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If your retail business is tied to the declining residential real estate market, it pays to listen to the shower-door guys.
That's Bill Daubmann, 51, who with his two sons Keith, 29, and Douglas, 23, own the license to Mr. ShowerDoor stores in Florida. The company, which makes and installs shower and tub enclosures, operates two stores in Naples and Fort Myers and is opening another in Sarasota. Two more are planned for the Tampa area and Daubmann is thinking about adding a Cape Coral location.
The elder Daubmann has experienced two severe real estate downturns with the company in the northeast. His advice to other retailers boils down to this: Focus on what you do best.
The company, which won the 2004 Entrepreneur of the Year Award from the Collier County Economic Development Council, focuses exclusively on shower doors. That's it - no showerheads, no bathroom tile, just shower doors.
This redefinition of "market niche" is the key to its success and is what gives the company its competitive edge, Daubmann explains. By financial measures he's been successful. Initially, Daubmann says he forecast $500,000 in sales at the Naples store in 2004, Mr. ShowerDoor's first full year in business. Instead, sales were $1.2 million. When the family opened a second store in Fort Myers in early 2005, company revenues doubled to $2.4 million. This year, Daubmann expects $3.5 million in sales from two stores.
Meanwhile, the initial investment for a new store is $100,000. The Daubmanns pay an undisclosed annual license fee plus monthly royalties to company founder Tom Whitaker in Connecticut. So far, Daubmann says he's opened the existing stores with existing cash flow and has not needed outside financing.
Maintaining focus
Daubmann says success depends on remaining focused on shower doors. That means he doesn't offer customers plumbing or tiling, even if it might mean higher revenues.
For one thing, the state requires shower-door installers to have a glass and glazing license. That creates a barrier to new competitors but it also limits what Daubmann can do. That's because he and his employees would need separate plumbing and tiling licenses to install fixtures and lay tiles.
Although Daubmann acknowledges that shower doors are a niche product, he says diversifying into other areas would mean losing focus on what he does best. Instead, he partners with plumbing and tiling firms when customers need those services.
Fact is, the shower-door business is good. Typically, the shower doors that builders install in new homes are flimsy and break. A Mr. ShowerDoor enclosure can cost from $600 to $4,000. You can even get a gold-plated shower door. The most expensive Daubmann has sold cost $7,800.
To maintain its focus, Mr. ShowerDoor controls the entire process, from assembling the enclosures at an offsite location to installation in the homes. "It gives us control and accuracy," Daubmann says.
Contracting out assembly and installation risks alienating customers if they're not done to exact specifications. What's more, Daubmann says that he can control installers' dress code and manners so that they don't risk offending customers.
Keeping busy
The flip side of not outsourcing assembly and installation is that Daubmann has to keep the work flowing in to keep everyone busy. That's a challenge during the residential real estate slowdown because his eight installers can install about a dozen shower doors a day.
However, Daubmann says remodeling work picked up during past real estate downturns as people fixed up their homes rather than moved and that compensated for the decline in work from homebuilders. He expects the same trend to occur here.
Currently, just 20% of Mr. ShowerDoor's business comes from homebuilders. The rest is from individual homeowners. Eventually, when the market comes back, Daubmann says he hopes revenues will increasingly come from homebuilders.
In the meantime, Daubmann says he thinks competitors who have ignored homeowners will go out of business as the home building business slows. "The cycle weeding them out will make us stronger," Daubmann says.
Daubmann is still pursuing homebuilder business because he wants to establish relationships so that Mr. ShowerDoor can benefit when the market eventually comes back.
Mr. ShowerDoor aggressively markets to homeowners by spending 8.5% of gross sales on marketing. The elder Daubmann handles marketing while Keith oversees installation and Douglas oversees sales.
The Daubmanns network with remodelers, architects and other specialty residential trades. The company exhibits at home-related trade shows and has painted its logo on the roof of every delivery truck so people who live in condos see the name of the company when they look out their windows.
It advertises in local newspapers, radio and television. It also promotes its shower doors in free home magazines that are delivered by mail to area residents. Based on customer polling, Daubmann says print advertising and his company's trucks produce the most results. So far, Web advertising has not been effective, he says.
Daubmann also recently started marketing to customers of other area companies. For example, Daubmann hands out $100 gift certificate to nearby jeweler Diamond District and the jeweler does the same thing for its customers to steer them to Mr. ShowerDoor. It's a way for both of them to share customers in similar demographics and generate new business.
In addition, Daubmann says it's important to locate stores in highly visible locations despite higher rents. In Naples, Fort Myers and Sarasota, Mr. ShowerDoor stores are located on busy U.S. 41. In Naples, Daubmann says he spends $4,100 a month for a 2,200-square-foot store. That's about $22 per square foot per year.
Steady expansion
Daubmann says it's important not to grow too fast. The plan is to have five stores in five years in the area from Tampa to Naples, even though he estimates there's room for more.
Mr. ShowerDoor has a bank letter of credit but it hasn't had to use it to expand. "We've got enough so we can do it from cash flow," Daubmann says.
When Daubmann moved to Bonita Springs in early 2003, it was to retire. He had sold his Mr. ShowerDoor stores in New England and was ready for a life of leisure. But he soon grew restless and decided to open new stores in Florida. What's more, he views the stores as a legacy for his two sons who will eventually manage without him.
Daubmann says few companies focus exclusively on shower doors, even outside Florida. When he travels to conventions in various cities in the country, he flips through the phone books and never finds anyone exclusively selling shower doors.
"We could take this thing nationally," he says.
Bill Daubmann, an owner of three Mr. ShowerDoor stores from Sarasota to Naples, says he's managed successfully through two residential real estate downturns in the northeast. Here's his advice on how to survive.
• Stick to business basics. Return customer phone calls and show up to appointments on time.
• Don't scrimp on marketing. Mr. ShowerDoor spends 8.5% of gross sales on marketing to keep his employees busy. Poll every customer to track the effectiveness of your marketing.
• Reward your employees. Now is the time to shine, Daubmann tells his staff. Organize weekly meetings and reward top performers with such things as gift certificates to local restaurants. Be sure your employees are upbeat about their jobs because customers can sense an employee's unhappiness by tone of voice.
• Team up with other successful businesses. Share customers by cross-marketing with other businesses that target your customer demographics.
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