Interview with West Marine CEO Peter Harris

EDITOR’S NOTE: During an exclusive interview with Boating Industry on July 21, 2005, West Marine CEO Peter Harris shared his vision for the boating supplies retailer’s future and how it will impact its suppliers. The interview, which lasted well over an hour, took place during West Marine’s Media Cruise, which left from Chelsea Piers, New York City.

While Harris had been in his new position for six months, the cruise was the first opportunity the media had to get to know Harris, and Boating Industry was the first trade publication to secure an interview with him.

The following is a transcript of that interview, edited for clarity and brevity.

Boating Industry: It seems to me that there has been quite a change in leadership at West Marine. You’ve come on board. There was the departure of your president and COO. Can you tell me a little bit about what this new leadership means to the company?

Peter Harris: My perspective is there has not been lots of change at West Marine. In part, that’s a reflection of the real quality appeal of the people and the historic foundation that’s in place. John retired and I took his place. And Rich who has been dedicated for 20 years has really seen a transition point in his life and he wants to go explore some other things personally. But beyond those two folks, it is a wonderfully solid group of people who share a sense of teamwork, commitment to the customer and a passion for boating. The change that is me arriving I think is a fundamental move from infrastructure attention at the top of the list to customer focus and the customer at the top of the list. And we have always as a company been committed to the customer. But in me joining the company as the leader, we are all about the customer. And it’s not just the customers’ demographics. It’s their pyschographics. It’s a real passion about who they are as people, not just how old they are and what their address is. It’s finding the soul of the customer in a way that we can deliver to their expectations and enhance their whole life, not just a particular supply they need because something is broken. We actually moved back to something that is a classic West Marine organization design approach. We now have an upside down organization chart, and I’m at the bottom. I exist to serve and help to succeed the six or seven people that work directly for me. They exist through the organization to help our store managers who are higher on the organization chart. And at the top of our organization chart is our customers. And so they are the bosses. They are the ones we want to understand, get in their head and then satisfy with every single thing we do.

Boating Industry: How would you describe your leadership style and how will that impact the company culture?

Peter Harris: I think my leadership style is a perfect fit with the in-place culture. It’s the only place I’ve ever been in my life where I walked in and felt like the culture that I believe in and the values I believe in were already in place. This is a culture that is teamwork, has high integrity, is respectful of each other, is open minded, is high energy and enthusiasm, and my leadership style will tend to simply add to the commitment that is already in place. And the effect is more a return to Randy’s roots and what made West Marine than a change to something new and different. There are autocratic managers in this world. And there are very participative managers. That’s what I am. I think great success comes from reaching out to everybody in the organization and saying, “What’s the best way to do things?” and hearing them and knowing that you’re going to be successful, in part because it comes from the customer. I also believe in taking risks and trying new things. And I think this is a group of people that embraces that as well.

Boating Industry: What have you learned from your experiences? What we know of you is that you were a chief executive of a football team and a toy store chain. How do you take those experiences and bring that to West Marine?

Peter Harris: I think two things that are consistent is a focus on the customer. And in both of those organizations, we really defined who our customer was in a way that we really got in their heads and then built a whole success story around giving them what they want. And I bring that commitment to the customer and listening to the customer and defining things for the customer that made FAO Schwartz great and makes a successful football franchise. The second thing – those are both entertainment businesses, as is West Marine. And if you really think about it, FAO Schwartz exists to make the emotional connection with the passion that parents or children or the child in us all have. And then delivers to it. It’s about emotion and the merchandise is a way to satisfy that connection. A football team is in the entertainment business. It’s fun to do. It’s about that emotion that exists in front of a television or in a stadium, that exists when a player walks by, or reads a magazine. It’s about the emotions. People loved FAO Schwartz, not Toys ‘R Us, FAO Schwartz, because it was a business of love. It’s entertainment. And I think boating is exactly the same thing. Nobody is involved in boating unless they love it. They make an emotional connection to being on the water, to having fun, to the joys of boating. And with that then, they say how can I live that connection out? And the answer is with the kinds of things West Marine has to help them maximize that emotional connection. And so West Marine is really in the entertainment business. It’s about the customer having fun with boating and we’re a vehicle through which they do it.

Boating Industry: Are you a boater?

