Harbingers of Wholesale

How Larry Gaynor’s knack for selling products people didn’t know they needed created a $71-million wholesale beauty supply and service business in Farmington Hills that spans the globe
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Photograph by Marvin Shaouni Larry and Teresa Gaynor worked together for several years before getting married. The life and business partners complement each other — Larry’s the idea person; Teresa’s the adviser.

By the time Teresa met Larry, she no longer wanted to be a nun. Or a nurse.

He was like nothing she’d seen before. Rangy but animated, intense — there was always a subtext of paternal conflict — angular, with long features and fingers. He was both purposefully — and sometimes unintentionally — comic.

He ran an upscale retail store whose core products were health and beauty aids, but it was something more — the kind of place that, in quainter times, might’ve been called a notions emporium. Browse the aisles — this was particularly encouraged — and past the tony Lancôme and Clinique cosmetics displays, there, in total non sequitur, were shampoos and soaps and hair sprays.

But shoppers also found the game Trivial Pursuit before it appeared on store shelves everywhere, and the Itty Bitty Book Light, which they didn’t know they needed until they saw it, and the potato-faced Cabbage Patch Kids dolls, and Furskins — giant teddy bears dressed in yokel duds that became one of the boffo toys of the 1980s — and Courrèges of Paris sunglasses, long before there was an apparent market for $300 shades. There was also a large baby department selling everything from teething rings to pricey, trendy Italian-made Aprica strollers.

And if you entered the namesake store of the Gaynor family three years after it opened in 1982, there was also a sideshow of sorts that amused both customers and employees, including Teresa, hired at age 19 as cosmetics manager.

Because manicurists came into Gaynor’s looking for supplies but didn’t find gallon jugs of polish remover and other staples of the trade, Larry installed a countertop wholesale operation to fill the need. He called it Nailco, and found himself increasingly busy, stooped over to pack orders behind the counter and popping up “like a puppet” to serve customers.

For a stand-alone store, Gaynor’s did good business — $4 million in annual sales. It was a success when it opened and a success when it closed, leaving devoted customers unrequited in their desire for things they didn’t know they wanted.

The little countertop operation had become a monster, with wholesale customers asking for more and more, as Larry and Teresa continued to add to inventory. The counter was expanded, and there was more growth.

Today, Nailco is TNG Worldwide, claiming $71 million in sales for 2008 and selling mostly through a fat catalog filled with the tools of the beauty biz — at wholesale prices for professionals only. Through a canny combination of goods and services, it’s been positioned as a one-stop “shop” for the means to plan, open, operate, and stock a salon, spa, tanning shop, or a combination thereof.

How it came to be is a study in entrepreneurial instinct. Larry Gaynor has an eye for trend-spotting, a willingness to fail, and the instincts of a thief. But he only steals from the best.

Lips and bolts

Lipstick marked the breaking point for Larry’s father. As the owner of a Detroit hardware store with homes in both Southfield and Florida, he relied on his son to run the family business during frequent trips south. Having worked since he was 10, Larry knew the business well, but had his own way of doing things.

In Dad’s view, a hardware store sold just what the name implied — tools, nuts and bolts, screws and nails, repair widgets, pipe, paint, wire, and fuses — the stuff men and some women love to browse and often buy on impulse, coming in for an extension cord and leaving with a power saw because there it is, waiting for a good home.

Located at Davison and Linwood, the store was next-door to a Laundromat, and Larry saw no reason that someone who came in asking for detergent or other clothes-washing supplies should leave empty-handed. “I used to take the station wagon, go to the wholesaler, load it up with Tide, and bring it back,” he says. “It was a huge seller. From there, I added toilet paper, paper towels, Kleenex, and those types of items.”

The next break with 1970s hardware store orthodoxy came in a spray can. “Eventually I added hair-care products,” Larry says. “It was all black customers, and they’re very conscientious of their personal grooming. The Afro was really big, so we started buying direct from the manufacturer and became the largest single location in the state for [Afrocentric] hair-care products. There were sheens, shines, sprays. And it became a huge part of the business. We did all that, and we began selling greeting cards, candy — we sold tens of thousands of candy bars.

