Key Idea #1 Reinvent Yourself

HATTIE: Hi. I'm Hattie Bryant, and welcome to SMALL BUSINESS SCHOOL. If you have a business, or want to start one, this is the place for you. Last week, wholesale, this week, retail. Today, we go to San Diego, California, inside The Art Store.

This is a how-to series about starting, running and growing a business, and we think you learn best from people who have already done what it is they're talking about. In academia, they would call what we do here a Master Class. That is, you don't have a professional teacher with a specific curriculum. You have an opportunity to meet a person who will tell you how it is they do what they do. This is not a class, it's an experience. Grab a pencil and paper. You'll want to take notes.

(Voiceover) After 30 years of working for huge companies, George Granoff is now an entrepreneur. Even though he lives in Boston, he owns The Art Store, which has locations in California and New York City.

GEORGE GRANOFF (Owner, The Art Store): I woke up one day and realized that I really enjoyed the hands-on store level, working with customers, building business.

(Voiceover) I poured a lot of money into the plant in order to put in new floors, new ceilings, new lights, new fixturing. We widened the aisles.

Basically, the attempt was to improve the shopping experience for the customer.

Unidentified Man #1: It's just a lot easier to get to everything. The paints are with the paints, the brushes are with the brushes.

GEORGE: One of the important things that I think we accomplished when we attacked these stores and remodeled them, was to identify certain classifications of product that perhaps we could show in a manner that was more customer-friendly. In the past, all these papers were shown--were carried in metal drawers and the customer had to go through individual drawers to take a look at what our assortment was. We felt that our assortment was so interesting that it would create much more impact if we had it out and visible to the customer. So we got rid of all those drawers, and put all the paper out.

HATTIE: So this is a new invention.

GEORGE: This is a new invention. We have experienced--the down side is, we have experienced some damage due to customer handling of the product. But our sales of paper have exploded because the customer can come in and at a glance get to see the huge assortment of paper that we carry.

Unidentified Man #2: OK, so a shade of this between the two should do the trick?

Unidentified Man #3: Mm-hmm.

Man #2: OK.

Man #3: Yeah.

Key Idea #2 Choose Where To Shine

GEORGE: Once you get inside the store, I believe that a retailer--operators have to deal with three different issues: issues of assortment, price and service. And I think that what--at least in my own view, what I do is I go out and shop the competition, looking very carefully at those issues. And I believe that unless I'm prepared to strive for dominance in two out of those three, at least, I am cutting short my opportunity to achieve success in my business. So that the great retailers have accomplished success in all three. A Home Depot certainly has assortment, a competitive price and excellent customer service. In The Art Store company, we hire and train our store personnel so that they are very adept in the product and the product's uses. Most of them are artists, and we require the manufacturers to come in on a regular schedule and train our employees on the newest uses and trends and opportunities to maximize their products.

HATTIE: You had some colleagues that you had as friends over the years who said to you when you bought an art store, `You don't know anything about art.' What did you say back to them?

GEORGE: Well, they weren't really colleagues. They were other people in the art material business who said, `How would you expect to be successful in the art supply business if you have no background in art supplies?' And that's an interesting comment. My background is in retailing, customer service, creating a delivery system that bridges the manufacturer to the consumer in an efficient way that gets the products that these manufacturers make to the consumers. And really, I have always seen myself as a retailer. And I take great care in hiring people as buyers and merchandisers who are artists and know all about these products, and I count on them to steer me in the right direction.

Unidentified Employee #1: That's $45.03, please.

Key Idea # 3 Offer Insight

HATTIE: (Voiceover) The Art Store may have been losing money when he bought it, but George was lucky to inherit some great employees.

GEORGE: Very often customers come in and say, `I need product X.' And our employees are trained to ask, `Well, what application are you going to use product X for?' Because very often the customer is heading for not the best choice of product. So we want to make sure that they're gonna get the effect that they're looking for.

Unidentified Employee #2: Well, do you want to get them all individually instead of this case?

Unidentified Man #4: If we can get them all individually, sure.