Peter Harris: I am a boater. I am not as experienced or active a boater as many of the people in our organization. But man, I’m becoming a boater now. I’m loving it. I grew up on an El Toro, on a fresh water lake on the High Sierra’s, out learning to race and sail and have fun. And have a number of times experienced with friends different forms and types of sailing and power boating. And now with the things I’m being exposed to, the joys on the water, I can’t wait to get some time and get out.

Boating Industry: You don’t have your own boat?

Peter Harris: No. I think the answer is not yet.

Boating Industry: If I’m running a West Marine store, how does this new leadership have an impact on me?

Peter Harris: I think the answer is I have a leadership that listens, I have a leadership that gives me the opportunity to be great and the room within which to define what great means in taking care of my customers. It is one that allows for me to truly continue to mix my passion for boating with what is work. It is a reinforcement that we’re having fun. Most people that run a store – virtually all of them – love customers. What we’re doing is saying, “Play with them. Visit with them. Schmooz with them. Talk to them about what is boating. Give them a place they want to come in January in cold weather markets because they just want to talk about boating.”

Boating Industry: Do you think they will see much of a change in the way they might operate their store?

Peter Harris: I think the answer is fundamentally no – because we were doing so well already. But there is a change in that it’s less about operating the store and more about taking care of the customer. Both are still important but the real area of high interest and the No. 1 priority now is who is your customer, what do they want, find a way to satisfy their needs.

Boating Industry: What about as a West Marine supplier? What do you see in my future?

Peter Harris: We have a lot of discussions about that. We are really recommitted to what is an off-used combination of words – vendor partnerships. We are now defining those partnerships in a way that’s freshly saying we can learn from our vendors. Our vendors – they really are our partners – and they know their business better than we do. And we want to reach out and say you tell us how we can best serve the customer. You guide us into the things you’ve learned about your product that make a difference. And we are really reaching out to rebuild or re-emphasize the significance of relationships with our vendors. We are the biggest folks in the industry, and we don’t want to act like a bully. We want to act like we care about them, we want them to succeed. And we want them to make money. And we want them to help us be super successful in dealing with our customers.

Boating Industry: What does that translate into?

Peter Harris: I think it means more discussions that are rooted in what’s best. Higher level strategic thinking rather than can we get an extra 1 percent discount on this one thing. We’re still good businesspeople so we’re going to still want to work with them so we maximize our ability to buy product well and offer it to the customer. But there’s going to be much more soft discussions and interactivity in that we are going to ask our vendors to allow us to introduce product even more. It’s a very, very important part of what we’re doing. We can become the vehicle that all the customers look to to see what is newest, hottest, freshest, coolest.

Boating Industry: In one of your press releases, you talked a little bit about trying to get a constant cycle of new products in front of the customer so there is always something new for them to come and see at the store, as a reason for them to come and visit more often.

Peter Harris: We’re really committed to that. If you think in one vein, demand and supply product. It’s broken, I have to fix it. We’re going to be the best, broadest selected people to help you do that. But we’re really recommitted to going way beyond that. And trying new things, taking some risks to putting a new idea out there for the customers to try, discovering what the customers want and finding people that want to build product to deliver to it. It’s a real commitment on our part.

Boating Industry: Do you think this opens up some new opportunities for suppliers you haven’t worked with in the past?

Peter Harris: I think it’s a huge opportunity for suppliers. We are committed to the lifestyle of a boater in addition to being a supply source. That means a whole vast array of new people who have merchandise that will enhance the quality of life a boater has and their emotional connection to boating. And in a way that currently they wouldn’t be thought of as someone in the supplies business. So, whether it’s something they would play with on the shore when they’re boating cause they do get to the shore, or whether it is something in their home that reflect their passion for the marine lifestyle or whether it’s a new cool electronics piece or safety piece. We’re going to be out there looking for new suppliers – vendors partners – to help us identify, define and work on something that will help the customer.

Boating Industry: One of the other things that you’ve been talking about recently is expansion.

Peter Harris: We are committed to continuing to grow the number of stores. We will this year open somewhere between 45 and 50 stores. And we are really committed to growing everywhere in the country where there are boaters that have the need state for our kind of product and being there for them, being their authority that they can look to to get them the right product. Although we haven’t talked publicly about the plans going forward, there is going to be lots of growth and there will also be some places where we go back into existing markets and add types of stores and more stores. There’s a whole bunch of underserved people. And we’re really committed to serving them by having our current stores be better and our new stores be where they want them.

