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TO BUY OR NOT TO BUY? THREE JEWELERS’ STORIES OF EXPANSION | September 26, 2012 (0 comments)
Centre Valley, PA—One afternoon, Kim Murphy went out for a shopping excursion to a new, beautiful, upscale center near Allentown, PA. When she got home, she told her husband, Patrick, “you’ve got to see this place.” He did, and together they mused about how wonderful it would be to have a store there. Little did she know that just a few years later, she and Pat—owners of Murphy Jewelers in Pottsville and Hamburg, PA—would be the winning bidders for the former Carlyle Jewelers location in The Promenade Shoppes at Saucon Valley.
For Bill and Cindy Sites, who were looking to expand their jewelry business from Clarksville, TN, into the state (and country music) capital Nashville, it was a “no brainer” when Ward-Potts Jewelers went up for sale. Not only had the Siteses known the former owners for decades, they realized it would be much easier to break into a market by buying a known entity than starting from scratch. But they never imagined that less than a decade later, they'd decide to close their original store and keep only the new one.
And when Michael Pollak, CEO of Denver-based Hyde Park Jewelers wanted to expand into southern California, he found a solution that not only met his goals, but also helped fellow luxury jeweler Lula Halfacre achieve hers, which was to retire. Pollak recently completed the acquisition of Newport Beach, CA-based Traditional Jewelers, making it the fifth store and fourth state in the Hyde Park stable.
Here are the three jewelers’ stories:
Murphy’s lands its second dream space. The Murphys were already considering another expansion when the Carlyle opportunity knocked. Their first expansion, five years earlier to Hamburg, had been very successful and dramatically increased business from the single Pottsville store. The Hamburg store, for which they bought the land and built from scratch, is situated across a highway from the only east coast outpost of Cabela’s, the outdoor sports mega-retailer. The new store, which won an InStore magazine “Cool Store” award, introduced the Murphy name to customers in Berks and Lehigh Counties, south and east of Pottsville. It also attracted customers who were interested in more fashion-forward, upscale merchandise.
Murphy Jewelers bought the land and built the Hamburg store--an InStore "Cool Store"--from scratch.
Patrick Murphy says when they first considered a third store, they were thinking of going north, rather than to the Lehigh Valley area east of Hamburg. But when they learned that Carlyle was in bankruptcy and its location in Saucon Valley was going up for sale, they jumped at the chance to be in the shopping center they’d both admired so much.
“I went to New York to bid. It was a room full of all these high-powered lawyers and executives from all around the country, and here I am, from little Pottsville, PA,” said Murphy with his trademark self-deprecating humor. He was almost shocked when he learned his was the winning bid, but he leapt right into Saucon Valley.
“It’s just such a lovely center. At Christmastime, it looks like a picture postcard with snow falling, music playing, and the lights and decorations.” It’s also a dog-friendly center, and apparently lots of customers do bring their four-legged family members, who always can count on a bowl of water and a biscuit treat at Murphy’s.
Murphy's location at the Promenade Shoppes at Saucon Valley. The "Murphy Mobile" parked out front is famous among locals, as evidenced by this Facebook post below.
The new store has a very upscale demographic, says Murphy, largely owing to the increasing influx of New Yorkers moving to the area. With regular bus service into Manhattan and the completion some years ago of Interstate 78 cutting travel time dramatically, the Allentown/Bethlehem/Easton area of Pennsylvania has become very attractive to New York commuters, with its lower housing costs and open spaces. The open spaces may not last long, however—Murphy says it feels like every month there’s a new development springing up.
The biggest change for Murphy has been in management and merchandise of the third store. The new store has added even more upscale designers, including names like Ippolita and Tacori, and—something very important to Murphy—kept the Rolex distributorship for the area. He’s also a Hearts On Fire store and has Rolex in his other stores.
“I had to prove myself to Rolex [for the new store] but I have a reputation and a track record,” he said.
