Thursday, January 15, 2015

Mergener's Printing and Office Supply

Yes, the pink sign says "22LR Sale"



This week’s Local Small Business essay is about Mergener’s Printing and Office Supply: Phone number (517-975-4550)

The selection criteria were much the same as last weeks.  I was looking for a local business with longevity and I wanted a business with enough “eye candy” to support the essay while I get the hang of business reporting.

Mergener’s Printing and Office Supply



Mergener's can print on a variety of substrates, many of which have good resistance to weathering.

This substrate is extruded plastic board.  The ink is fused to the board so it is wind, wear and waterproof.  This is ideal for permanent signs in high traffic areas.
Yup, they have office supplies.

Mergener’s is an interesting blend of businesses.  They provide a service (graphic design), manufacture a product (printed materials) and sell retail (office supplies and sundries).

Cash Flow and Pocket Stop


Mergener’s reminds me of the ideal Amish farm.  The ideal Amish farm typically has a milking operation which provides steady income year round.  Then, the farmer looks at his resources and his markets and produces a bewildering array of agricultural goods with the intention of producing a second, variable stream of checks every week of the year.  His variable stream might start with maple syrup, Easter chicks, cut daffodils and tulips, asparagus, rhubarb, green onions, strawberries, sugar snap peas, raspberries, green beans, pickling cucumbers, sweet corn…Christmas trees, mistletoe, fudge, fruitcakes, and smoked meats.

The key is to exploit every square inch and every moment of time.  It is also critical to keep the maximum number of dollars on the farm.  Cash-flow is of limited value if there is no pocket-stop.  An ancillary benefit of this approach is that it keeps kids busy and (mostly) out of trouble.

Gene Logsdon once asked an Amish farmer why he did not buy more farm land.  The Amish farmer owed 28 acres which is about 1% of what a conventional farm needs to be economically competitive.  The farmer looked over his domain and said something to the effect of, “I might be able to farm more than 28 acres, but I could not farm it well.”  It is telling that this farmer had been able to raise a large, healthy family on that 28 acres and he did not go into debt doing it.

The customers for skateboarding supplies is not big but they are very enthusiastic and tend to spend money as soon as it hits their pockets.
The owner uses these products and thinks the world of them.
Spinning product so the customer can see multiple aspects of it was pioneered by Lex Wexner.  It optimizes sales per unit of merchandise and  is still considered good merchandizing.
A key to staying in business during times of price instability (i.e., inflation) is to charge enough to ensure that you will be able to afford to restock your shelves.

Mergener’s is similar to that Amish farmer.  Mergener’s is not a small business.  The owner calls it a “micro-enterprise”.  The retail shop is about 12 feet across and 24 feet deep.  The owner not only sells office supplies, he sells skateboards, wheels, friction tape.  He sells Herbalife nutritional supplements.  He sells ammunition.

The printing side of the business is like the farmer’s dairy cows.  It produces steady cash-flow.  The majority of his clients are other businesses who come to him for their various forms and other printed material needs.

The retail side of the business is the variable side of the business.  He is always arranging and rearranging his offerings.  Square footage allocated to each class of products varies by dynamic demand.  For example, the nutritional supplements are selling well during these dreary days of winter and the skateboard supplies…well, not so much.  He is going to flip his retail space around to capitalize on that.

---Editorial Aside: The perils of a small, single person business---

Mergener’s office supplies retail business supports the printing business in a few unexpected ways.  It was originally put in as a convenience for his customers and to productively use some floor space that was too narrow for printing equipment but too wide to use solely as an aisle.  Perhaps the thinking was that walk-in traffic might generate some printing business as well.


A mini-pinball machine.  It is all mechanical.  It cannot be justified by any "hard" business basis but it is fun and generates showroom traffic.


A trickle of retail customers also gives the single proprietor a reason to get up and physically move around, to get a little bit of intellectual stimulation.  Working alone can make a person feel very isolated.  The prospect that customers might walk in at random times is enough to create a sense of connection.  The key is to not have the retail business become a burden that detracts from the meat-and-potatoes end of the business.

---End aside---


Merchandizing


At one point our conversation wandered into the details of merchandizing.  The owner was able to tell me on a rack-by-rack basis which ones moved a lot of merchandise and which ones seemed to be invisible to customers.

His observations were initially counter-intuitive.  Material in flat-racks sold briskly while merchandise in four-sided “spinning” racks did not move.  Upon reflection, it is probably due to the nature of his merchandise.  The customers fall into an efficient search mode by ignoring everything more than a few inches outside a given focal plane.  Customers end up seeing right past the spinny racks.

There are not many people in retail who can articulate that micro level of detail.

Overhead


Eaton Rapids has seen many new businesses come and go.  The ones with longevity survived because they developed strategies to keep their fixed costs low.  Business with high fixed cost may thrive during good times but fail during economic downturns.  They bleed money while their revenues dry up.

One of Mergener’s strategies includes low rent.  He has a very frugal footprint in square-footage.   Also, being an older building, he does not have to pay top dollar per square foot.  Older retail space might be the kiss-of-death for consumer products but his space is very close to many of his business customers. 

Another strategy is lean inventory.  A common failing of new business owners is to fall in love with some item of inventory and to over buy because they are absolutely sure everybody in town will want to buy one.  One happy side effect of frequently rearranging the footprint is that one does not fall in love with the inventory.

A fixed cost reduction strategy from the printing side of the business was to form strategic alliances with other printers.  Mergener’s quotes jobs that they cannot do in-house and then farms them out.  They have two reasons for doing this.  Mergener’s does not end up sitting on a bunch of seldom used, rapidly depreciating equipment.  The other reason is that they know the technical side of the printing trade better than their customers.  They can spec and source the job far more quickly than the customer, freeing up the business customer to do what that customer does best….providing service to their clients.


---Editorial Aside: Integrity and Trustworthiness---

I asked for some examples his work to photograph.   He politely refused. All photos shown here are of materials that are in the public domain or his customers encouraged him to distribute...materials like business cards.

Mergener's prints business cards.  This one looks very classy with white font on a black background.
Others opt for a more colorful palate to project a different image.  These cards have very good definition and the crisp detail that my cheap camera does not capture.


He explained that printed materials contains intellectual property which belongs to his clients.  He prints brochures, menus, fliers for upcoming sales promotions, business forms.  Imagine how betrayed a business would feel if a competitor learned about an upcoming promotional event and underpriced every special by ten cents?  Or, consider the effect on sales if customers learned that prices were going to drop by 25% within a week.

---End Aside---


Saying “No” to Business


This interview was conducted very shortly after the terrorist attacks at Charlie Hebdo, a French magazine.  So the topic of self-censorship came up.

One of the advantages of a private business is that the owner has more latitude to pursue or refuse business.  I ask the owner how he handled requests to print “edgy” or potentially inflammatory bumper stickers and other materials.

The owner told me that he has “not-bid” business in the past.  He also told me that he is a dedicated, practicing Christian and the last time he looked in the Bible it said something like, “…and treat your neighbor as your self.”  He uses that as his touch-stone.  In his mind, he replaces target of the bumper sticker with Christ or Christianity.  Then he consults his gut reaction to decide whether to “bid” the job or “not-bid”.

Link to previous small business report.
Link to next small business report. 

1 comment:

  1. Well done, and sounds like a quality business run by a man of quality!

    ReplyDelete