Boating Industry: You talk about markets that are underserved.

Peter Harris: New York is a market. There are a number of opportunities. It is a market where we can put a lot more stores.

Boating Industry: In markets that are underserved, where are those customers shopping now?

Peter Harris: The best answer is I don’t know. One of the things I’ve learned in my six months is that boaters sometimes don’t realize what they need until you give them the opportunity to discover it and buy it. SO part of this growth means business not coming from someone else, but instead offering merchandise – lots of the things here today – that someone simply wouldn’t buy at their local chandlery or wouldn’t buy at another store, because it isn’t there, so they’re not buying it at all. When introduced to it by West Marine – the authority that says if we’re going to put it in our stores, it’s going to be high quality, usable and enhance your boating life – there’s going to be new business done that’s good for vendors, by the way .. and it’s great for the customer too. And that business is not coming from somewhere else. With respect to where the business is coming from, though, let it be clear. We will be the best alternative in the market place, wherever we operate, to buy products, merchandise to enhance the boating lifestyle. Wherever we are, we’re going to be dominant.

Boating Industry: One of the things I’ve noticed a lot of is a growing number of destination stores – places like Gander Mountain, Bass Pro Shops, Cabela’s. How do you compete with businesses like that.

Peter Harris: The answer is clear. Have a better assortment than they do, better people at talking about boating that are boaters that are terrific. We are closer to where the customer is. And we are the destination, big combination store for boaters. Those people all have pieces of product, but in the area of boating, they don’t begin to compare with us. They are great stores, in general. I love the kind of people you’re talking about, as a customer.

Boating Industry: They are very interesting stores. They have thee huge indoor aquariums. They have all these things that make them a destination, entertainment experience. West Marine hasn’t really gone after that kind of entertainment. It’s almost shopping as entertainment.

Peter Harris: I like to say shopping as theater, retail as theater. I’ve been saying it for 25 years. Our stores in Fort Lauderdale and San Diego are, in fact, 27,000 square foot boating lifestyle stores that are entertaining and fun. And are pretty cool.

Boating Industry: Why do you think there seems to be more of a trend in that direction?

Peter Harris: There have been in the last 10 years, 15 years, a number of what are called classification dominant single store locations that tend to pull together a breadth of merchandise in an entertaining, participative environment. If you reach back, it goes way back. Toys ‘R Us was that kind of thing or tried to be. FAO Schwartz clearly was. Niketown, the NBA Store, I could give you a pretty good list. Best Buy is absolutely that kind of environment and getting only better. Home Depot and Lowe’s are that kind of environment for that kind of do-it-yourselfer. All we’re seeing now – all you’re identifying – is a move of that kind of thinking to a new merchandise classification. So, yes, it’s new for this kind of class of goods, but it is not new in the retail world.

Boating Industry: It’s not a direction necessarily though that West Marine is moving in or that it feels like there is a threat posed?

Peter Harris: I don’t feel any threat, but you’re talking to someone who absolutely believes that entertainment retailing is fundamental to great success. And you’re talking to someone who has defined it. FAO Schwartz really defined that whole delivery mechanism for retailing in general when we did it in the 80s. And set the tone that an awful lot of people. The Disney Store. All kinds of people copied and tried to do in all sorts of industries. I believe in that. I think it is an amazingly important part of being successful. And we’re going to do lots of those kinds of things that make for entertainment retailing. We’re going to do that. It is a direction. First of all, those big stores. We don’t see them as a threat. Secondly, independent of that, we are committed to building great destinations that people love to come to, even if they don’t want to buy someone or don’t think they want to. That’s one of the measurements. You get people to come to your store to play. That’s a good thing. And we will do that.

Boating Industry: Recently, West Marine’s comparable store sales numbers have been flat or down in some cases. Some people might be surprised to hear of your expansion plans given that — kind of the philosophy of why not fix what’s broken before you start expanding. That kind of a thing.

Peter Harris: To start with, it’s not broken. Number one, the lack of comp store growth is not a problem. We have opened so many additional stores where we have stores in place. And in effect, you add one and one together, you’re getting two. Some of the new business is coming out of existing stores. So it makes the comp stores look less.

