Robert J. McNulty, who in two years built the hugely successful HomeClub chain of discount home improvement stores that Zayre Corp. bought last year for $151 million, is preparing to launch a chain of no-frills sporting goods stores called All American SportsClub.
A hard-driving businessman who also considers himself a "sports fanatic," McNulty has just raised $10 million in private financing for the new project and is busily negotiating for store sites in California, Arizona and Colorado.
McNulty plans to open four stores in a six-week period beginning Oct. 1 in Long Beach, Burbank, South Sacramento and Torrance, and then go after additional financing to start up 18 more stores next year. He wants to move fast, he said, to secure a substantial market share that will cement his relations with suppliers.
Moreover, McNulty, who remains president and chief executive of Fullerton-based HomeClub, said he wants to enjoy the fruits of his concept before others in the sporting goods business start shaking the same tree. "We think if we are right with the concept, everyone else will try it," McNulty said.
The "concept" he is talking about consists of applying to the merchandising of tennis rackets and hiking boots some of the same warehouse sales techniques, coupled with club membership and deep discounting, that proved so popular in selling paint and faucets.
He says he plans to undercut the prices of his competition by 25% to 30% by eliminating trucking and distribution systems and selling directly out of high-ceiling, cement-floor warehouses with large volumes of inventory. He says that while most sporting goods stores mark up their merchandise from 40% to 60% and discount only a few items to attract shoppers, SportsClub will offer consistently lower prices.
"We will use a lot of mass merchandising techniques and offer prices as low as the other guy's promotional prices day in and day out," he said.
While SportsClub stores will be open to the public, those who purchase $8-a-year individual memberships or $5-a-year group memberships will get an additional 5% discount tallied at the check-out stand. For several months, McNulty said, the company has been working to obtain membership commitments from school systems, credit unions, parks departments, "sports-minded" corporations and athletic clubs.
Each SportsClub store, McNulty said, will contain about 60,000 square feet and house a broad array of sports equipment and clothing with a retail value of about $3 million. By contrast, he said, the average sporting goods store is about 10,000 square feet and is stocked with about $600,000 worth of merchandise.
Entirely Different 'Ambiance'
Despite similarities in warehouse merchandising, McNulty said SportsClub stores will have an entirely different "ambiance" than HomeClub outlets: They will have lively color schemes and special services such as an adventure travel agency and a library of sports-oriented books and videos. And they will feature such "traffic-drawing events" as sports celebrity appearances, slide presentations, sports clinics and classes in outdoor cooking. "It is going to be a fun place," McNulty says.
Stressing customer service, McNulty says SportsClub will employ an "advisory staff" of experts in specific sports who will counsel shoppers on how to choose the right equipment for their needs and level of play.
While McNulty has been concentrating on acquiring real estate and financing for SportsClub, he has handed over the operational reins to Thomas K. Haas, whom he recruited from Eastern Mountain Sports, a chain of 21 sports stores headquartered in Peterborough, N.H.
While McNulty provided hands-on leadership at HomeClub, he said Haas will run the show at SportsClub once it is established. McNulty said that although he will remain chairman and a major shareholder in SportsClub, he plans to continue working at HomeClub for the 2 1/2-year duration of his contract and then go on to pioneer other enterprises.
McNulty said that although the HomeClub merchandising concept is foreign to most of the sports industry, HomeClub's success helped him obtain the initial $10 million in financing for SportsClub. The money was raised through a private sale of stock to Oak Investment Partners, a venture capital company in Westport, Conn., and a number of other "blue chip" investment firms including Boston-based HLM Partners, Cambridge-based Harvard Management Co. and New York-based American Express. The stock sale closed July 2.
McNulty said that from the time HomeClub obtained $4.5 million in start-up funds from venture capital investors, it was in an uphill struggle, with some industry observers predicting that the concept of using a membership club to sell plumbing, building and other home-improvement items at bargain prices would never catch on.