The 2010 Ernst & Young Entrepreneur of the Year awards program recognized retailers from across the nation. Several of the regional retail winners are profiled below.
Matt Rubel learned his craft at an early age. The 52-year-old chief of footwear giant Collective Brands Inc., parent to such brands as Payless ShoeSource, Stride Rite and Sperry Top-Sider, was introduced to retail by his parents.
“I worked in their stores growing up, starting at a very young age,” Rubel said. “I learned that I loved customers and their passion for shopping.”
Rubel has remained true to his early vocation. After graduating college in 1979, he started his career at the legendary Bonwit Teller in New York. From there, he went on to hold leadership positions at some of the nation’s most prominent retail brands. From 1999 to 2005, Rubel served as chairman, president and CEO of Cole Haan, a subsidiary of Nike, where he led a multi-year turnaround, re-energizing the brand and creating a strong global presence.
Rubel brought a wealth of experience and business know-how to Payless, which he joined as chief executive in 2005. He also brought a knack for building things: In 2007, Rubel led the $800 million acquisition of The Stride Rite Corporation and the resulting formation of Collective Brands. Under his leadership, the Payless brand has been revitalized and has grown into the largest specialty family footwear retailer in the Western Hemisphere, with nearly 4,500 stores. The company has evolved into a diverse global player with a strong portfolio of iconic brands and five dynamic channels: wholesale, retail, e-commerce, licensing and franchising.
The road to dynasty-dom wasn’t without bumps, but that has played to Rubel’s skill sets.
“I love fixing and building, and this company offered both,” Rubel said.
The executive describes his leadership style as “empowering with strategic guidance.
“I believe that if you give people the right tools and resources, a framework and the right amount of guidance, they can accomplish just about anything,” Rubel explained.
Rubel is bullish on the future. The ongoing global expansion of Payless calls for at least 80 franchise stores in nine countries in 2011, with opportunities to expand to 700 stores within five years and 1,400 stores long term.
The company’s Sperry Top-Sider brand is also laying plans to expand its retail presence by 40 to 60 stores during the next three to five years, based on the success of five stores that have opened to date. And Rubel has outlined long-term growth targets companywide that call for net sales growth of 3% to 5% and operating profit growth of 9% to 12%.
Even when immersed in the big picture, however, Rubel hasn’t forgotten the lessons that got him to where he is today.
“The best piece of advice I received along the way was to master the fundamentals of business and your industry,” he said. “And if I, in turn, could offer advice to another entrepreneur, it would be to master the fundamentals — and know your customer.”
Lexy Funk has created a thriving retail business based on an unlikely mantra that grew out of her and her partner’s early experiences as artists trying to make a living.
“Our motto — LIVE, WORK, CREATE — is infused throughout everything we do. We believe in bringing creativity and an artistic spirit to our company and customers. This makes our stores fresh, original and constantly changing,” said Funk, 40, co-founder and CEO of Brooklyn Industries, which sells cool clothing and accessories to urban hipsters through its 14 stores and Web site.
In 1997, Funk and partner (now husband) Vahap Avsar were living in New York and running a design-based company that produced TV commercials and documentary films. The couple changed gears when Avsar found a vinyl billboard in a dumpster and decided the material would make an ideal messenger bag. Soon, they were working out of an old factory in Brooklyn, making the bags full time and selling them to boutiques. As the company grew, so did its product lineup, expanding from messenger bags to graphic T-shirts to a full range of lifestyle clothing for men and women, with some kids items too. In 2001, it opened its first store, also in Brooklyn. Today, Brooklyn Industries is a vertical brand, defined by its cutting-edge designs, limited-edition prints and strong sense of corporate responsibility. Nearly all (99%) of the merchandise is produced by the company under its own label.
Funk and her husband divide responsibilities. She is focused on the company’s business direction and strategy, as well as the merchandising, while Avsar serves as creative director. He is in charge of everything creative, including bag and clothing design, visual concepts and store designs.
In 2008, Brooklyn Industries began expanding outside its New York home base, opening stores in Chicago; Portland, Ore. (with a space that doubles as an art showcase for independent artists); and, most recently, Boston and Philadelphia. More stores are planned for 2011.
“We want to continue to expand our clusters and grow in existing markets,” Funk said.