GEORGE: Because our store selling employees are largely artists, they can communicate with those customers and dig in and find out, `Well, what are you trying to get to? What are you trying to get to with this work?' and perhaps--and `I want you to know that you have two or three alternatives that each give subtle differences in effect. Which one would you really like?' And that's the kind of detailed service that many of our customers really need.

Unidentified Employee #3: What classes are you taking this semester?

Man #1: Well, actually I'm an engineering student.

Employee #3: Oh, really?

Man #1: I just paint as a hobby.

Employee #3: Well, that's cool, that's cool. That's kind of a nice balance, there.

Man #1: Yeah. Gets me away from all the calculus and physics and all that kind of stuff.

Key Idea #4 Infuse Fresh Thinking

GEORGE: Well, I actually think that to a certain degree not being in this business and not having the background in art supplies has been a benefit to me, because I don't necessarily have to accept the way things have been done for 10, 15, 20 years. In some cases the art material business is behind the general retail curve regarding scanning, bar coding, just-in-time delivery . . .

HATTIE: So you're not stuck in a rut.

GEORGE: I believe that many times during the past year and a half my lack of knowledge in the art material business has helped me focus on an issue that otherwise has become accepted practice and just the way things have been done forever.

HATTIE: It's fresh eyes.

GEORGE: And I've had a chance to say, `Well, wait a second. That's really not the best way to get this done.' What's in my mind for future is growth. And we have really two avenues of growth that we're currently analyzing. The first is to support internal growth with which we could open one or two stores a year from cash flow and grow this company over the next four or five years to two or three times its current size.

We operate and maintain an enormous level of in-stock, with no back room in this operation.

HATTIE: (Voiceover) What do you mean, no back room?

GEORGE: There is no back stock. All the inventory that we own in this building is on the floor.

And we fill this store sometimes weekly from certain suppliers, sometimes twice a week from certain suppliers, exercising sort of the just-in-time delivery strategies that I saw developed in bigger retail companies during my prior life.

It is an enormous challenge to stay in stock in 17,000 different items, day in and day out, with no back room and no warehouse.

And there is virtually nothing in this building besides what you see on the floor. And I think that that is a credit to my organization and technology.

Key Idea #5 Database Everything

HATTIE: Technology is an important part of George's strategic plan for growth.

GEORGE: One of the areas that was the most important to us was to install point-of-sale scanning at the front end of the store, so that the customer's merchandise was bar coded and scanned by the cashier.

This item is missing, and what's gonna happen today is that someone's gonna go through this store with a Telzon bar code reader, and they're gonna pop that bar code, which is gonna cause an order to be written for that item. And we happen to buy this item through a distributor, and that item will be here in two days.

HATTIE: You're kidding.

GEORGE: No.

HATTIE: And that goes through the phone lines.

GEORGE: Yes. That information is transmitted through the phone lines, and that order will be at the manufacturer's place tomorrow morning.

HATTIE: OK. And then they'll ship it that day, and you'll get it the next day.

GEORGE: Yes. The AS/400 is the base of our whole technology system. It not only handles merchandising, but it handles all the other functions in our business.

HATTIE: The payroll and...

GEORGE: It is the workhorse and the system that we use to run the company.

HATTIE: OK. So now how would you imagine growing without technology?

GEORGE: Well, quite frankly, I can't imagine trying to stay in stock in 17,000 items without technology. If you asked me how to do it, I wouldn't know. So it's not so much that I thought this was a great idea, this was the only way that I knew how to operate this company.

HATTIE: What are you doing to get customers in the door?

GEORGE: Well, that's a good question. In the past, this company didn't do anything to build business or explain to customers what was new or happening in the store. What we have done is launched a direct mail program, and have worked very hard to build a mailing list now for our five stores that is in excess of 100,000 names.

HATTIE: And where'd you get the names?

GEORGE: These are actual customers who've shopped in the store, who filled out mailing list applications and been in the store.

HATTIE: So that's a very high quality list.

GEORGE: High quality list.

HATTIE: And you're now mailing them how frequent?