Boating Industry: That’s one of my questions, actually. With expansion, how do you keep from competing with yourself?

Peter Harris: You do. My second point is our store model is enormously profitable when we don’t have comp store growth. And so the way I look at it is that if we can build new stores, move some business but serve a lot more customers and both stores are profitable. Then we’re doing what we want, which is serving customers, and that ought to be the measurement. More important than comp store growth is market share and our market share continues to grow dramatically. And it has a huge impact on what we think of as our success model. So, I am not worried about comp store growth. Having said that, we intend to get some comp store growth with some things we’re doing to more than cover for the business that we move to other stores. It’s also been a difficult winter and a much longer winter. The last six months results were heavily influenced by the fact that people didn’t put their boats in the water until way later.

Boating Industry: Bigger isn’t always better. How will your expansion improve your business? How does it meet your goals? To what extent is it an effort to satisfy Wall Street?

Peter Harris: It’s not an effort to satisfy Wall Street at all. In fact, we’ve done some things since I’ve been there to reduce earnings in the short term as we recommit to the customer. And Wall Street embraced it. It was amazing, actually, how positive Wall Street has been to our story and where we’re going. So, what we’re doing it not for Wall Street. It’s all about customers and serving them. New store growth is not driven by a need to have some number of stores. It’s driven by the fact that customers in the Minneapolis market – we’re not there virtually at all. And there are lots of people that would love a West Marine store, and we just need to provide it for them to satisfy customers. That’s what driving it. Not Wall Street.

Boating Industry: Any specific geographic areas that you’re targeting?

Peter Harris: Not that we’ll talk about publicly.

Boating Industry: Can you share any information about how or when you’ll be satisfied in terms of expansion? Is this a five-year plan?

Peter Harris: I think the big picture answer is it is all about the customer. Are there customers that love boating and are they being satisfied by West Marine. And we will not stop growing or stop adapting or stop being flexible in our store offering until we have them all satisfied. It’s easy to talk about new markets where we’re not there at all. But there’s a real opportunity to expand in infill, which is markets where there is a store over there, but I need one closer. And we will not stop expanding until customers tell us by their behavior with us that there’s no more places to go. It’s hard for me to think about that ceiling being there. I’ve been a retailer for almost 40 years – the hard number is 39 years – and I’ve never seen a business model that didn’t always keep raising the bar of how many stores they could do as they discover more and more customers and ways to do it. Don’t forget we have an Internet business that is really important and strong. Huge opportunity and will be reflective of what customers want and are looking for. A catalog business that is wonderful. We’re really committed to our wholesale business. And we have an emerging services business. There are a lot of people out there that don’t want to do it themselves. And we think there is an opportunity to expand a business that does it for them.

Boating Industry: Can you give me an example of what kind of services?

Peter Harris: You want to buy that thing but don’t want to install it. You want to buy a radio. We’ll install it for you. Our growth won’t just be bricks and mortar growth.

Boating Industry: Do you feel like you compete with boat and engine dealers?

Peter Harris: I think that anyone that sells anything to satisfy a boater’s lifestyle or supplies’ need is in some form a competitor. And I want that business. As we watch the growth of the people that sell boats and the parts to go with them, they’re satisfying a very tight need state for customers. They are not reflective of the passion for boating. They’re selling supplies in a tight way. They’re not fulfilling the dream. Yes, there is some business there that people are doing well with. The people are in the business. I’m not sure they’re doing well. We are a very different destination experience for customers. We’re going to work hard to be the best place for someone to buy oil, even if the gas station down the street from the marina is selling it. We’re going to be such a cool place to come that they’d rather buy it from us. So, everyone is a competitor.

Boating Industry: In a recent press release, you mentioned new initiatives developed as a result of time spent listening to and learning from customers and associates. Can you explain to me a little bit about how you collected this information?

Peter Harris: We did it three ways. We did it with hard, classic, objective research done with a huge number of customer outreach questionnaires. We did it with what is subjective research that includes things like focus groups and other questioning. And we did it with what is best described as one-on-one contact research where we in our stores, in our district folks and in our leadership team simply went out and talked to a whole lot of customers and concluded things from that. For instance, we have a whole new initiative to do products that the female boater wants. We’re really committed to that. And all of that came out of asking questions of customers and hearing women say you don’t have anything for me. It’s an important, huge market base that we listened to. And that tended to be more conversational stuff.

