eight weeks on the water and by truck to Edmonton gets those containers to Beachcomber’s warehouse just in time.

And timing is everything in the casual furniture business, especially in the higher latitudes.

“If we don’t have our product in place by March, it makes it real hard,” Yadlowski says. “If you miss one or two months of selling time, you’ll never make it up in the fall.”

Everything for outdoor living displayed under a 40-ft. ceiling.

Evolution

Yadlowski’s brother-in-law founded Beachcomber Hot Tubs & Patio 35 years ago. He joined the company 10 years later. What began as a swimming pool service business quickly became a hot tub dealer and then moved into patio furniture. Grills were added about 15 years ago.

“Now we’ve become the outdoor living store in Edmonton,” Yadlowski says.

Two Beachcomber locations have 18,000 sq. ft. or more of showroom with 40-ft. ceilings, perfect for raising cantilever umbrellas. More than half of the space is dedicated to casual furniture. The third and newest location has about 9,000 sq. ft. of showroom.

The third store is only a 20-minute drive from one of the larger stores, but it’s in an area with one of the highest per capita income levels in Canada. The store first opened as a pop-up, in a temporary location, and Yadlowski logically stocked it with his top-end lines.

Shoppers let him know his logic failed. “That’s all you got?” they asked. “What if I don’t want to spend $8,000 on my outdoor furniture?”

Yadlowski revamped the product mix, bringing in more affordable furniture. Shoppers responded more favorably to choices, rather than being told to drive to another Beachcomber location. After two seasons in temporary space, Yadlowski felt confident enough to commit to a third permanent store.

You won’t find many vignettes at Beachcomber. Each store has a number of compartments – hot tubs here, patio furniture there. All sectionals are displayed in one area, with dining sets in another.

“We try to make it as easy as we can,” he explains. Customers “can make their decisions by moving from one to the other, quite easily.”

Tabletops are accessorized with placemats, plates, and glassware. Walls display flags, outdoor thermometers, clocks, and mirrors. The grill area has “charcoal trays, smoker trays, you name it. We sell tons of accessories and tools.

“Our store is full of that stuff,” Yadlowski says. “We pride ourselves on having things you can’t find anywhere else.”

Just as the company’s product mix and sourcing strategy has evolved, so has its name.

The company became affiliated with Canada’s Beachcomber Hot Tubs soon after opening. Independent retailers who signed on with Beachcomber “for a dollar and a handshake” got to use the name, signage, and point-of-sale material in return for brand exclusivity, Yadlowski explains. The deal remains the same today.

“By and large,” he says, “it’s been a good relationship.”

This unusual “friend-chise” business model explains why there are numerous Beachcomber stores sprinkled across Canada with many different owners.

The Edmonton Beachcomber stores have seen several name variations over the years. Beachcomber Spas was used for a time, until the Americanized usage became pervasive and shoppers thought a spa was a place for a massage, manicure, and perhaps a pedicure. Beachcomber Home Leisure was on the signage for a while. Now it’s Beachcomber Hot Tubs & Patio, and Yadlowski is happy with it.

“I like the fact that there’s no confusion about what we’re all about,” he says.

An umbrella adds a touch of color to a display of Napoleon grills.

Short Season, Long View

Yadlowski’s stores do more than 80% of their business in an eight-month span. The casual furniture season is even more concentrated, with most sales being made between April and September, which is “clearance time. We sell very little patio furniture between October and February,” he says.

Fortunately for Beachcomber, the end of the outdoor furniture season is an excellent time to sell hot tubs. That’s because when the air is frigid, Albertans love to immerse themselves in hot water.

Hot tubs, Yadlowski says, “are used more between September and April than they are in the summer. That’s the reality. We’re just moving into our super busy season for hot tubs right now.”

When the air begins to get nippy, homeowners hankering for a new or replacement hot tub get panicky, he says. Those who thought about a new hot tub all summer must act in the fall, or they might not have any bubbling hot water in the backyard come winter.

Beachcomber does everything it can to encourage buying now, not later. Financing can be arranged from the shopper’s smart phone. Purchase of a hot tub includes delivery, setup, and a “wet start.” In other words, it’s a turnkey purchase, ready to go.

Occasionally, customers look at hot tubs in the fall, thinking of a backyard remodel come spring. Construction of the new patio might be scheduled for April, but Beachcomber sees no reason to forego a new hot tub until then. Beachcomber offers a “six-month move policy.” The company will install the tub in a temporary spot where the homeowner can enjoy it through the winter.

Then, Yadlowski says, “We’ll come out and move it within your yard for free within six months.”

New hires are told to think of Beachcomber as being in the car business, except “we call them hot tubs, and we’re a little smarter than the auto business. We also sell fuel, and we have a service station in all our stores.”

As a result, Beachcomber’s customers return again and again. The adult children of loyal Beachcomber customers become second-generation customers. Hot tub customers need patio furniture, umbrellas, and grills.

“It’s all about foot traffic and getting these people back in,” Yadlowski says.

Beachcomber Hot Tubs & Patio enjoyed its best year ever in 2015. Its second-best year was 2016. Sales declined a bit in 2017, Yadlowski says. “We have struggled a bit,” he says. “I will be upfront with you.”

Store traffic has declined since 2015, perhaps another symptom of the still ailing local economy. The economy of Alberta, with great petroleum reserves, is closely tied to Canada’s energy markets.

The hot tub business has remained strong, though some of the company’s other product categories have taken the hit. Maintaining sales volume is all about finding the sweet spot with the right balance of price point, product, and perceived value. This season, Yadlowski found it in another high-ticket category: modular outdoor kitchens.

