2002: Business - ‘Pro shop for the public golfer’

By John Steinbreder

In the beginning, it was mostly about the music for Randy Zanatta. His first job after graduating from Winona State University in Minnesota was as a disc jockey. Next, he started selling stereos for the fledging Best Buy retail chain, eventually working his way to senior vice president of marketing as the company grew into a $7 billion behemoth with 300 stores.

But then, Zanatta decided he needed to do something else.

“So I told my wife I wanted to quit and open up a golf store,” he recalls. “I thought she’d tell me I was nuts, but it ended up being OK with her. And that made me think maybe I wasn’t a total idiot after all.”

Actually, it would be more accurate to say that Zanatta, 44, and his partner Greg Maanum, 40, who also worked at Best Buy, have been nothing short of brilliant as they turned that idea into a profitable chain of 20 stores known as Golf Galaxy.

At first, it might have seemed that their successes were more a product of good timing than anything else. The pair opened their first shop, in Bloomington, Minn., the April 1997 weekend that Tiger Woods won his first Masters. Suddenly, it seemed, golf was ultra-hot, and potentially ultra-profitable.

In reality, however, it has been the business acumen of the Golf Galaxy founders that has carried the day, because the golf industry sank into a debilitating slump soon after the first store opened. Yet Zanatta, who is the company’s chief executive, and Maanum, who is chief operating officer, have found a way to prosper.

In their work, that’s like hooding a 5-iron around a tree and onto the green for a tap-in birdie.

From a consumer standpoint, Golf Galaxy, which is based outside Minneapolis, works for a number of reasons.

The stores average 17,000 square feet, which makes them big enough to house the top brand names in balls, clubs and clothes but not so large that customers feel lost in the aisles. Each store also has ceilings that are painted sky blue, to give a sense of being outside, and special drop lighting that produces a clean, bright look. The sales staffs are well-trained and the pricing competitive. Plus, each store is set up to function like a green-grass pro shop. Golf Galaxy was one of the first retailing outfits to put PGA professionals on staff (see accompanying story), and it offers lessons, club fitting and club repair. It also utilizes simulators and high-tech computer equipment as well as hitting ranges and putting greens, which not only provide valuable services for customers but also give each store an open, interactive feel that draws crowds and keeps them around for a while.

“Eighty percent of golfers don’t belong to a course,” Zanatta says. “They don’t have a pro shop to fill their needs, so that is what we try to provide. That’s why we call ourselves the pro shop for the public golfer.”

That sort of approach appears to satisfy equipment makers as well.

“The guys at Golf Galaxy are highly motivated and very professional individuals, and they do an excellent job,” says Luke Reese, general manager of Wilson Golf. “With their on-site golf professionals and demo programs, they help golfers find the right products for their game, which has been very good for us.”

Adds Gary McKenna, national accounts sales director for Nike Golf: “Overall, Golf Galaxy does very well. We see consistent sales increases with our products there, and we like the way they present our merchandise to the consumer.”

One reason for the growth and success of Golf Galaxy has been the ability of its founders, who collectively own nearly 20 percent of the privately-held company with the rest held by outside investors (including, ironically, Best Buy), to meld their retail experience with their passion for golf.

“Greg and I both love the sport, and we have played it for some time,” says Zanatta. “But more importantly, we have experience as retailers. We had a front-row seat at Best Buy on how to build a retail company, and we had the benefit of witnessing successes and failures at our former company and learning all about the sound fundamentals of that type of work.

“For example, if the market stopped growing, then it was up to us to become more aggressive with our inventory management and maximize our gross margins. Right now, we are running our stores on half the inventory we started with, which allows us to be more nimble. And that’s part of the reason why our bottom line has increased much faster than our top line.

“Our vision was to take what we did at Best Buy and translate that into golf. There was no real dominant superstore in the business when we got involved, and we were more or less underwhelmed by what was out there when we got started.”

The growth of their business, however, was anything but underwhelming. In 1998, Golf Galaxy opened five new stores, including two more in Minnesota, and seven came on line the following year in locales such as Dayton, Ohio; Cleveland; and Des Moines, Iowa. Five were added in 2000, in Chicago and Milwaukee, and two in 2001.

“We had hoped to do more, but things have been very slow the past 18 months,” Zanatta says. “So our focus has been on profitable growth. We were ready to open two new stores in one market this year but have delayed it until we are positive we have the right sites. We want to open more stores, and we hope to add five or so over the next 12 months.”

Zanatta asserts his chain actually can afford to expand faster.

“But we want to stay profitable,” he says, “and keep growing our bottom line.”

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