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27.5.11 0318
The 7 - Random - Spag's, or How the Little Guy Can't Survive Against Big Business Anymore
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Lap cheong
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#1 Posted on 10.10.02 0801.14
Reposted on: 10.10.09 0805.17
(People from New England should understand the significance of this)

From Worcester Telegram :

Spag's Supply Inc., a discount store that was born during the Great Depression and grew to become a local institution, is being sold to the family that runs Building 19 Inc.

The deal brings together two businesses that have had ties to each other for years, and should allow Spag's, which will be renamed Spag's-19, to retain much of its identity, said Jerry Ellis, chief executive of Building 19.

“People know what a Spag's is,” Mr. Ellis said yesterday. “I hope they know what a Building 19 is. This is going to be kind of a meld. There will be changes, but it's not going to be a sudden eruption.”

Officials from the two privately held companies signed a purchase and sale agreement yesterday. They declined to comment on the financial terms of the deal, which includes a 13-acre complex of buildings and properties off Route 9 that are valued at more than $5.9 million by the town of Shrewsbury.

The transaction is expected to close in November. And then Spag's will operate as a company owned by Building 19 and Mr. Ellis' three children: Linda Marshall, Judi Elovitz and William Elovitz.

The prospective owners said they do not expect to eliminate any jobs at Spag's, which employs about 200 people. Nor do they plan to change much about Spag's appearance, merchandise, strategy or operations, at least not right away, said Mr. Elovitz.

“I don't think the customer will see any difference,” he said. “Maybe gradually, but we're going to learn a lot as we go along.”

The deal ends months of speculation that Spag's, battered by the competition of retailers such as Wal-Mart Stores Inc., would be sold. Spag's officials began exploring options to improve the company's position about a year ago but did not begin talking to Building 19 until August, when Spag's offered to lease empty space in its Olde School House building to Building 19, according to Joseph N. Kirby Jr., Spag's chief operating officer.

Two of the three sisters who own Spag's said they had mixed emotions about selling the business, which was started in 1934 in an old truck garage by their father, Anthony “Spag” Borgatti. He died in 1996.

But the sisters have felt the pull of different priorities in recent years. Carol Borgatti Cullen survived breast cancer. Jean M. Borgatti, an associate professor of art history at Clark University, is in Africa on a Fulbright teaching and research grant. Sandra Borgatti Travinski thought it would be harder to continue working at Spag's without her sisters.

“It was really time for us all to take a new direction in our lives, because you don't know what's going to happen,” said Ms. Cullen.

It helped that Mr. Ellis, who considered their father a role model, possesses a style that meshes with the Spag's culture, said Mrs. Travinski.

“It's almost like listening to my father speak again, and that's very nice to know the store is going to be run with the same values,” she said.

Discount retailing is one of the few retailing segments thriving now, as consumers, anxious about the nation's economy, seek to wring value out of their purchases. Spag's and Building 19 appear alike, and the merger should be good for both businesses, said Michael J. Tesler, president of the Norwell consulting firm Retail Concepts.

Spag's is “a business well positioned in the marketplace to be doing very well at this point in time,” said Mr. Tesler, who has consulted with Building 19 in the past. “The fact that Building 19 was willing to buy them says the same thing, because they're very shrewd business people.”

Other observers were less enthusiastic, calling the deal the end of an era.

“Business evolves, and business changes, and you know, market conditions and business conditions come and go, but it's sad when it happens, especially when it's something that was so dominant in the area,” said Maurice M. DePalo, Shrewsbury selectman and former general manager of Spag's.

Yet the consolidation of businesses, including family-owned businesses, is common across all industrial sectors, not just retailing, said Michael Levy, professor at Babson College and co-editor of the Journal of Retailing.

“It's difficult, but that's the way it is now,” he said. “Every business has a life cycle, and this may be the end of the life cycle for this particular business.”

Based in Hingham, Building 19 operates 14 stores in Massachusetts, New Hampshire and Rhode Island. The company got its start in 1964 when Jerry Ellis, formerly known as Gerald Irwin Elovitz, lost his job as a department store salesman and joined forces with Harry Adler to sell salvaged furniture.

One of the people Mr. Ellis modeled himself after as the business grew was Mr. Borgatti.

“Spag was a great mentor. He encouraged me when nobody else did,” Mr. Ellis said yesterday during a news conference in a Spag's office decorated with portraits of Mr. Borgatti and his wife, Olive, who died in 1990.

“I copied a lot of stuff from him,” Mr. Ellis said. “I have tried to emulate his interest in his employees and his customers, and it worked.”

Yet the two businesses have distinct differences. Building 19 is an opportunistic buyer of merchandise, snapping up bulk purchases of Oriental rugs, batches of unsold designer clothes or furniture damaged by fire or floods. Mr. Ellis even rejects the label “discount retailer” and prefers to call Building 19 a “bargain store.”

Spag's concentrates more on general merchandise. It sells fresh food, and it operates a garden shop.

Neither business discloses annual revenues. Mr. Ellis would only say that Building 19's sales so far this year are 18 percent above sales at the same time last year.

The differences between the two companies raise questions about what Building 19 hopes to gain from the acquisition of Spag's, said Scott F. Bearse, a retail expert and partner in Deloitte Consulting.

“This segment is one of the retail segments that is doing well right now,” Mr. Bearse said. “I think there's an interesting question of what's the purpose of the investment. Why do they think this is a good idea?”

Because they can learn something from each other, Mr. Ellis said. Building 19 officials particularly want to learn about Spag's garden business and expand that to Building 19 stores, he said.

“They do some things better than we do,” Mr. Ellis said. “We do some things better than they do. We'll teach each other.”

One of the first changes the new owners may make will be to reopen the first floor of the Olde School House Building at 35 Harrington Ave.

Spag's closed the space earlier this year and consolidated all of its merchandise in its main building on Route 9. But Building 19 officials are hoping to fill that empty space with rugs, furniture and other large items.

Some things will not change. The owners expect to continue working at the store part time, Mr. Kirby expects to remain as chief operating officer and in the spring, the store will stick with one honored tradition.

It will give away tomato plants.

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#2 Posted on 10.10.02 0932.33
Reposted on: 10.10.09 0934.36
When I was in College in Worcester I frequented Spags, nice and cheap. But Im not sure this is not surviving against big business, building 19 isn't exactly a multi national conglomerate. From my one visit (last moth near Boston) it seems to sell mostly crap.
Lap cheong
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#3 Posted on 10.10.02 0954.52
Reposted on: 10.10.09 0959.07
True, Building 19 is closer to a flea market than a mulitnational corporation ... Perhaps I should have said "The family-owned business can't survive anymore". That's the point I was trying to make - Spag's had been family owned and operated for over 60 years, but once all the big-time stores started breathing down their necks (Wal*Mart, etc), they could no longer compete and had to sell.

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