Boating Industry: What about you personally? How have you gotten to know the company?

Peter Harris: My first day as CEO of West Marine, I went to the store in Long Beach and waited on customers and worked alongside everyone else. And that in itself is symbolic and reflective of my view of what I’m about and what this company is about. And the best way to learn. I have been, although I haven’t done a count lately, in six months in I believe 12 states and I have now been in 120 stores. That’s a rough number. And in every one of them, spent more than half my time talking to customers. That’s how you run a great business focused on the customer.

Boating Industry: After doing this research and immersing yourself over the past six months, how would you describe West Marine?

Peter Harris: The place that is most front of mind and respected for product assortment, great people and being there – being close by – when you’re needed.

Boating Industry: How do you think the company is perceived by its customers, its employees, its shareholders, its suppliers?

Peter Harris: We’re clearly the best. We want to be even better. We’re the leader but we can be lots better as we focus on the customer. The perception is strong. The brand is understood. People know what we stand for and look to us as the leader in the industry.

Boating Industry: One of the initiatives you talked about in a recent press release is expanding your efforts to build Internet sales. Can you share what percent of your sales are conducted online today, what you’d like that percentage to be and how you plan to accomplish that?

Peter Harris: I think the public number is that 7 percent of our sales are done in direct businesses, which includes the catalog and the Internet combined. I personally am a huge believer that the Internet will become more and more important in the lives of our customers as an alternative way to buy merchandise. And great Internet sites represent a broad array of merchandise available in a way that it can be quickly in the customer’s hands, which means a great infrastructure system to go with it. The Internet is community. The Internet is the authority that can answer questions, if done right. And we are really, really committed to building on our strong internet base to make it much, much bigger and much better.

Boating Industry: What’s reasonable when you talk about percentage of sales?

Peter Harris: The answer is I don’t know. But I do know is there will always be the customers need for stores and the majority of sales will be done in stores. Customers want to bounce off walls. They want to interact with other human beings. They need that aestethic experience of boating and being together with other boaters, other people that are passionate.

Boating Industry: Another one of those initiatives was lowering inventory levels. Can you tell me why you feel that’s necessary and how it will impact your suppliers?

Peter Harris: It has absolutely no impact on the customer. And really, no impact on our suppliers. We now have grown to have our suppliers, our vendor partners, be so much better at getting us goods when we need it that what we are really doing is reducing the amount of merchandise held in our distribution center. One of the historic areas of improvement is what we call turns. And by reducing the amount of merchandise in our distribution center one time – it is not progressive, it’s one time less – we will be building on that base and it’s totally transparent to the customer. The store’s inventory will be the same and to our vendors it should be no different at all.

Boating Industry: You don’t feel it will put more pressure on suppliers to respond more quickly?

Peter Harris: I think the short answer is it will be basically the same expectation we have today. In this world, in many, many more industries than the marine industry, the cycle has been reduced and vendors are good about building product as it is needed, getting it in stores as it’s needed, and everyone is better about managing their own business. And in this case, the exact same thing is happening.

Boating Industry: We were talking about expansion earlier. Can you tell me a little bit about what expansion means to your suppliers? Does it mean your suppliers will need to be bigger? Does it mean they will have to expand their businesses to keep up with you?

Peter Harris: I think the answer is there are a whole bunch of customers out there that we’re going to take care of and we want our vendor partners to grow with us and to find ways to take care of those customers. And we want and hope all of them will grow with us. And we recognize there will be some that chose not to build their capacity in a way that they will be in a position to serve a greater number of customers. Remember, it isn’t suppliers to us, it’s suppliers to the end use customer. We share our suppliers and we need to share a passion to take care of customers. So by expanding, it’s really growing the market.

Boating Industry: Do you think that means that you’re going to be working with fewer, bigger suppliers?

Peter Harris: No, the best case would be to have our smaller suppliers continue to be this nimble, quick, creative, imaginative group of people and simply help them, support them and their successes as they grow to be able to handle more customers. I would rather have a base that is broader of suppliers and support those smaller guys that just want to be better. And I think we can help them.

