Fairfield, N.J. — Karl’s, the 54-year-old, seven-showroom majap chain in Northern New Jersey, bills itself as “The Ultimate Appliance Store.” It’s a claim that few in the white-goods industry would challenge.
Indeed, the family-run independent is a favorite with vendors for showcasing their wares in idealized settings, while fellow dealers admire its ability to survive myriad regional competitors and to thrive amid clusters of Lowe’s and Home Depot locations.
CEO Danny Schwartz, a third-generation owner, attributes the company’s success to a number of factors, including controlled growth, an emphasis on profits over volume, buying group support, and a loyal customer base won over by first-rate service and a knowledgeable and attentive sales staff.
But most important of all was his dad’s allergy to rubber.
“The company was founded in 1941 as a tire store by my dad and granddad,” Schwartz recounted. But early on Karl Schwartz developed an allergic reaction to his products, and the business shifted to refrigerators — a former sideline thanks to GE’s relationship with a tire supplier.
By the late 1940s TV was added to the mix, and the Victory Tire Company was reborn as Karl’s.
Along the way, the business came up against a host of once formidable New York area competitors including such late-greats as Two Guys, Vim, Trader Horn, Brick Church, Friendly Frost, Newmark & Lewis and Tops Appliance.
“We competed with people who ran their companies at a loss and went out of business,” Schwartz noted. “They chose volume over profitability, and became too large too fast. They thought they could cover their expenses through expansion and manage the growth. Those that went public couldn’t satisfy Wall Street.”
By contrast, Karl’s “stayed below the radar and kept to smaller locations serving local communities,” he continued. “We kept our heads down. We understood that you don’t need to run a large-volume business to have a profitable business.”
The focus on profitability also compelled Karl’s to essentially abandon the CE business when high-margin products like stereo systems and VCRs became commodities. “The growth was originally in CE,” said Schwartz, whose brown- to white-goods mix was 50-50 as recently as 10 years ago. “Appliances were mundane. It took years to build up our business in dishwashers and microwaves.”
“But then the black boxes became available as cash-and-carry items in drugstores,” he said, “and the CE profits went away.”
Today, Karl’s carries a smattering of Sony flat panel TVs as a courtesy to customers, but its real bread and butter is in the selling, installation and delivery of high-end white goods. Half the assortment is comprised of the major manufacturers’ step-up brands, including GE Profile, Monogram, KitchenAid, Jenn-Air, Electrolux Icon and Frigidaire Gallery, and half is ultra premium lines like Viking, Sub-Zero and Gaggenau, although Schwartz acknowledges that the demarcation between premium and super-premium majaps is blurring. “There used to be a separation between better and best,” he said.
Karl’s displays its top-of-the-line goods within vignettes, a move that has “paid strong dividends,” and draws customers with live cooking demonstrations and heavy advertising in regional editions of upscale magazines like Architectural Digest, Food & Wine, Bon Apetit, House & Garden, and Travel & Leisure. “It helps create an upscale image for us and separates us from competitors,” he explains.
Also supporting the business is the company’s membership in the Intercounty chapter of the NECO Alliance, a division of the $8 billion Nationwide Marketing Group. Leveragingthe groups’ buying power, warehousing and back office functions has “allowed us to focus on selling,” Schwartz said, although Karl’s maintains its own warehouse to accommodate its luxury lines, an area where buying organizations are still lacking, he said.
Buoyed by the addition of two larger locations (with footprints of 12,000 square feet to 15,000 square feet, compared to Karl’s older 3,500 square foot showrooms), plus a housing and renovation boom spurred by low interest rates, sales have more than tripled since 1998, to a projected $60 million this year, Schwartz said. “We’re enjoying spectacular growth.” — Alan Wolf