Marty Allen CEO Party America
The executive behind the chain’s comeback gives his take on the industry.
By Sarah Mandel – Editor
The story of Party America as it relates to CEO Marty Allen reads a bit like a Horatio Alger tale. Despite the fact that the company declared bankruptcy shortly after he assumed control in 1996, under Allen’s watch Party America bucked the odds and not only recovered, but soared. First it acquired Paper Warehouse in 2003, then Party Concepts the following year. Meanwhile, same-store sales snowballed at an impressive rate, with the company posting a 6.6 percent increase for its fiscal year ended Jan. 31, 2005.
This meteoric ascent literally made headlines. In one of many magazine pieces devoted to the company’s comeback, reporter Mike Troy concluded in a May 25, 2005, “DSN Retailing Today” article that the store “has emerged as a national player in the party goods segment.” In that piece, Allen was quoted as saying that as a result of their “aggressive growth pattern” of the past 18 months, the store went from a “regional chain of 36 stores doing approximately $55 million in sales to a national chain with more than 290 stores … with sales of more than $255 million.”
I caught up with Marty to ask him, among other things, how he transformed Party America into the second largest party supply retailer in the country, currently having stores in 45 states.
A Party America facade is distinguished by a pair of palms.
P&PR: Can you tell me about what you did before this?
MA: When I started with Party America, I had just finished a roughly four-year-turn-around and sale of California Closets, which was owned by Williams Sonora. That company was my third successful turn-around. I was in the process of buying another company when I was contacted about Party America.
I remember the phone call clearly, because after I hung up I got in my car to see what a party store looked like. To the best of my memory, I do not think I had ever walked into a party store. Well, the rest became history, and the start of another turn-around.
P&PR: What were the earliest obstacles you faced, and how did you turn the situation around?
MA: I was with Party America about 30 days when the CFO told me that the company would lose several million dollars that fiscal year as a result of their failed merger with Party World. That was news to both my Board of Directors and me. Welcome to the party industry!
And so I began a long, difficult turn-around. First, I built a new management team. At Williams Sonora I had worked with Alice Tang, whom I thought very highly of, so I went off to find her. She’d moved from the Bay area to Washington state, so I had to convince her to move back to join me in another turn-around. She’s still with me nine years later as our executive vice-president and general merchandising manager.
Then I got the perfect guy to run our stores, Tony Oliver. At the time he was running all the West Coast stores for Party City. We had been watching their stores improve, and that was of concern to me. Once I figured out Tony was part of my problem, and Party City’s success, I hired him to be our vice president of store operations. That was five years ago, and he is still with me today.
My first CFO, Mark Mummy, who helped steer us through Chapter 11, is still with me today as our controller. After the 11, he said, “I love this, but how about a few less days of work in the week?” So we cut him down to a six-day work week, as he’s still our controller eight years later.
We actually have a large group of people in management who’ve been with us for at least five years. My point for taking the time to mention this in detail is simple: Business is about winning, and winning is all about people. I wish I could say it was more complicated that that.
P&PR: Have your plans for Party America changed since you came on board?
MA: Our original plan was to fix Party America and then sell it to one of the other party chains. It was a good plan, but it only half worked. We fixed Party America, but then we had no buyers. They were all broken, in Chapter 11, getting ready to go in or sitting on the edge. So, we ended up being the company that began the consolidation of the industry.
P&PR: You have grown from 30 stores in October 2003 to 285 today. Roughly speaking, 255 of the new stores were as a result of your acquisitions of Paper Warehouse and Party Concepts. How did all that break out?
MA: When we purchased Paper Warehouse, we ended up buying about 60 company-owned stores and about 30 franchises. We did several things in that transaction: First, we sold about 20 stores to one of our current franchise owners and he became a master franchisee. We then closed about 16 stores through liquidation on day one. These were stores that did not fit our criteria.
One year later, we found ourselves in the center of the Party Concepts deal. In this transaction, we ended up buying around 160 stores. And along the way, we have been closing and opening new stores in all of our markets.
So far, we have built over 25 Party America stores from scratch. That is, these were brand new buildings that were built to our specifications. You can tell our new stores by the ceiling lights; they zig and they zag. They accidentally evolved into one of our trademarks.