“My dad and I always had this contentious kind of relationship. And I guess when I added lipstick to the mix, it really sent him over the edge. The two of us in one location was never great. I quit many times.” After graduating from Southfield High School and earning an accounting degree from Michigan State University, Larry planned to leave the family business and work for an accounting firm. But crunching numbers didn’t offer a lot of stimulation. He stuck with the hardware store until 1982, when the familial rancor led him to “split off” and open Gaynor’s with his parents’ backing. There, Larry could — and did — add anything he wanted to the mix.

“I was always fascinated with F&M,” he says of the now defunct but once wildly popular metro Detroit discounter that foreswore the usual trappings of retail for warehouse-size stores selling health and beauty products and a lot more. “That was before Costco, before Wal-Mart — getting things that people wanted that were hard to get, that you couldn’t get at Kroger’s or the drugstore.”

Rather than try to pass off imitation as the sincerest form of flattery, Larry says frankly, “I steal other people’s ideas. I tell everyone all the ideas are up there, and if you think about it, you just grab them down, and those who grab the most are the most successful. So I’m always grabbing someone else’s idea.”

The ideas come from magazines and trade shows, whatever the trade. At the hardware store, he’d learned the lessons of impulse-buying, and kept the blinders off when looking for merchandise that made sense at Gaynor’s. That’s how toys and shower radios and gag gifts and baby strollers came to be found in his upscale health and beauty store. But the key to making it work was spotting trends before or during their peak.

Photograph by Marvin Shaouni
TNG’s orders are quickly filled through a network of computers and conveyors.

Bub, the Gazoo

When Teresa Persha went to work at Gaynor’s, she had little preparation for the day when she would be co-owner and executive vice president of an international, multimillion-dollar, hydra-headed business. A graduate of Hazel Park High School, she’d gone through phases of wanting to be a nurse, then a nun — after a yearlong childhood hospitalization for meningitis, then attending a Catholic grade school. From high school, “I went to a trade school to be a travel agent, and I also went to manicuring school.”

She applied for work at Gaynor’s as the store was preparing to open, and was hired as cosmetics manager. She learned on the job, as she has in every phase of the business but marketing. Eight years after helping him open Gaynor’s, Teresa married the boss. “I would never look at him as I wanted to date him,” she says. “We happened to go out and have a drink; we were just having a bad day.

“He’s a completely different person at work than he is outside. We just clicked and wanted to know each other more.” Today, she says, “Even if he’s kind of crabby or super focused at work, I can still get the personal Larry to come out, that’s for sure.” He interrupts, saying cryptically, “She’s a Gazoo.” He seems surprised when the name isn’t immediately familiar, then explains that this was a character on The Flintstones, an invisible, exiled space alien only Fred and Barney could see. “A little thing … on your shoulder,” Larry says. “The inner voice.” And conscience? “Well, of course.”
Teresa is also known as The Bub, short for a mutual pet name, bubbeleh, a Yiddish term of endearment. Employees — or “talent,” as they’re called at TNG — also refer to the company’s second-in-command as The Bub.

After Nailco outgrew its countertop quarters in Gaynor’s and Larry decided to stick with the wholesale business and close the eclectic retail shop, they took on talent one by one, and moved a couple of times before settling into a 120,000-square-foot building in Farmington Hills. TNG has used every foot, and added warehouses in Georgia, California, and New Jersey, and a $15-million, 170,000-square-foot distribution center in Lyon Township. Although the bulk of its business is catalog sales, there are also 22 wholesale stores in Michigan.

