Dover Saddlery IPO places bet on bricks and mortar
Dover Saddlery Inc., a Littleton-based retailer of high-end equestrian gear, recently completed a $27.5 million IPO to finance the expansion of its retail outlets. But why does Dover, which relies mostly on direct mail and online retailing, need to go public?
Answer: Sales channels. In a reversal of the common thinking that direct mail and online sales boost store sales, Dover is betting that the reverse would be true. And it’s willing to spend between $700,000 and $1.1 million per new store, to make that happen. The company plans as many as 50 new stores, financed by this IPO and other revenue. Sales from Dover’s four stores topped $58.7 million in 2004 and results for the first nine months of 2005 are higher than those of the comparable period in 2004.Dover states in its prospectus that the customers that shop through all three of its sales channels — stores, direct mail and online — spend almost three times as much ($882) as customers who use only one channel ($301). As competition in the equine supply market heats up, Dover wants to raise its profile and establish its brand.
Dover Saddlery isn’t a household name unless a horse is part of your household. If so, you recognize it as a leading retailer of specialty equestrian tack and clothing for upscale sports such as dressage, jumping and other show competition. You’re also most likely buy from its 260-page catalog. About 89 percent of Dover sales come through direct mail, while 15 percent comes through the four stores.
"The horse industry is booming," says Susan Karsch, an equestrian, stockbroker, and Dover customer. Within the last 5 years, competitive equestrian sports have gained recognition and interest, despite the expense associated with horse ownership. "If there’s a will, there’s a way," she says.
But for such a high ticket hobby, the equine market doesn’t have any national retail chains. Of 10,000 equestrian retailers in the country, most are too small to develop multiple sales channels; 60 percent of them have no more than one fulltime employee and 40 percent don’t use computers, Dover states. Publicly-held PetSmart’s State Line Tack stores come the closest to being real competition. Dover’s CEO Stephen Day came from State Line Tack, and Dover recently hired a marketing manager from that company.
PetSmart has piggybacked State Line Tack stores within selected PetSmart stores. State Line Tack targets the English-style market. But it’s also known for its concentration on Western-style riders.
A quick computer search of PetSmart’s web site indicates that for each of Dover’s three stores in the Northeast, there are three to five PetSmart outlets with State Line Tack components within a 30 mile radius. So, will Dover be going head to head with State Line Tack?
"Dover Saddlery has a very different marketing position and offering and we will continue to do what we do best," says company spokeswoman Janet Nittmann. According to the prospectus, that means concentrating on the high-end of the market and relying on its extensive customer database of 300,000 names. But meanwhile, Dover is indeed leaving hoofprints in the Western business as well, with the opening of its fourth store in Denton, TX, under the Smith Brothers name.
Customers comment on Dover’s high-end market strengths and the quality of its direct-mail service. Karsch and Tracy Richardson, who is proprietor of Black Cat Farm in Hanover, say they buy most of their custom, high-end equipment from Dover. Richardson says she goes to State Line Tack for the more general-purpose merchandise.
Nittmann says the retail expansion will strengthen Dover’s outreach to customers like Richardson and Karsch. "Growing the retail store network will actually facilitate the ability to offer custom fitted products, because the more stores we have, the more we will be able to custom fit consumers in our stores," she says. "It’s actually a win-win."
Christina P. O’Neill can be reached at coneill@wbjournal.com
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