Chain Store Age

Profiles of Leadership: Marty Allen
CEO/President, Party America

Shortly after Marty Allen joined Party America, Inc. as chief executive in 1996, the company filed for bankruptcy. Six months later, the retailer emerged stronger than ever and has yet to turn off the afterburners. In fiscal 2003, same-store sales rose 5.8% while overall sales were up 33.5%. Allen spoke with Chain Store Age recently to discuss Party America’s recent acquisition of Paper Warehouse, the importance of having fun at work and the benefit balloons can have on a party.

CSA: It’s July, which means Independence Day is near. What kinds of displays and activities are going on at Party America stores at the moment?

Allen: We have a very powerful seasonal aisle that runs roughly 300 linear ft. in each store. Graduation merchandise has just finished its run, and our stores are now stocked with patriotic merchandise for the Fourth of July. This includes plates, napkins, flags, table covers and other related goods.

CSA: Does it help that there is basically a major holiday or big event each month to boost seasonal sales?

Allen: It’s what brings our customers back into our stores. We start the year off with New Year’s, which is then followed by Valentine’s Day, St. Patrick’s Day, Easter, graduation and Fourth of July. We also have created a complete summer season that didn’t even exist in our stores five years ago. Then the year ends with Halloween, Thanksgiving and Christmas. Our seasonal business in terms of store square footage has roughly tripled in recent years. All of the seasonal merchandise is placed on one side of the store, usually on the right side, from the entrance to the back. By doing it on one side, the wall is uninterrupted.

CSA: There are really two parts to your business: everyday party products, which account for 80% of sales, and seasonal goods, correct?

Allen: Right. Everyday merchandise still accounts for the lion’s share of sales, but seasonal goods are what brings mom back into the store week after week. When she buys seasonal stuff, she also buys everyday items such as balloons, gift wrap and greeting cards. But our seasonal business continues to grow. We are developing it even more.

A few years ago, we hardly had a luau business, but today it is one of our biggest categories as people are throwing big parties year-round, especially during the summer. We sell a lighted palm tree for luau parties that retails for $100. It is selling nicely. That is a big-ticket item for us and probably our most expensive item.

CSA: What is the average order size at Party America?

Allen: It is probably about $25, but that is because a lot of people come in just for greeting cards. For someone hosting a party, they will spend about $50 or $60.

CSA: When a holiday is over, what do you do with the leftover inventory since it can’t be used until the following year?

Allen: Some of it gets packed up and shipped back to the distribution center, but a lot of it is marked down the day after the holiday. It’s a pretty steep markdown the day after, so we try to sell goods at the last minute the day before the event. We really prefer to sell the leftover seasonal merchandise rather than pack it back up.

CSA: Last year, you acquired Paper Warehouse out of bankruptcy. Did it help at all that you had been through the experience of Chapter 11 and knew what needed to get done?

Allen: It was a huge advantage since we understood the shape the company would be in and how to get them out of bankruptcy. When you take a company into Chapter 11, you are running to the lowest levels, as a lot of things are broken. But we knew what was broken and how to fix the problems. We used our own resources and experience.

When we acquired Paper Warehouse, Party America only operated 37 stores. So we took on another 26 company-owned stores and more than 60 franchise stores. There was a greater chance of the bigger company damaging us, but it turned out the opposite way. We have completely swallowed the acquisition and are now fully integrated. All stores have been switched to the Party America banner. It makes it a lot easier. Trying to run two names on one advertising campaign is a nightmare.

CSA: What changes, if any, did you make to the Paper Warehouse stores?

Allen: In addition to changing the name, we completely reworked the inside of the stores. We changed the fixtures, ripped out the cashwraps and added balloon bars to the Paper Warehouse sites. We also liquidated their inventory and brought in our merchandise.

CSA: How big are balloons as a business segment for you?

Allen: Balloons are a big business for us, as they account for roughly 10% of sales. It’s seasonally driven and event-driven. The busiest day for balloons is a Saturday morning. We carry hundreds of balloons in about 20 different shapes, from bottles of champagne to Winnie the Pooh. They appeal to all ages and are great fun. They add such great decoration to a party. They’re better than flowers.

CSA: What is your expansion strategy?

Allen: Party America is predominantly in California and Colorado. After the acquisition, we gained entry into Minnesota, Kansas and Oklahoma. We also have franchise stores scattered across the countryside. Over the years, we will continue to expand on the West Coast with backfilling.

CSA: Is there any secret phrase that helps you stay on track and maintain focus?

Allen: One thing that has made us successful is that we don’t try to do it 100% better than competition. Rather, we choose 100 things and try to do each of those 1% better. For example, we decorate and maintain very clean bathrooms. Our customers will bring their friends to our stores to show them that.

CSA: You also place a strong emphasis on customer service, correct?

Allen: We place a huge emphasis on customer service at our stores. We “secret shop” each of our stores three times a month. They are scored and rated, and they compete with one another. We measure quality of service just as highly as profit and sales. If you are serious about customer service but don’t measure it, then you aren’t taking it seriously enough. Our stores are secret-shopped once on the weekend and twice Monday through Friday, one time in the morning and another in the evening.

CSA: Tell me about your corporate mascot Hattie.

Allen: Hattie just evolved over time as our mascot. We refer to him as our VP of fun. We have three strategic goals at Party America, and the main one is to make the business a fun and wacky place to work. Hattie is our fun mascot that we rally around. You don’t find a lot of companies that place having fun and being wacky as a strategic goal. But not every aspect of business has to be serious. A lot of us would rather be doing something else. But just because we are serious about our business doesn’t mean we can’t have fun.