Beachcomber learned in previous seasons that customers would buy an outdoor kitchen package with a cabinet, grill, refrigerator, and storage if the price could be capped at about $10,000. But with the unkind exchange rate and rising freight costs, the retailer found few options.

That changed for this season with products from Bull. Customers liked being able to customize the synthetic stone face of the two-tiered bar of Bull’s Ultimate Q model. Beachcomber stocked the product and participated in a quick-ship program. Tickets came in around $8,500 or less, the perfect sweet spot for the Edmonton market.

“We couldn’t keep them in stock,” Yadlowski says. “The price point was phenomenal.”

Once Beachcomber lands a customer with the sale of an aspirational product such as an outdoor kitchen, other sales often follow. Sometimes those sales follow sooner, rather than later.

A shopper came in intending to purchase a hot tub on an August Saturday. He did. But before leaving, that customer also purchased an outdoor kitchen and patio furniture. “Basically,” Yadlowski says, “everything we have.” The only product type not listed on that ticket was a big umbrella, but that purchase may come next spring.

Fire pits share space with deep-seating chairs.

Beachcomber made its first direct purchases from Chinese factories about two years ago as a way to counteract pressures that have continued to worsen in 2018: an unfavorable exchange rate and rising shipping costs.

A lot of U.S.-sourced product, Yadlowski says, “has priced itself out of my Western Canadian market. We were a fairly successful Tropitone dealer for many years. We’re not anymore.” He had to drop the line.

The decision to buy containers direct from factories has paid off. “The difference in the cost and pricing for us was astronomical,” Yadlowski says.

The price points afforded by container purchases, he says, allow Beachcomber to retain customers it would otherwise lose to competitors such as membership warehouse stores, home improvement chains, and mass merchants.

Yadlowski says he repeatedly saw young families shop for furniture in his stores but fail to buy. Upon follow-up, he learned that they often purchased a patio set in the $2,000 range from a competing Big Box store. Before purchasing direct, Yadlowski had nothing for them.

He acknowledges there is a market in Edmonton for high-end, top-quality casual furniture offering superior comfort and a long warranty. But he felt Beachcomber couldn’t ignore shoppers with less buying power.

“For us to compete and continue to grow, we have to bring in product at that $1,500 to $2,000 price point,” he says. “Going direct to China has allowed us to bring in quality, outdoor, all-weather wicker furniture in deep-seating sets or sectionals, a lot with Sunbrella or equivalent material. It’s selling very well.”

The strategy, he says, is the only way to keep prices down, make profits, and move all the product by season’s end.

“It’s unfortunate,” he says, “but that’s just the way it’s happening.” Had Beachcomber not taken this path, the result would have been “big trouble.”

Yadlowski is pleased with the product mix on his floors now. At the lower end, Beachcomber has better quality entry-level product, two or three steps above that of competitors, he says.

“By going direct, we are finally able to compete at a similar price point. We’re finally there,” he says. It’s like going back 25 years, he says, to be able to offer a four-piece set with a love seat, two club chairs and a coffee table for $1,499.

“But now, in 2018, I can price it at that and still make the margin I need to be successful.”

Unusual Partnership

Edmonton boasts seven Costco membership warehouses. Each runs a multi-day hot tub promotion one or more times during the year. Each one is staffed by sales personnel from Beachcomber Hot Tubs & Patio. The arrangement is in its ninth year.

Costco invited Beachcomber to be its hot tub purveyor after a prior arrangement led to too many returns, Yadlowski says.

The downside of the deal is that Costco “takes a good percentage of the sale.” The upside, he says, is that Beachcomber still makes money and potentially earns a new customer for life.

“The beauty of the Costco customer is that they’re our customer,” Yadlowski says.

Those who buy a hot tub in an Edmonton Costco are treated “just like a normal customer who buys in our stores. They’re treated exactly the same way. Same delivery, service, everything.”

When friends ask that homeowner where he got his hot tub, the answer isn’t Costco, Yadlowski says. It’s Beachcomber.

The “customer for life” philosophy has credibility. Yadlowski sees it in the second-generation shoppers who come in to furnish their first Outdoor Room. He sees it in loyal customers who come back year after year.

For example: There’s a fellow who comes in for a new Beachcomber hot tub every time he moves. He got into a new house in August and bought his fourth hot tub. He purchased a model from inventory and got his wish to have it installed the next week.

Yadlowski smiles when he recalls the salesman’s summary. “Easiest sale I ever made.” That’s just another benefit of nurturing customers for life.

SNAPSHOT

Store Name: Beachcomber Hot Tubs & Patio

Address: 15139-118 Avenue, Edmonton, Alberta
5213-99 Street, Edmonton, Alberta
270 Baseline Road #128, Sherwood Park, Alberta

Number of Stores: Three

General Manager: Warren Yadlowski

Owners: Value Invest

Year Established: 1983

Web Site: www.beachcomber.ab.ca

E-mail: warren@beachcomber.ab.ca

Phone: (780) 448-9815

Number of Employees:
Full-time: 18
Part-time: 5

Gross Annual Sales: $10.5 million

Sq. Ft. of Building Space:
Showroom: 12,000
Warehouse: 3,000
Outside Area: 1,000

Lines Carried:
Hot Tub: Beachcomber Hot Tubs
Barbecue: Napoleon, Weber, Bull, Louisiana Grills
Patio: OW Lee, Homecrest, Erwin & Sons, Plank & Hide, Ebel, Kettler, Hanamint, Woodard, Treasure Garden, CRP

Advertising % of Gross Revenue: 2.5%

Advertising:
Direct Mail: 10%
Other: 90%

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