When we built our first store, we had our lights running the entire length of the building. When I saw them in a straight line, they looked a little crooked to me. The electrician looked at me and said, “Son, this is the best anyone can do when you hang 8-foot florescent lights in a straight run over 100 feet.” So, I said, “Then let’s see just how crooked we can make them.” Thus, one of our trademarks was born.
As of today, all but eight of the Party America superstores have been remodeled and carry the Party America brand.
The award-winning balloon bar in the Grand Rapids, Michigan store.
P&PR: Your website mentions that you currently have room to award another 430 franchises. Can any independent party store assume one? As you see it, what benefits would that bring?
MA: There is no question that we are growing our franchise community. It is part of our strategy to help grow and build our brand on a national level. We have had many independents inquire about becoming a franchise, and we recently opened two new franchises owned by former store managers from one of our competitors. So the trend is starting.
The party industry is just starting to mature, and is one of the last retail concepts to mature. When I was a kid, we used to have stationery stores, hobby stores and the like. Today, chains have taken over. They are good and bad. And I actually have a love-hate relationship with retail chains, even though I run one. I love the selection found at a Staples, Bed Bath & Beyond, Costco or Target. And, they can bring us great prices along with the vast selection.
The hate part is that everywhere we go in the country, there’s a sea of sameness. A Party America store in Boston looks just like our Party America store in Los Angeles and San Francisco, as does every other chain.
So, the chains bring selection and price. The independents need to bring service that the chains just cannot provide. Those that can do that will survive; those that can’t will struggle when a chain moves next door.
This is why I like the franchise model. It still gives the independent owner a lot of control and ownership of their business, yet it gives them the buying power, selection and brand of a big chain. And with imports beginning to play a more important role in this channel, the day will come when the cost of goods will give an even bigger edge to the dominant party chains.
Every year we have been sending buyers directly to China on buying trips, and that is only going to increase. Plus, our franchises get state-of-the-art systems to run their business, inventory movement that is proven in sales, and will always be available by the vendors. While working with vendors, trust me, size matters. It’s not just price, but there are hundreds of other things from distribution to product design. To see how this works on a really big scale, just walk into a Wal-Mart.
P&PR: Your website mentions developing your Internet strategy as part of your overall plan. Without giving away any of your trade secrets, can you tell me what your Internet strategy entails in terms of goals, and the way you’d like to make it happen?
MA: The Internet is here to stay and we are learning how to use it as a tool to help us grow. Our site is about a three on a scale of ten. The Internet is much like the printed catalog for retailers. We view it as an asset to our stores, not a threat. I realize that many view the Internet as a threat to their business, but I honestly think that it is an educational issue for those people.
Before the Internet we had catalogs in the specialty channel. It has been proven that the catalogs helped the retail stores, not hurt them. The Internet is doing the same. First, there is a group of consumers who do not care for shopping in stores. It’s either a time issue, too crowded, out-of-stock issues, parking and the like. They buy from catalogs and now maybe the Internet. Then there are those who enjoy doing their research via catalog or Internet and then go to the store. We are a brick and mortar company first and would never do anything to hurt store sales. So far, our website is proving to be a big home run for our company in terms of helping the stores.
P&PR: You mentioned that customer service is key to success. Do you feel that the other party chains take a similar approach, or is that what sets you apart from them?
MA: As far as party chains go, I do believe that we are the best, not that I think we are the best in retail by any means. I walk retail everyday, and this is something that we all see and experience. We all get judged thousands of times a day by our customers. In fact, in my opinion, most retail is lousy in this area. Party America is not where I want us to be, but I will get us to the level that I want, and soon. I want us to be considered one of the best, if not the best one day. This is far more important to me than getting any larger.
P&PR: How do you implement a customer-focused system amongst employees, and the organization as a whole?
MA: Wow, what a loaded question. First, it’s hard when you are big. You must hire right and train and train and train. After all that training, you then end up hiring again and restarting the process. Somehow, every employee needs to learn that they are paid by the customers, not the president or owner of the company. You see, profits come from customers, not the other way around.
P&PR: What services or amenities do you offer to set yourself apart from other party stores?
MA: Boy, you want all of our trade secrets. I have a simple philosophy on this subject. I do not believe in today’s environment that any company can do anything 100 percent better than their competition. If they did, the competition would copy it, improve upon it and then leapfrog you. You then just lost your edge. But, what is difficult to copy is this simple philosophy: Find 100 things in your business and do them one percent better than everyone else. We have yet to find 100, but we have our list. I’m not going to share this list in this interview, but it does start with our bathrooms. I’ll leave it at that.
