Mall Anchors Away! The Retailer's Perspective:
The Plastic Models Place
Terence L. Holmes, Murray State University
Frank Runyon had started his retail business just after finishing high school in Cincinnati. Ever since he was a child, Frank had enjoyed working with his father, grandfather, and uncles on various types of scale models. He had become quite skilled at customizing boxed model kits and won ribbons and other prizes in contests all over the United States. Finally, one of his uncles talked to him about making a business out of his hobby. He related his own start in retailing and what he'd learned.
"Frank, you've got what 90% of retailers don't have-passion. You can do it!"
Frank started his business with just a few thousand dollars in savings, family investment, and bank loans. He chose a location in a small strip center in an eastern Cincinnati suburb. His uncle helped him pick it out, saying that traffic had been steady there for a long time.
For more than a decade the store thrived. People came to The Plastic Models Place for the models and much more. Some customers would spend hours talking with Frank about model building techniques and Frank sold materials, tools, and other accessories. Many customers commented that Frank's store had more of what they needed than many larger ones.
By the late 1980's, business had slowed and Frank wondered how he might get his traffic pattern back into high gear. His uncle, now retired to Florida, advised him to take a class from his local college on marketing or sales. "You need some models, pardon the pun Frankie, . . . some models you can use to help you decide how to better build traffic."
Frank took this advice and enrolled in an introductory marketing course and a retail management course. The ideas he had that were stimulated by these courses paid off for a while. For example, he hosted a model-building workshop, with each participant guaranteed a display-quality finished model by the end of class. He then sponsored an annual contest, with all entries displayed at local retirement homes and schools and prizes for the winners.
These activities stimulated sales for several years, but business settled back to a slow, stable level. His store was showing a bit of age, with worn carpet, cracked concrete outside the door, and a sign that he felt was dated. However, Frank couldn't see forking over thousands of dollars for something new. He hoped to wring a few more years out of the business and then perhaps sell out or close.
In the end, it was something new that Frank learned about that helped him save his business. His 12-year old son, Bill, showed him an article about the new World Wide Web, a part of the Internet that allowed for commercial activity. In 1994, Frank Runyan went back to his local college, taking a class on marketing via the Internet.
Within three months, Frank put much of what he'd learned into practice. He had Bill research something called web hosts, ISPs, and other still-unclear concepts. Finally, just after Christmas of 1996, The Plastic Model Place opened its online presence.
Frank had always gotten his business from greater Cincinnati, probably 75% of it, according to zip codes he had looked over after learning about that technique in his college retail class. Another 20% was from outside the city, people who'd heard good things from his customers or who had seen news items about the contest or the workshops. These people lived closer to several other hobby shops, but they drove the extra distance to The Plastic Models Place. The remaining few customers were those who just happened to drive or walk by and stop in.
With the website now functioning, Frank soon realized he would have to re-think some of the retailing lessons about traffic and other areas of the business he'd learned first-hand and from his uncle. For example, he would leave work disappointed that few Internet sales had come in, but the next morning perhaps a dozen such orders would be waiting. He got orders from all over the country and even a few from international customers, including a couple of countries he had never heard of! He even bought a world map and pinned it to the wall near the office computer.
Quite a few of the things Frank had used over the years still worked well. He'd learned early on to have the store name, address, and phone number on anything printed or painted having to do with the business (such as the pens and calendars he occasionally gave out). Now, however, he had learned from his class, and from observing other retailers, to put his website address on everything he could. Also, he started receiving inquires and attempts at ordering via the e-mail account that he now had from his Internet service provider.
Frank even saved money on inventory. The added sales from the website, plus more local people who came in because of the website (like himself, some people just wanted to deal face to face he'd learned over the years, thinking back to a couple of experiences with catalog shopping) meant higher volume, which translated into qualifying for volume discounts from some suppliers (Frank had received volume discounts from two long-time suppliers who allowed his periodic purchases during the year to be added together for discount calculations). He found another inventory savings in special orders. With the use of e-mail and his website, Frank could get a customer order for a unique item and then purchase that item from a supplier after the sale. He loved that capability!
The Internet presence had paid off handsomely. After some initial difficulties in arranging for returns (most of the things about Internet retailing he'd read and learned in his late 1990's classes didn't even mention returns!) Bill, now 21 and a college senior, was seasoned and ready to take over The Plastic Models Place. He told Frank he wanted to shift operations even further onto the Web, mentioning a couple of success stories he had studied: Model Expo and Internet Hobbies. Frank looked forward to semi-retirement; he planned to play some golf with his uncle in Florida and perhaps teach model-building classes in the retirement community. After all, he still had that passion!
Q: What is a common term for the business format The Plasitc Models Place uses?
Q: Discuss the appearance of orders from outside Cincinnati, including international orders.
Q: Discuss the quantity discounts Frank already used and those his change in strategy allowed him to start using.
Q: Summarize the promotion efforts Frank Runyon used over the years, as described in the case.
Q: Discuss the new capability of The Plastic Models Place in selling an item (special orders) and then buying it from a vendor. Could this be expanded beyond special orders? How?
Q: Discuss the example of reverse logistics described in the case. What other areas of retailing involve this concept?