Even hip retailers like Brooklyn Industries have been challenged by the economic downturn. But Funk remains optimistic.
“Cash flow and funding continues to be an issue in the current economic climate,” she said. “But we have a terrific brand, and the response from customers continues to be very strong.”
As for advice to others who may be thinking of striking out on their own, Funk said that having a financial background or working with a financial partner is critical to a successful start-up.
“To have a successful business, it is also important to identify a ‘blue ocean strategy,’ or an area in the market that is underserved,” she added. “The strategy, however, might not be what you initially think. Be flexible to the market and your customer, and do not be afraid to switch gears if your initial idea is not working.”
Looking back, is there anything Funk would do differently?
“Believe in our gut feelings about business issues and not listen too much to what other people in the industry are doing,” she said. “And get into vertical retailing faster, as it is a great model.”
Take good care of people and the rest will fall into place. That’s what Phil Hagerman’s father told him when he was just starting out, and it’s a credo that Hagerman continues to live by today.
“My dad was a great mentor,” said Hagerman, 58, president and CEO of Diplomat Specialty Pharmacy, the nation’s largest privately held specialty pharmacy company.
Now a $100 billion industry, specialty pharmacy — which focuses on comprehensive and coordinated medication management systems for patients with serious and chronic conditions — was barely a blip on the radar when Hagerman, fresh out of pharmacy school, and his father, Dale Hagerman, also a pharmacist, opened Diplomat Pharmacy in 1975. Located in Flint, Mich., Diplomat was a conventional drug store. But the Hagermans soon got involved in compounding, or making up customized medications and therapies for specific customers. Diplomat’s compounding business picked up steam throughout the 1980s and early 1990s. The store also developed a reputation for carrying medications that the average pharmacy did not carry.
“Compounding really got us into the niche of specialty pharmacy,” Hagerman said.
From compounding to creating programs specifically for patients in need, starting with individuals on dialysis, Diplomat began to expand its reach and services.
In 2005, Diplomat opened two additional locations. The company has been on the fast track ever since. It has experienced dramatic growth in recent years and has contracts with managed care, pharmaceutical manufacturers, large pharmacy benefit managers and clinical research organizations. Hagerman estimates sales will grow 55% in 2010, to $600 million.
Today, Diplomat offers a comprehensive array of complete medication management programs in such areas as oncology, HIV/AIDS, multiple sclerosis and Crohn’s, to name but a few. Other specialty areas include transplant, fertility and specialty compounding. It has more than 40 pharmacists and 20 nurses on staff.
Most recently, the company launched Diplomat University, a Web tool designed to educate and train new and existing employees. Hagerman’s daughter, Jennifer, who has a doctorate in pharmacy, serves as director of education.
“Our goal is to have the best trained staff in our industry,” Hagerman said.
Diplomat’s original Flint location remains a conventional walk-in pharmacy and fills 700 prescriptions daily. But specialty order mailings make up the bulk of business at the company’s four other locations, which are scattered across the country (traditional pharmacy accounts for less than 3% to 4% of overall revenues). It plans to open a location in the New York metro area to expand its Northeast effort.
Hagerman has two partners who are minority owners in Diplomat.
“Much of my success in recent years has come from surrounding myself with great people,” he added.
Hagerman is proud of his profession and his business, which touches people’s lives in the most critical ways.
“Our dramatic growth will never take away from our emphasis on service,” he said. “At the end of every transaction, there is a patient in need. As we’ve grown our company, that’s our focus. As our mission statement says, we are dedicated to keeping patients healthier, one patient at a time.”
It wouldn’t be a stretch to assume that Charlie Chanaratsopon has lived a charmed life. He was just 26 years old when he founded the women’s accessories concept Charming Charlie, and now, at age 32, the young entrepreneur has grown the privately held Houston-based chain to 98 stores strong.
But Chanaratsopon is quick to point out that a lot of effort, and a little luck, have propelled him down his current path to success.
“My team and I have had to work very hard and be very patient to grow this chain to where it is today,” he said. “If I were to offer one piece of advice to an up-and-coming retail entrepreneur, it would be to explore unmet demand, and then open a store that meets that demand.”
