Music to their ears - music box entrepreneurs

Nation's Business, March, 1989 by Michael Barrier

Music To Their Ears

Sometimes, John Lenser's experience suggest, the way to succeed in business is to observe what everyone else in a field is doing, and then do just the opposite.

Take music-box stores. "The typical thing we found," Lenser recalls, "was a young woman, working behind a counter, wearing designer jeans and reading a paperback book, who could not have cared less about what was going on in the store.

"Usually, too," he continues, "you found the prices were stuck on the bottom of the product with a little price gun--but there were also signs, if it was a music box or breakable, that said, 'Do not touch, ask for help.' Or, 'If you break it, you buy it.' People have had that drummed into their heads since they were little kids... You almost feel guilty when you touch."

But not in the San Francisco Music Box Co.'s stores. Lenser and his wife, Marcia, founded the company almost 11 years ago, when they opened their first store in Pier 39, one of the collections of tourist-oriented shops on the San Francisco waterfront. They decided, Lenser says, that all those negative messages would have no place in their store. "We tell our staff, 'If somebody looks crosseyed at an item, you pick it up, wind it up, and hand it to them. Get the product into their hands.'"

It is a simple business philosophy, and it works, Lenser says. "We just reacted to how we saw other people running their businesses in a way we thought was crazy."

By the time the critical Christmas shopping season was under way last fall (50 percent of the company's sales come in the fourth quarter), the San Francisco Music Box Co. had opened 72 stores all across the country, up from 15 in 1986.

Each store typically carries 800 to 1,000 music boxes and other items (such as stuffed bears) with musical innards. Sales more than tripled in two years--from $11 million in 1986 to $38 million in 1988--thanks to the rapid expansion that an $11 million infusion of venture capital permitted.

It is an impressive performance, especially since both John Lenser, 44, the company's president, and Marcia Lenser, 43, executive vice president, embarked on their business with something less than abundant experience in retailing. He was a criminal-justice planner, she was a teacher in the public schools of nearby Oakland. After 12 years of marriage and two children, they were looking for a business to run on the side. They settled on music boxes more or less by accident.

Pier 39 was being built then, Lenser recalls, and "I called over there, just to see what they were interested in. I got this lady on the phone who was a real tiger. She wanted to know what kind of business I had, and I said, 'What are you looking for?' She said, 'That's for you to tell me, not for me to tell you.'" Lenser had recently been in a store that sold antique music boxes and antique clocks, "so I just blurted out, 'Clocks, pianos, music boxes.' She said they were looking for somebody to run a music-box store."

The Lensers put all the money they had--$25,000--into stocking that first 500-square-foot store. Within two months after its October 1978 opening, the store was so successful--it went on to $600,000 in sales its first year--that the Lensers had to quit their jobs and become full-time retailers. In 1979, they opened their second store, which was, like all of those to come later, in a suburban shopping mall.

In 1980, the Music Box Co. began mailing a catalog. By 1986, before the big push to open new stores, the catalog accounted for close to one-third of the company's sales. Because the company could count on large sales of the music boxes shown in the catalog, it could order large quantities, which meant, in turn, that it could design and sell exclusive items.

The company's rapid growth has not been trouble-free. It took a while, John Lenser says, to overcome "terrible computer problems." Now growth will slow down a little, with only about two dozen new stores scheduled to open this year, compared with 35 last year.

Slower growth for a year "will allow us to bring some profit in," Lenser says. "There comes a point at which you cannot continue to deal with your bankers and your investors on the promise of better things to come. And although we have never lost money, we certainly have compromised our profit, simply because of the extra overhead it takes just to operate the rollout."

Bringing the San Francisco Music Box Co. so far, so fast, has been hard, Lenser admits, but rewarding as well:

"After two or three years at a particular plateau, you begin to say, hey, this is just repetitious work. I'm still sweating, and maybe things are getting a little bigger, but there's not any true excitement and challenge. Well, getting involved with a venture group is certainly a challenge. And as long as you're moving fast, you don't think about any of the negatives."

PHOTO : John and Marcia Lenser, founders of the nationwide chain of San Francisco Music Box stores, demonstrate one of their key marketing precepts: Put the product in the customer's hands if you want to sell it.