GEORGE: Well, we're mailing them now, we've mailed four in the past six months. And what we try to do is not only show them what's new in The Art Store, but, of course, offer them special buys and deals that we...

HATTIE: So is this working?

GEORGE: This is working great.

Unidentified Employee #4: We're getting busier and busier by the day. Every day our sales are going up and up. And we're starting to see repeat customers coming in, which is great.

GEORGE: And this is--the quality of this also, I think, is different than what has been available at other times in the industry. This is a glossy stock; it's full photography. We spend a lot of time and effort to make this be a high quality piece, because it stands for what the store stands for.

HATTIE: Plus your customers are in this business, meaning the way things look, the way things feel, and they're gonna respond to something that appeals to them.

GEORGE: Right. We are beginning to enter customer profiles into our computer. And as the number of customers that we have in our database increases, north of 100,000 people, it is getting expensive to mail them flyers having to do with all aspects of the store. As we develop a profile of what various customer groups do and use this store for, we'll be able to segment our direct mail efforts to a more focused group of customers and be able to offer oil paint to oil painters and be able to offer pastels to folks who use pastels, and in a way be more efficient.

Key Idea #6 Buy A Tired Business

Lightbulb HATTIE: George's extraordinary business experience taught him much about scale, critical mass, and volume. Having run huge retail chains, George just couldn't imagine a business that is so small you can't enjoy the benefits of size. To start a business from scratch would be too slow for him, so, he bought an existing business. When he found The Art Store, it was in distress, so he got a bargain. Like George, you don't have to start a business from scratch. You can buy an existing business. There are business brokers who function just like real estate brokers. They're listed in the phone book. Be sure to work with your banker, accountant, lawyer and friends. Maybe you'll find a good deal like George.

You can look for business brokers in your phone book, or you can go to the Web.

Key Idea #7 Sell An Emotion

GEORGE: The things that I hoped to accomplish by doing my own thing was to get closer to --to be more hands-on -- with the stores, the merchandise, the customers, and my employees. The interesting thing and exciting thing that has occurred for me at The Art Store is that I have come to understand that I'm not selling tubes of paint. I'm selling self-expression, creativity, relaxation, wonderful things. And the people that come to buy the products in this store really get a good feeling from using them, and that gives me a good feeling, that I'm into a business and a segment that is selling good feelings and self-expression and creativity.

Unidentified Woman: It's really endless what you can do with painted finishes.

HATTIE: (Voiceover) When I met George's customers, I learned why he has fallen in love with the art supply business.

Woman: I am an interior decorative painter.

HATTIE: This is a chance for you to do a little market research. Do you want to ask her some questions that you might have on your mind about her shopping experience here at The Art Store?

GEORGE: Well, of course. I suppose the first question would be, tell me about how you see this store different today as it was a few months ago.

Woman: Well, it's certainly an improvement, and you have quite a good supply of various types of paint. And I do work with acrylics and oils and other mediums, so it's nice to have it all in one place.

GEORGE: Mm-hmm. One of the things that I think is interesting about this business is that although we're called The Art Store and sell all kinds of products for fine artists, there is really a surge in the industry in the home decor, faux finishing kind of products.

Unidentified Man #5: I'm a free-lance artist, and primarily a political cartoonist. I buy all my stuff down there.

HATTIE: Is it a fun place to go?

Man #5: Oh, it's a great place to go. But sometimes I don't remember actually being in there, because once you go in The Art Store, you just kind of go into a fog. And it's a crucial part of the inspiration process. Especially if I'm starting a new project, I make sure I go down--I clean my desk off and I go down to The Art Store, and I just kind of look around, and I wander around. And a lot of times I'll walk right smack dab into other artists down there doing the very same thing I am. We're getting our game faces on, and we're just kind of ogling. And we're visualizing our new project with all these different too--`What am I gonna need? Can I see it on this? Can I see it on this paper or can I see it with this ink?' And I go by--they've got a fabulous book section down there, I'll flip through there and see if I can steal some ideas. And, seriously, it's a good place to just go get inspired.

Key Idea #8 Hire Helpful People

HATTIE: If one of your dear friends' kids, say 25 or 30 years old, came to you and said, `I want to do a business,' what are some of the pieces of advice you'd give this person?

