House of Tyrol, which specializes in selling gifts and collectibles from Germany and Austria, is closing up shop. The Cleveland, GA-based company, which mails the Tyrol International title, plans to liquidate the catalog by the end of June. The fate of the company’s Cleveland store and Website was undecided at press time.
The 34-year-old company mailed its final 64-page catalog in early April. To publish a summer catalog, Tyrol needed $1 million in capital that it was not able to secure, says owner/president/CEO Bernd Nagy.
“We had problems in keeping our promises to our printer in a timely manner,” Nagy says. “We couldn’t obtain financing we needed, and sales were down so much that we couldn’t cover printing, postage, and production.”
Nagy and his wife, Linda, founded Tyrol in 1969 and launched the catalog in 1972. The company peaked in 1999 with $15 million in sales, 85 employees, and three stores. The following year, response began declining while costs escalated. “Then came Sept. 11, then came the postal increases of 2001, customer confidence fell, shipping costs increased, catalog production costs increased, and the first three and a half months of this year were just horrible,” Nagy says. “We had an O.K. January, but February was disastrous with the war. March was up from our expectations by 10%, but April was again just disastrous.”
And being $1 million in debt gave Nagy no choice but to liquidate, he says. If the company had instead filed for Chapter 11 bankruptcy protection, “we’d have had no chance to obtain more funds to operate,” he explains. “And by liquidating we could offer our vendors the most for their money without giving it up to the court and attorneys.”
The cataloger’s vendors may not agree with that assessment, however. In a letter it sent to suppliers on April 22, Tyrol said its preliminary liquidation analysis shows that distribution to unsecured creditors would be less than 10%.
Too fine a niche?
The company’s demise “highlights the dangers of having a very specialized market niche,” says Douglas Timms, a business recovery specialist who ran House of Tyrol from 1993 to 1997. “The good news is there was very little competition; the bad news is that the market is too small and limited for competition.”
Timms says the company was “always thinly capitalized and only survived by tight financial controls, conservative mailings, and detailed objective analysis of the results.”
And though Tyrol had many loyal customers, it may have suffered from what Timms calls “natural attrition.” Tyrol’s customer base consisted mostly of consumers over the age of 45. As aging customers stopped buying, they weren’t replaced with younger buyers.
Compounding matters, the conflict in Iraq brought a significant backlash against the company’s core line of German-made beer steins, cuckoo clocks, and porcelain figurines. “This year, we got quite a good stack of letters from our customers saying they wouldn’t do business with the German-based manufacturers that supplied us, because Germany was opposed to the stand the U.S. took in Iraq,” Nagy says.