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REVIEW SUMMARY
Company. Aqua Beachwear
Industry. Retail
Key. Turn over inventory to keep customers coming back.
Don and Mary Bauer may own and operate a small chain of swimsuit shops, but they're running the stores with the sophistication of much larger retailers.
The Bauers run the 13 Aqua Beachwear shops with software that lets them carefully manage about 100,000 top-quality swimsuits. For example, their “just in time” system knows exactly how many swimsuits sold each day so employees can restock them the following day from their Fort Myers warehouse.
Each store stocks about 7,500 suits, enough to fit almost any woman perfectly. To keep up with the latest styles, the Bauers move 90-day-old swimsuits to their two outlet stores where they sell the inventory at a discount.
The inventory turnover is important because retail styles are always changing and the Bauers need to stay ahead of the fashion trends to survive. “Whatever happened yesterday doesn't mean it will happen tomorrow,” says Don Bauer, 57. “We have to forget what we learned last year.”
The Bauers stock their stores with the newest collections from 40 luxury swimsuit vendors. Some manufacturers have access to Bauer's sales data to track how well new styles are selling before they make large quantities for the department stores. Although Bauer acknowledges the risk that one new style may not sell well, he says Aqua Beachwear stores always are months ahead of department stores for the hottest trends.
Bauer also shrewdly picks retail locations, preferring high-end shopping centers near other luxury retailers. He's willing to pay high rents as long as it meets his percentage-of-sales ratio (a closely guarded secret). Locations include St. Armand's Circle in Sarasota, Chadwick's Square in Captiva and the Village at Venetian Bay in Naples.
While Bauer doesn't disclose financial performance, he says the Aqua Beachwear stores sell enough swimsuits to hit nearly $800 a square foot in annual sales. The regular stores measure about 1,800 square feet and the outlet stores measure 2,500 square feet.
Sales in 2009 dropped 13% compared to 2008, which Bauer says was the best year ever for his stores. The 2009 sales might have been positive if it weren't for the fact that Bauer trimmed inventory by 25% last year in the face of the recession.
The Bauers recently opened their 13th store on Siesta Key and plan to have 22 stores within the next five years. He's targeting Florida, Arizona and the Caribbean, “anywhere swimwear is the uniform of the day,” he says.
Sanibel start
When the Bauers bought their first store on Sanibel in 1994, the previous owner warned them never to stock red swimsuits. “It was the only piece of advice,” says Bauer, chuckling.
But Bauer quickly learned that what might not sell one year might be a hot trend the following year. Indeed, red swimsuits sold briskly the following year.
Fortunately, the original Chico's FAS store was located a few feet away at the Periwinkle Place shops on the island. Chico's founders, Marvin and Helene Gralnick, gave Bauers advice (the Gralnicks have since sold their stake in Chico's, a publicly traded company with more than 1,000 stores). “We didn't tell anyone what we didn't know,” Don Bauer says.
The Bauers had moved to Sanibel from Detroit after Don Bauer had helped a failed chain of electronics stores in the Midwest wind down their 300-store operation. The couple bought Aqua Beachwear (formerly called The Beach House Swimwear) through a business broker, looking for a retailer they could expand.
Don Bauer chuckles when he looks back. “Chapter one is: How hard is it to sell swimwear?” he laughs. “Chapter two is: It's hard to sell swimwear.”
The Bauers invested in point-of-sale software, remodeled the store and changed the staff. To differentiate themselves from their competitors, they made their stores more upscale. Suits cost from $80 to $200 each.
The changes paid off. When they acquired the Sanibel store, it was selling $350 per square foot of inventory annually. A few years after the Bauers acquired it, sales more than doubled to $770 per square foot. “We always know what our stores do by the minute,” says Bauer, who is also the company's technology expert.
To keep the staff motivated, the company holds sales contests every day. Prizes range from gift cards to cruises. “There's always something going on in the company,” Bauer says.
Finding good employees is a challenge because the staff has to pry very personal information from people about their thighs and busts in order to fit them properly. And they have to know the trends because what might be popular one month may be outdated the next.
Each store stocks 7,500 swimsuits representing 40 vendors each with as many as 25 collections, virtually guaranteeing the right style and fit. The company's software tracks each suit so that when one is sold, it's replaced the next day from the Fort Myers warehouse.
In the swimsuit business, new collections come out every three months. To keep the inventory on the leading edge of fashion trends and keep customers coming back without having to discount at its regular stores, the company moves its inventory of suits more than 90 days old to its two outlet stores where the merchandise sells at 25% to 80% discounts.
Aqua is also a tester for manufacturers' latest fashions. “We had products at Christmas that are now showing up at department stores,” Bauer says.
Scouting good locations
Half the retail battle is getting the right customers into your stores. Bauer's philosophy on picking store locations is to limit his quest to the best shopping centers with luxury tenants such as Louis Vuitton and Tiffany. Even if they charge high rents, the right locations can still meet Bauer's closely held formula of rent as a percentage of sales if business is good.
Bauer learned the hard way that cheap rents in poor locations are doomed to fail, such as the time he was lured to Primm, Nev. “It was a disaster,” Bauer remembers asking himself. “Why did we do this?”
In some cases, such as Ocean Drive in South Miami Beach, swimsuit retailers have never been successful and the Bauers closed that store in 2003. “Most of the picking is gut,” says Bauer, who learned some valuable lessons on locating stores from the Gralnicks at Chico's. “I'll wait in the bushes for years for the right spot to open.”
As the company expands in Florida and Arizona, it is also looking at the Caribbean. Bauer says its store in the U.S. Virgin Islands is among the top performers. Because it's hard to do business in the Caribbean, there are fewer competitors. There are tariffs, different labor laws and other issues to contend with, but Bauer says: “Most people don't want to work that hard.”
Fact is, Bauer says hard work is what's made the couple successful. “It's much more fun thinking there's a secret sauce,” he says.
In addition to the new stores, Bauer is building the firm's online store. “The key to success online is to limit returns,” Bauer says. In the online retail business, some returns are as high as 50% he says. Aqua's rate is closer to 18%, very low relative to other clothing retailers. “You can't stop the customer from buying,” Bauer explains.
So Bauer has created an online tool called the “fit wizard” that helps customers select the right bathing suit online. He created a system with 160 tables that can calculate the right size. “We invested a lot of time, but it separates us from the competition,” Bauer says.
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