Posted: Dec. 13, 2012, 2:45 p.m. EST
By Clay Jackson
By all outward appearances, Nick and Christine Watts live the American Dream: a nice home, two healthy children and a successful dog toy company, Charming Pet Products.
The dream took a nightmarish turn, however, on the night of Jan. 16, 2012.
That’s when more than 100 firefighters raced to an industrial complex in Agoura Hills, Calif. An electrical fire that began inside a cabinetry shop spread to three other tenants. Charming Pet Products was one of the businesses destroyed.
Only a blackened shell remained after a fire destroyed Charming Pet Products’ headquarters in January 2012.
“It was decimated,” Nick Watts said. “It was a 100 percent loss.”
“Every pencil, every toy, every piece of paper—all gone,” Christine Watts added.
Nick thought the dream could have ended there.
“We had no right getting back in business after the fire,” he said. “I mean, not many businesses come back from 100 percent loss, even with insurance.”
Less than a year later, Charming Pet Products has fully recovered.
One of the saving graces was the fact that the Wattses had installed a backup accounting system a week before the fire, saving their most recent customer data and invoices.
“It was huge,” Nick noted.
Because of a seasonal fluke, only 70 to 75 percent of the company’s inventory was covered by insurance.
“We were just coming off Christmas and were just getting product in to replenish Christmas sales,” Nick recalled.
“It just so happened that the ballooning of the inventory coincided with the fire,” he added. “What in normal circumstances would have been insured was way under the mark.”
A Charming Story
Charming Pet Products got its start in 2001, and the Wattses took over in October 2007, when they left their day jobs. Christine was a paralegal in entertainment law and Nick was a financial adviser for Merrill Lynch.
“When we bought it, it was just a storefront, a couple of offices and a small warehouse area,” Nick said.
In the years that followed, the Wattses transformed the company from an 800-square-foot operation with four distributors to 10,000 square feet and 37 distributors.
The couple designs the company’s whimsical dog toys, which are manufactured in China. An exception is the plush Henry’s Toy, named for their office dog, Henry, which is produced by Nick’s brother, Marcus, in North Carolina.
Trial by Fire
The fire exacted a heavy financial toll, and the Wattses had to dip into their savings to keep the business afloat.
Already burdened with uninsured inventory and lost sales, they were faced with the need to replace molds for one of their bigger lines, pay for express air shipments of product from China and hire a third party to take over warehouse and shipping functions.
“Our total loss was way over $500,000, which is big for anyone,” Nick noted, “but being a small company, it was huge for us.
“We were at a crossroads.”
“It was a hard first week,” Christine recalled. “We got orders, but we just couldn’t do anything. We had nothing to ship to them.”
From the Ashes
The first thing they did was call customers.
Charming Pet Product owners Christine and Nick Watts.
“These customers supported us all these years...and they’ve got empty [display] pegs now,” Nick recalled.
The Wattses were determined not to let their business go up in smoke.
“We set up remote lines, and we had to work from home until we set up the office,” Christine said. “So we had remote email, fax and phones coming to the cell phone.”
The other problem was a cultural one. Their overseas manufacturers were shutting down for four to eight weeks because of the Chinese New Year.
“You’ve got to operate on their holiday schedules, and there is a huge holiday around January, February—China stops working,” Nick said.
This led to one of their most costly financial decisions.
Charming toys normally arrived in the United States on transoceanic container ships, a 14- to 18-day journey, plus five days to clear customs. The Charming warehouse was usually well-stocked, but the cushion vanished with the fire.
“We knew right from the outset that we had to do everything we could do to try at least to keep customers happy,” Nick said. “So we took a huge financial hit flying it in.”
Shipping costs immediately became 10 times more expensive.
“Our first air bill was $14,000,” Nick noted. “It was scary times.”
The first small shipment arrived several months after the fire.
“The first half of the year we lost money on everything we shipped,” Nick said.
November marked the last air shipment as Charming became flush with product.
More Time, Fewer Headaches
The final monumental decision was to turn over shipping and warehouse functions permanently to a third party. They went with Avanquest Distribution in Riverside, Calif., about 100 miles from their new office in Thousand Oaks, Calif.
“We send them our orders, and they warehouse our product,” Christine said. “They pick, pull, pack and ship out [orders], and we do all the paperwork here.”
The Wattses couldn’t be happier.
Avanquest Distribution in Riverside, Calif., now handles all of Charming Pet Products’ receiving, warehousing and shipping.
“It’s more expensive, but it’s more efficient,” Nick said. “We’re a much more efficient company now. The biggest benefit is just freeing up our time to concentrate on managing the business.”
Offers of help after the fire came from unexpected sources.
“A lot of people you wouldn’t have expected to support us did,” Nick said.
Competitors such as Kong Co. of Golden, Colo., and Coastal Pet Products of Alliance, Ohio, provided large cardboard bins for in-store product displays.
“People didn’t have to do that, but they still did it,” Nick noted. “That sort of stuff really makes you feel fortunate to be in this industry.”
Distributors also pitched in, through a few dropped Charming. Nick and Christine understood that some companies couldn’t wait any longer.
“Even though they have moved on from us, we are still extremely grateful that they held on as long as they did,” Nick said.
The day before the fire, Charming had 37 distributors. Eleven months later they were back to 37.
Its popular Corduroy Balloon toy line also is found today in the 1,200-store Tractor Supply chain, which Nick commented was “pretty exciting, especially with the year we’ve had.”
The Wattses gained some wisdom during the past year.
“I’m always checking plugs and lights now,” Christine joked, alluding to the bad wiring that started the fire.
Nick has become more laid back.
“For me, nothing is stressful anymore,” he said. “I used to get stressed out about the little stuff, but now I’m like, ‘It’s water off a duck’s back.’”
They learned important business lessons as well. A bit of sage advice from Nick: Meet more than once a year with your insurance agent.
“We now insure ourselves more than we need,” he said. “We also meet with our insurance company quarterly to adjust the amount of inventory covered to reflect growth.”
Christine will never forget the relationships she and Nick cultivated.
“Every single person we called was supportive,” she said. “It endeared us a little bit more to this industry.” <HOME>
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