Boating Industry: When you say you can help them, what does that mean?

Peter Harris: We can provide market for them. We can help guide them by giving them forecasts. We now give a number of our supplier partners forecasts nine months out of goods we’re going to need. And those forecasts have a very high level of accuracy. SO we say to a supplier, we don’t want it now and you don’t need to build it now, but over the next nine months, we’re going to need a total of this much product in roughly this kind of timing. And that helps them because a little guy says, “Wow, if I know that’s where I’m going to be, I can tool up and I can do things.” American business success is rooted in little guys with a dream, and I really, really, really believe in being there for them and not running away from them, but helping them, teaching them, showing them. We now help people plan deliveries. We give them a few tools to help project and tighten what they’re doing. EDI is an example of something the little guys first went, [weird sound], and now they all do it, and it actually helps them.

Boating Industry: You talked a little bit earlier about inventory mix and constantly surprising customers with new products. What would you recommend to suppliers that would like to receive that business?

Peter Harris: Continue to focus on the customer, to figure out what they want in their life and then design products that fit their needs. That could be a classic supply item that can be built better, last longer, easier to install. Or it could be something as extreme as a lifestyle thing. Boy, I think they’re in a much better position to do things like this Manta Ray thing. Or the Zodiac boat we just saw. Just an array of things here today that says, “Here is a smaller guy that says whose my customers or a big guy, what do they want and then they design things to deliver to it.

Boating Industry: Given the number of products that West Marine produces or that it outsources to be produced, how do you decide when you’re going to make something yourself vs. when you’re going to go out …

Peter Harris: We want our customer to tell us. If a manufacturer can build a product that the customer wants, boy, that’s where we want to be. And one of the elements of the customer wanting it is the price value relationship so that if a vendor says I’m going to build it, but I’m going to make the customer pay way up here for it and there’s another way to do it so that it’s a lower price and a better value for the customer, the we’re going to try to find another way to make it a better value. Hopefully, there’s a vendor out there that wants to do it, and if not, we’ll do it ourselves. We really want our product development program internally to fit vendors, not to kill vendors.

Boating Industry: Who are your main competitors and how has that changed over time?

Peter Harris: I don’t like to think in terms of competitors, meaning stores, I would rather think in terms of who is our customer and what can we do to be the place that every one of them wants to come. That’s the way to look at it. Not where are they shopping, but what do they want. Let’s be the place they want to be. And then, as I told you earlier, the absolute direct answer to the question is everybody that sells anything for the boater is a competitor and we want that business. And we only want that business if we deserve it by being that combination of broadest selection, greatest people that are really knowledgeable and care and help, locations that are appealing to get to and that price value combination. You pull that together, everybody is a competitor and we’re going to do better than they are for the customer.

Boating Industry: We’ve been hearing that the high end boat market has been doing well, while the entry-level segment is pretty flat. How does that impact your business?

Peter Harris: We appeal to used boat owners and there’s a huge amount more used boat transactions than there are new ones. And we appeal also to the higher end newer boats as well as older, wonderful classics. We think we see each of those segments as independent and in different ways appeal to the customer in each. That’s a long answer to say, it’s transparent to us

Boating Industry: So if new boat sales are up or down, it doesn’t have as much of an impact on you?

Peter Harris: No, I’m really saying that we appeal to new boat owners because we’ve got cool stuff to help them love their boating experience. We appeal to used boat owners or smaller boat owners for helping their lifestyle be improved. Whether it’s the total numbers of boat registrations, we’re going to be there for everyone.

Boating Industry: Any expectations or predictions for the boating industry this year?

Peter Harris: I’m really excited about the industry and the market because I think we’re seeing the beginning of a growth out of a dip that we’ve had in the last few years. You can see it in new boat sales. You can see it in the beginnings of turns in some places. And we are really committed to supporting the growth in the boating market. We very supportive of the Grow Boating effort. And Tom actually is on the committee to develop the communication vehicles as we find ways to make the market bigger and better in general. And I think this year is going to be the one that, independent of the impact of weather on some kinds of things, this is the one that, if you pulled out that impact that showed the beginning of a building greater interest in boating, a renewed interest. And I think we’re watching this. We as a company really are optimistic about the boating industry and the beginning of a positive trend.