Retail Consolidation: 5 Questions With Ken Gart

The scene at a recent Boulder Running Company Wednesday evening run.

Boulder Running Company is considered one of the top retail running store groups in the U.S.

Earlier this week, news broke about the Boulder Running Company specialty running stores being sold to Running Specialty Group (RSG), a Denver-based specialty running retail conglomerate with 38 stores across the U.S. and operator of the Run.com running retail site. RSG is a partnership between The Finish Line, an Indianapolis-based operator of 635 athletic retail stores, and Denver-based Gart Capital Partners, which previously bought up 140 ski and snowboard shops before selling that group to Vail Resorts in 2010 under the name Specialty Sports Venture. The RSG partnership was announced in 2012 with the intent to buy up to 200 running retail shops in five years.

The reason it is such big news is that Boulder Running Company is considered an industry leader and one of the top running shoe sellers in the country. It was started in 1996 by legendary South African runners Johnny Halberstadt (the 1972 NCAA 10,000-meter champion while at Oklahoma State) and Mark Plaatjes (the 1993 world champion in the marathon) and quickly gained national prominence, initially because it was the first store in the country to offer free video gait analysis on a treadmill. BRC’s Boulder store was named the national store of the year in 2006 by the Independent Running Retailers of America and has repeatedly been among the IRRA’s Top 50 Running Stores in America.

The original BRC store, located at 2775 Pearl Street in Boulder, expanded several times to its current 6,000-square-foot store, while additional Boulder Running Company stores were added in Littleton, Colo., (south of Denver) and Colorado Springs. Plaatjes will continue assisting with the management of BRC and operating his separate InMotion Rehabilitation physical therapy business upstairs while Halberstadt will stay through a transition period and then move into a consulting role.

Running retail is in a high-energy consolidation period, with big brands like RSG and Fleet Feet buying up stores and big national retailers Dick’s Sporting Goods and Sports Authority making a bigger play at selling running gear. We caught up with Ken Gart, 57, a partner of Gart Capital Partners, to discuss the BRC transaction. (Gart’s family has been in the sporting goods retail business for three generations.)

You’ve been talking to Johnny and Mark for a while about acquiring BRC. How will this acquisition play into your overall plan with RSG?

Boulder Running Company is an awesome business with a very strong reputation. We’re very fortunate to be able to add it to the portfolio. We’ve talked to Johnny for three years. We always felt that if there was a business around the country that we’d like to buy, it was Boulder Running Company because of its reputation. Additionally, it’s in our back yard, so we can take some of the best practices in all that they do with their running groups, training and races and learn from those.

The theme in our first meeting with their staff [on June 4] was to “Do no harm.” We don’t want to buy the business and harm it. We want to buy the business and use the great things that they’ve built and be able to grow it. But it has to be a part of our bigger company, so some jobs will change and some things will change, and I’m not going to pretend otherwise about that. Like any business, you have to buy it and make sure it is profitable. We’re going to look at more Denver stores. We think we can take the base and use it as an opportunity to grow it. And we think Run.com and our digital piece will be a big piece of the puzzle, too. So we bought it for more than having a feather in our cap, of course.

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How does your partnership with The Finish Line work?

Finish Line is a partner and owns 51 percent of the business and we own 49 percent. They don’t have anything to do with the day-to-day operations. Unlike what we did with Vail Resorts, Finish Line is in the retail business, so we’re using what we think applies to this part of the business. For example, we are leveraging Finish Line by using their 1 million square foot distribution center in Indianapolis. So there are some synergies. But essentially they’re a silent partner and we’re the managing partner.

You’ve kept the name in place of many of the running stores you’ve purchased. How are you operating each store at a local level?

We want to keep the culture of each store in place. Anything the customer can see, we want to do as close to the customer as possible. So the local hiring, the running groups, a lot of the promotions — all that stuff will be done out of each store. But the customer doesn’t care where the bills are paid or where the computer system is headquartered or where the distribution center is based. We call those transparent functions and those can be done elsewhere.

How has the increase in online business in the running industry changed things?

It’s a big deal. There is going to continue to be more business done online, with Zappos.com and Amazon.com and RunningWarehouse.com. And there is a role for that. I don’t think there is any reason to pretend to think there is not. There is also a role for high-service, high-touch retail and brand loyalty, and our job is to build that. But because we have Run.com, we have the ability to go into Boulder Running Company, and if we don’t have a product in stock, we can have the salesperson go to their iPad and tell the customer we’ll drop ship the product and have it their house the next day. We’re not there today, but we will have that ability. Hopefully we can “showroom” or compete with the online businesses as well. That’s certainly our goal to be able to offer both.

Given its reach and connection to your stores and The Finish Line, will Run.com start to offer discounted prices online?

That’s a great question. Right now, our prices are the same in stores as they are online. We have said we don’t want to be the discount leader. That’s still our goal, but on the other hand there are murky waters because when you go to Road Runner Sports and you join the VIP program, you get a discount. We have to look at those models and see how we can add value, but at the same time compete, too.

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