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Santa Claus, Indiana is a special town that embraces the magic of Christmas all year round. One of their local retail attractions, Santa’s Toys, reached out to Marcus Lemonis for his assistance in growing their business. Their goal is to be able to create a refuge where kids can come and feel the magic of Christmas all year long. With the toy business undergoing some major changes in the past few years, Mark and Heidi Schmidt are in desperate need of some guidance so that they can remain competitive and continue to expand their business.
Marcus is surprised when he entered Santa’s toys. He expected to walk into a store that resembled Santa’s workshop, but instead found a retail space that was cramped, dark and uninviting. Throughout the store, 16 security cameras and accompanying signs reminded consumers that they were being watched. Instead of a fun environment where people can play and fall in love with toys, he felt there was a staunch surveillance feel in the storefront. The brand did not match the business.
“The best way to get someone to buy something, is to get them to fall in love with it.” – @marcuslemonis #TheProfit
— CNBC’s The Profit (@TheProfitCNBC) December 19, 2018
Santa’s Toys carries over 4,000 SKUs including games, knick-knacks, educational toys and a popular toy area (among others) but there are not any labels on the toy sections to help direct customers around the store. To compete with online sales, brick and mortar stores have to make their stores as easy to navigate as a website. If a store is disorganized or consumers have trouble finding what they need, they will leave. In the case of Santa’s Toys, it appeared that the customer experience was not a focus when the facility was organized.
In evaluating their business, Marcus discovered that Mark and Heidi were not focusing on their website and had not made it a priority. They only invested in a .net and not a .com web address, they reused old shippng boxes instead of purchasing branded packaging, their website was severely outdated and it was clear that they had not thought about the online customer experience any more than they had considered the in-store customer experience. This is a major concern for Marcus.
A busy day for Santa’s toys would net about $5-6K but there are days when they do not sell a single item. This is especially true in the summer months when people are not focused on Christmas shopping. Marcus asked if they have considered closing seasonally, but they feel they have an obligation to their customers to be there for the whole year to cover everything from birthdays to get well soon presents. Marcus suggests that they launch a proper website that can work for them 365 days a year. This will also help to supplement their family income through the slower months so they do not have to worry about their financial stability.
After reviewing their financials, Marcus was impressed that they learned how to run a business in two years that is financially healthy and does not have significant debt. He decides to make them an offer to invest $75,000 in their company with a stipulation that half of the money will go into the store and the other half of the money will go into the website. In exchange for his investment, he wants 50% of online sales. He wants them to keep 100% ownership of the physical store. He feels that the store will help to build their brand and will ultimately drive web traffic as well. His expectation is that they will stock inventory and ship it out in branded, Santa Claus packaging. He wants the brand to exemplify joy, family, and Christmas. They agree to the terms and agree to enter into a business agreement with Marcus Lemonis.
In beginning their store-front makeover, their first step was to remove the slow-moving product and liquidate it. Marcus decided to purchase all of these items to donate to charity. This also allowed that portion of the money to flow directly back into the business. They also decided to redesign the space by putting in new lighting, floors, signage, and fixtures. This updated and opened the floorplan allowing them to stock double the amount of product while increasing the physical organization and flow for the customer. They also decided to turn some of their wasted storeroom space into Santa’s workshop to add to the appeal of the business.
The changes to the physical space and website were not the only upgrades that Santa’s Toys went through during their time with Marcus Lemonis. Mark and Marcus focused on making some marketing upgrades to strengthen their brand. They met with a packaging manufacturer to pick the perfect packaging for their products. By investing in branded packaging, they are increasing their customer retention, brand awareness, and customer experience. They also met with a prestigious marketing firm to help create the strategy behind their website and other advertising outlets.
Another important upgrade that was made during their renovation was an updated product line. Heidi and her family attended a wholesale toy show to preview new and trending toys. Heidi has proved that her judgment on selecting toys is solid and her choices have primary been the best sellers for their company. Marcus puts her in charge of expanding their product line. Although she is reluctant and unsure of herself, she does take over managing and selecting new products for Santa’s Toys.
After investing $25,000 more than his original offer, Marcus is very pleased with the progress that Santa’s Toys has made. The new and improved website is up and running and the physical store has been completely renovated. The store looks brighter and more open. The Christmas theme is tied throughout the store making the customer experience feel truly magical. Although there is still some fine-tuning to be completed, Santa’s Toys grand re-opening was a great success.
What do you think about the changes Marcus implemented with Santa’s Toys? Do you feel that he made significant improvements to the physical and virtual customer experience? Let us know in the comments below!
“The Profit” airs Tuesday at 10 p.m. on CNBC.