GEORGE: Well, the first piece of advice would be to get good people.

I'm very fortunate to have good people at The Art Store. I don't think I would have bought it if my assessment was that I didn't have good people, so that was critical.

Unidentified Employee #5: I get to help decide what comes into the store and what gets edited out of the stores, depending on volume and what's in demand.

HATTIE: So are you an artist?

Employee #5: Yes, I am.

HATTIE: What do you do?

Employee #5: I'm a painter, oil painter.

HATTIE: Now how long have you worked for George?

Employee #5: Since he bought the company.

HATTIE: A year and a half?

Employee #5: Yeah, a year and a half.

HATTIE: Right. What have you learned from him?

Employee #5: I think what I learned from George is that there's possibilities. I think being in the art material industry so long that you get blinded by a lot of things. You know, you take it as a norm, `This is good enough.' And having George come from an outside retailing business, a large retailing business, he brings a lot of ideas that might have been taken for granted on the outside, but for the art industry, it's fresh ideas, and it's very innovative. Just small things, like lighting or wide aisles, keeping things organized and making sure that things are always in stock. I mean, it's little things that pile up, making a big picture.

Key Idea #9 Build Strong Vendor Relationships

GEORGE: I think secondly you have to focus on your customer base, and know them as well. I spend a lot of time in these stores because it's very important for me to feel and have an understanding of what my customer is looking for. The third thing that I would say, and place where I don't think people really spend enough time, is developing partnerships with the trade. The trade is really a very critical element of our success.

HATTIE: You mean your vendors?

GEORGE: My vendors are a very critical element of our success. And if it weren't for them being interested in helping us press the envelope regarding what has been an art material store in the past vs. what one could be in the future, I would have had a much tougher time getting this done.

HATTIE: So what you're saying is that you can't do it alone.

GEORGE: That's right.

HATTIE: That there are entities that you have to pull together, like banking or your vendors or...

GEORGE: I mean, the trade has to be challenged to help you grow your business. They have the ability to give you terms and cash flow derives from the terms you get from the trade regarding when they want payment for their merchandise. There are a lot of areas where the trade can and should be helpful in order to help you start, grow or mature a business.

Key Idea #10. Be Obsessed With Numbers

HATTIE: George, you're in Boston, you've got five stores in California. How do you know what's going on? How do you keep up?

GEORGE: Well, certainly there's a couple of ways. First of all, our office in Boston is online with the AS/400 through some lease lines all during the day. And I can sit in my office and tap in and find out where we are by store during the day. When I'm not in my office, my head of stores out here is able to page me with sales both midday and at the end of the day. So I just got paged a minute ago, and there are the sales for the stores through noontime, and...

HATTIE: Now wait a minute. End of the day in California is what, 10:00?

GEORGE: End of the day in California at certain times is 10:00.

HATTIE: PM. So what time does that make us in Boston?

GEORGE: Sometimes I get that page at 1:00 in the morning.

HATTIE: So, like, you're asleep?

GEORGE: I'm asleep. And what happens is, this little baby rotates...

HATTIE: This wakes you up in the night.

GEORGE: This would wake me up in the night. And after I found my glasses and was able to find all the buttons, I'd be able to determine what the sales were for the day in the stores.

HATTIE: And then you can sleep the rest of the night like a baby.

GEORGE: I sleep sounder.

HATTIE: So you told me your wife says to you, `Why...'

GEORGE: My wife says to me, `What is the difference between knowing the sales at 1:00 in the morning and knowing the sales at 6:00 in the morning when you get up?' And my answer is that I sleep sounder knowing how the day was, and I'm curious. And by the way, on a serious note, I think it's good for the company. A retail company, after all, should be sales driven, and I try to instill in the company the importance of pushing sales every day, and I think that effort starts at the top. And they're gonna care as much as I care, and...

HATTIE: So if they know that you're gonna look at that number as soon as it comes in...

GEORGE: I care. I care and, therefore, I know that they care.

HATTIE: So that works.

GEORGE: That works.