The book of genesis

In the beginning, Gaynor’s begat Nailco for the manicure trade. In 1992, after adding tanning and spa products to the line, Nailco begat Nailco Salon Marketplace. Two years later, that combo begat Hairco to service the demand for hair-care goods. The business went live in ’95 with Nailco.com, offering online sales of everything found in its catalog, TheBeautyBook. In ’97, Nailco begat The Industry Source, a name change to reflect product lines that went far beyond the adornment of fingertips. In 1998, The Industry Source begat stores by the same name, and in 2007 begat The Pavilion — a 25,000-square-foot showroom for salon and spa furniture, equipment, and talent who consult on design for everything from logos and business cards to salon and spa décor. And they train their clients in the craft of running their own beauty businesses.

“It’s what our customers are looking for,” Larry says. “They didn’t go to college, they didn’t want to become businesspeople. They want to be a manicurist, a hairdresser, a spa … they need help in running their business.” This year opened with yet another name change, abbreviating The Nailco Group to TNG Worldwide.

Talk to the Gaynors for any length of time, read their signage or promotional materials, and the underlying theme and mission for everything they do is customer service, or “100 percent customer success.” And unlike the countless other businesses that pay lip service to customer service, the Gaynors have had their results independently certified not by select testimonials, but through bloodless science.

Although TNG, albeit worldwide, is smaller than most companies that ask for such help, Larry approached the Gallup Organization several years ago, after reading about it in the Harvard Business Review, and asked for a look at his business. Besides its venerable polling work, Gallup also analyzes and consults on customer engagement using an 11-question survey that measures loyalty, satisfaction, and “emotional attachment,” among other metrics. The total score, called CE11, “is the most powerful predictor of customer loyalty we know,” says senior consultant John Fleming.

TNG Worldwide scored 92 out of 100.

“We do two surveys a year,” Larry says. “One for our talent and one for our customers, and one of the questions Gallup asks our customers is, ‘Can you imagine a world without TNG Worldwide?’ That’s a pretty balls-on question. It comes to the brand — what brands are out there that you couldn’t imagine a world without?

“Some people say Nike, some say Apple, some say Starbucks. There’s not a lot of brands out there that people couldn’t imagine a world without. With us, it’s important that the brand is such that if we were out of business, the industry would be really in mourning because they would miss us. This year, we’re 92nd percentile with Gallup, of all the companies they work with — Best Buy, Stryker, Blue Cross — just tons of big companies.”

This high level of customer engagement doesn’t offer just bragging rights. It’s also why Larry has prospered, going all the way back to Gaynor’s, without offering discounts. “If you’re disengaged and that iPhone is less at Wal-Mart, you’ll go to Wal-Mart and buy it,” he says. “If you’re engaged, you’ll go to the Apple Store and pay the full price, because you like dealing with Apple. Wal-Mart sells that phone now — $2 less. If you’re engaged, two bucks doesn’t matter.”

TNG also boasts of being “the only one in the professional beauty industry to achieve ISO9001 certification for quality.” Such certification is granted by the International Organization for Standardization, based in Geneva, Switzerland, only after a company has proved it has systems in place to assure that its various processes are effective, accurate, regularly reviewed, and include a formalized method for ongoing and continual improvement. Among them, in TNG’s case, is a human-resources department that doesn’t function quite like those in other businesses.

The workforce in Larry and Teresa Gaynor’s company is collegial, in the literal sense of the word.
Dancing on tables, and the day the music died

The Bub, among other things, oversees TNG’s human-resources department in concert with its director, hired five years ago, because “I felt it could be a conflict of interest with myself — an owner — being the sole person in HR,” Teresa says.

The job covers some unusual ground.

 

“We have a corporate culture much like college,” Larry explains. “We have our own cheerleaders, our own mascot (the Rebel), our own fight song, cartoons. Every year we have a different motto. This year, it’s ‘Making It Happen.’ Every one of our talent has to have an annual motto themselves, a personal motto.” There are even company colors — purple and white.