The hardest part has been staffing the new store. Murphy says, “With Pottsville, it was Ma and Pa. We grew with Hamburg, but with three you really have to pay attention and have passion.”
Finding the right staff for the new store has been the biggest headache, he says, but he and Kim recently welcomed their daughter Mallory into the business; she joined the firm full time after graduating from college. She’s the fourth generation of the store that will celebrate 100 years in 2013. Its motto is ‘100 years, four generations, three stores, one family.”
The other thing that was very tough was a smash-and-grab at the new store last spring. The thieves didn’t know there was bulletproof glass in the showcases, so they “really beat them up,” says Murphy, before attacking the wood sections and making off with his Rolexes. The incident not only shook up Murphy (“you really feel violated,” he says), it also scared off two staff members who quit shortly thereafter.
Murphy says he wouldn’t change a thing, though he’s always struggling to be everywhere at once. When someone joked that he ought to put cardboard cutouts of himself in each store so that he could be in three places at once, he did exactly that. More than a few people have greeted the life-size cardboard “Murph,” as he’s called, before realizing it was a fake.
Pat Murphy and his silent twin at the original Pottsville location.
Ward-Potts Jewelers: New city, new kind of store. Bill and Cindy Sites bought the Ward-Potts store in Nashville, TN, in 2004. The entire process took about a year from start to finish, says Bill Sites. There were three offers for the store, but the owners selected him and Cindy because they knew the two and trusted that they would carry on the store’s tradition of very personal service.
At the time the opportunity arose, the Siteses were actively looking for a store. Their son and daughter were ready to come into the business, and they felt it was a good time to add a second store. They had targeted Nashville, not only because it was the state capital as well as the country music capital—and therefore offering lots of opportunity—but it was only an hour down the road from their Clarksville business, as Sites puts it. It was far enough away not to cannibalize the original store, but close enough to manage both. It wasn’t an AGS store, but he’s a titleholder and the Clarksville store is AGS, so it was a natural fit to bring Ward-Potts into the fold.
Ward-Potts was a totally different business, says Sites. Sites Jewelers in Clarksville was 6,000 square feet; Ward-Potts a little over 1,000. Sites had a strong bridal business; Ward-Potts didn’t really have a bridal component at all. It was strictly a fashion store, and at the time was the area’s David Yurman retailer. The brand has since opened its own company store in a nearby mall, and dropped Ward-Potts.
“We were sorry to lose Yurman, but it offered us an opportunity to try new designers,” says Sites. In the long run, it’s actually been a bonus, because he’s grown the business tremendously by bringing in designers that weren’t in Nashville at all prior. For example, he’s about to host an Elizabeth Locke trunk show. Among other brands he carries are Marco Bicego, Gurhan, Gumuchian, and more.
Something the Siteses did but the Murphys didn’t was keep the old store name. Of course, the situations were different—Carlyle was a defunct operation with no strong ties to the area—but Ward-Potts was very much a going concern with deep roots in the city. The Siteses felt it would not have made sense to change the name.
“Nashville’s a big city. If we changed [the name] nobody would know us. If we keep it, people know us.”
Bill and Cindy Sites went through some big changes with the second store. The first change they implemented was bringing the new store into AGS; the second, a little later, was bringing their bench jeweler down from Clarksville to work in the new store.
The hardest part of the acquisition was arranging the financing, says Sites, but the easiest actually was adapting to the differences between the two stores.
“We had to wrap our head around a new concept,” says Sites. But not only did they wrap their heads around it, they embraced it full on. Sites strongly believes in the opportunities presented by the female self-purchase market, and the tremendous growth of Ward-Potts since his acquisition of it is a testament to that belief. So much so that last year, they made the biggest change of all: closing the original Sites Jewelers store in Clarksville and focusing solely on Ward-Potts.
Ward-Potts's website leaves no doubt that it's a designer and fashion oriented store.