Chanaratsopon, whose varied background includes commercial real estate and shopping center development, launched Charming Charlie in 2004 to fill an empty space in one of his shopping centers. The success of the store prompted him to forego a career in shopping centers and, instead, focus on growing the popular accessories concept into a national chain.
From the start, Charming Charlie has been distinguished by its broad selection of trend-right accessories, affordable price points and stylish upscale boutique environment. But what really sets the format apart from its competitors in the accessories space is an innovative merchandising strategy that displays merchandise by color, not category.
“Listening to our core customer has been key to our success,” Chanaratsopon explained. “Even our color-grouped merchandising strategy is based on customer input. Organizing by color is what our customer wanted, so that is what we gave her.”
Chanaratsopon hasn’t been deterred by the recession. Store numbers have continued to grow throughout the downturn, and he is planning to open 60 new stores in 2011. Overseas expansion is also on his radar.
“I think we can be a leading global accessories retailer,” Chanaratsopon said. “There really is no limit to our growth because our customer [base] is evenly distributed among Gen Y, Gen X and baby boomers, [and our merchandise] appeals to all ethnicities, ages and income levels.”
As Chanaratsopon sees it, the greatest challenge to retail success is securing unwavering patron loyalty. “The hardest part to all of this is gaining the heart of the customer,” he said. “We have that part down.”
The football analogies come easy for Jimmy Haslam, 56, president and CEO of Pilot Flying J out of Knoxville, Tenn. The part-owner of the Pittsburgh Steelers NFL football team has leveraged his knowledge and love of the game to strategically run a privately held company that merged Pilot Travel Centers LLC and Flying J Inc. to become one of the top 10 privately held companies in the United States.
“Strategy is important, but execution is even more important,” Haslam said. “If I can offer a football analogy: Strategy is equivalent to developing your game plan, but good blocking and tackling will help you win the game.”
Haslam joined the Pilot team in 1976, after earning a degree in marketing from the University of Tennessee. He was promoted to VP sales, development and operations in 1980. In 1996, he was named president and CEO.
“My career has been marked by the continued growth of our business, culminating in the merger last summer that created Pilot Flying J,” Haslam said.
Although Pilot was founded in 1958 as a single, family-owned gas station in Gate City, Va., it has been under Haslam’s tenure that the chain has grown from a c-store concept to comprehensive travel centers. By 2001, Pilot was operating 65 convenience stores and 140 travel centers in 37 states, and Sept. 1 of that year, Pilot Corp. became Pilot Travel Centers out of a merger with Marathon Petroleum Co.
In February 2003, Pilot acquired Williams Travel Centers, doubling the size of the company, and in July 2009, the merger with Flying J created Pilot Flying J, expanding the network of interstate travel centers and travel plazas focused on superior customer service and enhanced offerings for professional drivers and traveling motorists.
The company now operates 500 locations in 43 states and six Canadian provinces and employs more than 20,000 people. Offerings include fuel, restaurants and convenience products. Coming brand additions will include Denny’s, Subway and Pizza Hut, as well as upgrades to drivers’ lounges, new gasoline and diesel pumps, and remodeled restrooms at many locations.
For Haslam, growing and running the company has been as much about the team as it has been about the game plan.
“If I could give any advice to another would-be entrepreneur, it is that relationships are very important,” he said. “You need to take the time to coach people to ensure the success of your organization.”
And if he could have done anything differently along the way?
“I would have spent even more time coaching our people,” he said.
In the five years since he launched ZAGG, Robert G. Pedersen II, 44, has managed to carve a unique niche in the tech industry as a leading producer of accessories for protecting and enhancing the mobile experience. The CEO and co-founder of the Salt Lake City-based company, which grabbed global headlines when its invisibleSHIELD film became the protective covering for Apple’s iPod Nano, set up his first headquarters in a backyard workshop in 2005.
Today, the company is publicly traded on the NASDAQ, and its flagship invisibleSHIELD product is the best-selling mobile accessory at Best Buy and AT&T, according to Pedersen.
With sales of $38.4 million in 2009 and $65 million projected for 2010, ZAGG has moved on to its next stage: brick-and-mortar retailing. It has opened one store at its corporate headquarters, with another five operating under a franchise model.
“We will continue to consider new stores as the interest is there and opportunity arises,” Pedersen said.
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