A Chat With May's Profile, John Doheny, CEO, Doheny's Water Warehouse

Catalog Success: Where's your company headquartered?
John Doheny: Kenosha, Wisconsin.

CS: When was the company established?
JD: My parents started it as a wholesale pool supply business out of their garage in 1967.

CS: When did the company begin mailing catalogs?
JD: Our first catalog mailed in the spring of 1980.

CS: What are your catalog's customer demographics?
JD: In-ground and above-ground pool owners and commercial pool operators.

CS: What's the primary merchandise you sell?
JD: Swimming pool supplies.

CS: How many SKUs do you offer? On average, how many SKUs are offered in the catalog?
JD: Over 4,000 total, with approximately 1,500 in any active catalog.

CS: How many employees work at the company?
JD: Forty-eight full-time, plus an additional 90-110 seasonal hires.

CS: How many times per year do you mail the catalog?
JD: Sixteen.

CS: What's the catalog's annual circulation?
JD: Over 13 million.

CS: What's the company's annual sales?
JD: $40 million to $50 million.

CS: Do you have retail stores?
JD: We have one retail outlet at our headquarters in Kenosha.

CS: How do sales breakdown by channel?
JD: Eighty-five percent of our sales are to residential customers, B-to-C, and the other 15 percent are commercial/wholesale customers, B-to-B.

CS: How did you get started in the catalog/multichannel business?
JD: The company started as a wholesale distributor of pool supplies in the Midwest market. In 1979, my dad came across a list of swimming pool homeowners and the idea of delivering pool supplies directly to homeowners’ doors via a catalog was hatched.

My parents gambled everything they had and mailed out our first catalog in 1980. I purchased the business from my parents 12 years ago. At that time, we did just under $10 million a year in sales.

CS: What do you like most about this business?
JD: Having a 12-month housefile over 125,000 customers has its advantages.

CS: What do you like least about it?
JD: The seasonality of the business. The annual fire drill takes its toll.

CS: What's the toughest challenge you've faced in your career in the catalog/multichannel business? What did you do to overcome that challenge?
JD: With any business, you face steps of growth. How you manage those steps will affect your ability to grow to the next level — and how quickly. We're very conscious of this and change as our company does. We recently put in place a new senior management team, and we're always evaluating what to do next. My role has really changed from working in the business to working on the business.

CS: What's your approach to beating the competition in your marketplace?
JD: We look at all the types of competition in our channel — retail, mass merchants, service companies, direct competitors, and so on. We try to stay focused on what we do well and do it better every day. We believe the long-term value to our brand is staying focused on the basics.

Our model of providing pool supplies directly to the customer’s door quickly and at great prices keeps our customer satisfaction ratings high and our customers coming back year after year.

CS: What factors have led to Doheny’s Water Warehouse being a successful business?
JD: We've developed a strong team that's passionate about the business. We have a great desire for growth, and never settle on things being good enough. And we always stay focused on how to better serve our customers.

CS: What's the best thing about working for Doheny’s Water Warehouse?
JD: In today’s environment, having a debt-free business with a strong balance sheet and good profit margins allows us great flexibility. I'm able to sleep at night because we've always run the business with a very strong spirit for growth along with financial discipline.

I have good friends that took advantage of the credit markets and leveraged their businesses up with acquisitions, expansions, etc. Today, that model doesn’t seem to be working, regardless of size. The cost of leverage is high today, and in many cases threatening the survival of some very good companies. Bigger isn’t always better. That seems to be the important lesson learned from the current crisis.

CS: If you hadn't gotten involved in the catalog/multichannel business, what do you think you would've done for a career?
JD: That's an interesting question. I was very entrepreneurial at a young age and always looked for opportunities to make money. My extended family and many friends are in business for themselves, and because of this exposure it's always been a goal of mine to own a business of some sort. I worked very hard from early on and did everything I could to prepare myself to advance in the business community. It's something I've always truly enjoyed doing.

I believe if you're very passionate about what you do and have a strong work ethic, it doesn’t matter the industry you end up in. You'll have a fair shot at being successful.

CS: Where do you see both yourself and Doheny’s Water Warehouse in three years to five years?
JD: In the past, our goals have been to double our business every three to five years. However, the economic uncertainty has affected our customers and supply channels like we’ve never seen before. Overall, I feel we're well positioned to weather this storm and will have the opportunity to grab market share. However, the size of our industry pie could change. So the bottom line is we need to continue to stay focused on the basics, be sharper than ever before and do everything possible to keep our heads above water.

As for myself, I'll continue to work on finding balance between the company’s needs and my family’s. We have four small children, and as a father I've found our family dynamics change as rapidly as the business’s. One of the last things my father said to me before passing away was to “smell the roses.” Life's short and very unpredictable. I measure success in many ways, not just financially.

CS: Have the rising costs of mailing catalogs forced Water Warehouse to invest more heavily into online marketing (e.g., e-mail, search)?
JD: We’ve cut many expenses on the print side and have really enhanced our circ strategy, so any future large savings is limited on that side. All current investment is going entirely into our Web marketing plan of e-mail, search, Web content, among other things. We feel this shift will only continue and accelerate as people go to the Web first for many routine purchases. How we make this more effective for our business is the question.

CS: It would seem that Doheny’s Water Warehouse's business could be very seasonally driven. One, is that the case? And two, if so, what steps are taken to help drive business during the slower months of the year?
JD: Yes, we are very seasonal, doing over 50 percent of our business in two months to three months. We currently have no major offset to this. We'd like to buy a counterseasonal business with a great marketing/merchandising team that could take advantage of our infrastructure, systems, call center, nine warehouses, and other things. My biggest concern is I don’t want to distract from our core, from what we do well.

CS: How has the recession affected Doheny’s Water Warehouse? Have you had to downgrade your projections for this year?
JD: Our original budget for 2009 was revised twice as the economy sank in the fourth quarter of 2008. Basically, we took 15 percent growth out of our plans given the uncertainty. Since the start of the year, we’ve noticed lower average orders. However, we’ve seen a nice pickup in our order counts, allowing us to stay ahead of last year overall. We feel the market share pickup is related to pool owners looking for ways to save money. We're well positioned to serve that need. We're not taking anything for granted and will continue to wish for a hot summer!