“I think that our employees appreciate that it doesn’t get stale, it doesn’t get old, it’s not mundane, it’s constantly changing, and it’s still exciting.” Teresa says. “And we always, always [treat] the employees with respect, and respect for what they do. I don’t care what you do, if you work in the warehouse or you’re the maintenance guy, if we didn’t have that person working for us, we couldn’t run as efficiently as we do today. We make it known that they’re important no matter what they do.”

Even when Nailco was in its infancy, Larry knew the value of incentives. “When we had three employees, we had a contest that if we ship 100 boxes in one day, we’re going to take you to the London Chop House. That was back in ’86. We hit the hundred boxes, and three of us went to the London Chop House for dinner.” Such outings became a regular practice, and gave the talent a chance to see their normally intense, focused boss let his hair down.

“Unfortunately, a couple years later at Buddy’s, someone gave me Santa briefs or shorts for a Christmas present,” Larry says. “I put them on and was on top of the table dancing.”

There is, admittedly, a goofy element to all this that isn’t everyone’s cup of foot bath. Teresa says simply, “They weed themselves out.” But a few employees, the proverbial 5 percent that ruin things for the other 95, also weeded out one of the company’s longest-standing and most lavish traditions — the annual Christmas party. “We had a great run for a lot of years,” Teresa says. “One of the problems that you have to deal with in a growing business [is] people, unfortunately, who are going to take advantage of any situation they can.

“There was no drinking allowed if you didn’t stay overnight, and we would pay for the employees’ hotel rooms and their spouses’. If they chose not to stay there, they weren’t allowed to drink.” That kept trouble contained, but it wasn’t eliminated.

“People would pass out in their room before the party even began,” Larry says.

“And fights,” Teresa continues. “Kicking in doors at the Ritz-Carlton, fighting in the parking lot, getting sick in the hallways. It just got totally out of hand and it could get very ugly. We didn’t have any lawsuits, but if we’d continued, we could have.”

Onward, into the breach

One result is a hair-care line that debuted in the 2009 catalog. It started with another of Larry’s purloined concepts. “We stole the idea from Trader Joe’s,” he says of a new line of hair-care products called Ginger Lily Farms. “Before you went to buy your wine at Trader Joe’s, you went to a wine store [or] wherever, and that wine was $10 to $20 a bottle. Now you’re buying a bottle of wine for $3. And it’s drinkable — more than drinkable.” He’s talking about the Trader Joe’s house label, Charles Shaw, which immediately came to be known as “Two-Buck Chuck” after its introduction on the West Coast for $2 a bottle. When it entered the Detroit market several years ago, the price was $3.

“A bottle of shampoo and conditioner in a salon is going to be $10 to $20 a bottle,” he continues. “So Ginger Lily Farms is the Two-Buck Chuck of shampoos and conditioners for the salon market — $2.99 retail. First time in the history of the industry. It’s not like crappy shampoo, crappy conditioner. It smells good, it lathers, it cleans and conditions. That’s what we’re most excited about in 2009. It’s innovation.”

So was adding reading glasses to the new catalog, intended as a point-of-sale item for salons whose baby-boomer clients have a reputation for owning several pairs of cheap readers that are routinely forgotten at home, in the car, wherever.

Larry flips through TheBeautyBook’s 348 pages looking for more examples of the unexpected — things customers don’t know they need until they see them, just like on the shelves at Gaynor’s. “This is one of our biggest-selling items,” he says, pointing to an entry that shares a spread with mascara, teeth-whitening gum and trays, eyedrops, and anti-cellulite sleeves. “The nipple covers. They’re not easy to find; only certain stores sell them, so we make them easily accessible, and they buy a lot of them from us — thousands and thousands a year. The thing about huge sellers — the best ideas are, ‘Uh, why didn’t I think of that first?’ It’s really simple.”

Time will tell if the newest items, and those yet to come, are a hit or a miss. Every one of them, in the eyes of a thinking entrepreneur, is worth taking a shot. Larry Gaynor has taken a lot of them. And for the record, today, his nails are perfect.

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