“It was tough to close an 89-year-old family business,” he says, “but the lifestyle change going from two stores to one, and from 6,000 square feet to 1,000 square feet has been wonderful. We now have me, Cindy, a part time person and a full time person and that’s it.” He relishes the newfound time he and Cindy have to spend with each other outside the business.
His advice to anyone considering buying a store is simple: “Know and understand the business you’re buying so you know what to expect. We knew this business for 30 years, and we knew the owners and their families personally for 20 years.”
Traditional Jewelers: Two goals, one store. Michael Pollak had his sights set on Southern California for a new store. While looking at various opportunities in both Los Angeles and Orange County, he gently approached Lula Halfacre, owner of Traditional Jewelers in Newport Beach, and told her that if she were ever interested in selling the business to someone who could uphold its reputation, please call.
Traditional Jewelers in the Fashion Island center, Newport Beach, CA. Hyde Park Jewelers acquired the business this summer.
Pollak was already very familiar with the store, both because of Lula and Marion’s [her late husband, who died suddenly in 2007] reputation in the industry, and because it is a fellow member of the Luxury Jewelers Resource Group, a group of leading luxury jewelers around the country who gather regularly to share ideas.
In terms of strategy, it was an excellent fit, with 90% of Traditional’s brands overlapping with Hyde Park, he says. The acquisition brings the total of Hyde Park stores to five. There’s the flagship store in Denver and another Hyde Park store in Phoenix. The third, in the Forum Shoppes in Las Vegas, remains a Hyde Park-owned store but will be rebranded as a Rolex boutique shortly. An Omega boutique in Denver (rendering top of page) is the fourth store, and Traditional now makes five.
Hyde Park Jewelers' flagship in Cherry Creek (Denver), CO, and Biltmore Fashion Plaza, Scottsdale (Phoenix), AZ. Below, a rendering of what its Rolex boutique in the Forum Shops will look like.
What about the Traditional name? Pollak says he honestly can’t answer that. Traditional has a lot of brand equity, so he’s in no hurry to change it, but he will gradually begin to include the Hyde Park name on marketing materials, co-branding the two stores. A full name change might follow eventually—or it might not.
What will change imminently is the look of the store. The current Traditional Jewelers is about 3,700 square feet, but Pollak is doubling it by taking on an adjacent space in Fashion Island and doing a 100% renovation. The new space will be between 9,000 and 10,000 square foot including back areas, and is slated for completion in July 2013. No “pardon our dust” signs, though; Traditional will move to a temporary location during the renovations.
Merchandising will change as well.
“There’s no doubt that Traditional is the dominant player and best of class when it comes to independents selling luxury watches. They have Jaeger LeCoultre, Panerai, Audemars, Patek, IWC; all the top names. But we feel there’s room for growth, especially in bridal [jewelry] which they’re under-serving, and in designer and classic jewelry.” Those areas will be amped up considerably.
What did Pollak find easiest about this acquisition? Like Bill and Cindy Sites, it was buying from someone known and trusted. “Knowing there was a desire on Lula Halfacre’s part to find a smooth transition made it easy,” he told The Centurion. We inherited a great staff, dedicated, and we kept all but two whose roles were duplicated by people at Hyde Park.” Lula Halfacre will remain in an advisory role, especially helping with community and charity connections.
The hardest part of the integration was technology. The two stores were on completely different software platforms, and as always when merging two systems together, there were lots of bugs to work out.
Pollak offers three pieces of advice for jewelers considering an acquisition:
1) Make sure you have the management team and skill set to operate it. Three stores going to four, or 10 going to 11 already have that built in, but if it’s a first acquisition to go from one store to two, be sure you’re ready for the management.
2) If you buy a store, vs. growing organically, realize that you are buying another culture, and it’s essential to make sure those two cultures fit or you’re going to have a lot of turnover.
3) Make sure your financing is in place before you go shopping for another business, and make sure you have a good understanding of the business before the letter of intent is signed. Much the purchase process comes from that letter, so know what you’re getting into first.