P&PR: What advice would you give the independent party store struggling to carve out a local niche for itself?P&PR: What role does Hattie play in your overall branding approach? How else do you convey your specific brand to customers?
MA: Hattie is our company mascot. Today, he is more of an internal icon than external. However, as we begin our national branding, Hattie will become more visible. Today, every vendor has an 18-inch statue of Hattie in their offices. He is on a branding mission.
MA: Well, my dry humor would tell them to join Party America as a franchise. But, my compassion for the person who owns his or her own business would have me say, “Never, ever quit.” There is a very famous line from Vince Lombardi, “Quitters never win and winners never quit.” Our country was built by entrepreneurs, and that’s what keeps our country great. I have much respect for the guy who has to worry about making payroll each week and then, after paying all of his bills, still has to support his own family.
The party industry is changing; it’s maturing, but there will always be a niche for the individual. The individual may not like Party America because we are a chain. Well, Party America does not like Target because they are a bigger chain and hurt us too. So, we have to find our niche, and you need to do the same thing against us and/or the other party chains. And you can, just take a deep breath and be creative. Keep in mind that every chain started with one store. So, if you own one store, don’t knock the chains, learn to beat them and then build your own chain. I do not know of any business that by choice decides to stay small, unless you are moving into retirement. But then, didn’t Colonel Sanders start his chain in his mid-60s?
P&PR: How strong do you think the party industry is now, and do you think the market on the whole is growing stronger?
MA: I love the business aspect of this industry. First, as soon as we sell it, the customer throws it out. And then they repeat the process. This is almost as good as selling food, except we make better margin dollars. Second, our country loves to party. We celebrate our own holidays, like the Fourth of July, Halloween and Thanksgiving, but we also celebrate everyone else’s too, such as Valentine’s Day, St. Patrick’s Day, Mardi Gras, and so on. No chance that any of that is going to change in our lifetimes.
The best part of this is that every mom has to throw a better party for her child than the previous mom; every wife has to throw a better party than the last one the couple just attended, and what single adult does not like to throw or attend a party? Actually, partying is ingrained in America’s DNA.
P&PR: How do things like high gas prices and the war on terrorism affect the industry?
MA: Both will only help us, long before hurting us. First, terrorism continues to drove our patriotic line, which I think is a good thing, not from just a profit point of view, but I like to see people celebrate the greatness of our country. Gas will take a toll on our economy, but only in the short term, as we all will learn to adjust. If the consumer has X dollars to spend and gas is taking a bigger part, then something else is going to give. Is mom going to cut or reduce her child’s party? Are you going to cut out your own adult party? I don’t think so. I can think of 100 things Americans will cut or reduce expenditures on before they cut into celebrating and bringing happiness to others.
P&PR: What are your goals for Party America’s future?
MA: And you expect me to let you put that in writing? Despite our track record, getting bigger is not one of my main goals. If that happens, so be it. I have but one real goal and always have. I want the people who work for us to enjoy their careers and have an opportunity to grow, financially and otherwise. In the eight years that I have been running this company, I have watched employees get married, have children, buy houses, go back to school and earn more money every year they have been with Party America. You tell me: What in life is cooler than that?
Party America receives the first “Retailer of the Year” award at the National Party Retailing Awards gala in Chicago, an event sponsored by American Greetings, Hallmark and Greetings, Etc.
Marty Allen is nominated and becomes a finalist for the prestigious Ernst & Young Award for Entrepreneur of the Year.
Party America completes ten consecutive years of growth and increased profits under the leadership of Marty Allen.
Party America makes the list at number 32 of the 100 fastest growing companies in northern California three years in a row, clocking a growth increase of 180%. Amazingly, it is also the fifth largest company in sales on the list.
Greetings, Etc., establishes a Party Retailing Hall of Fame to honor individuals who have made a significant contribution to the industry. Marty Allen is the first to be inducted. Editor Ms. Krassner points to Mr. Allen’s creativity and leadership in growing the Party America chain from just a few dozen stores into an industry powerhouse by upgrading in-store and corporate technology, overhauling the inventory system and improving customer service through better employee training.