A Tough Sell for Smithsonian's Stores

The Air and Space store was singled out by outside consultants as a success, but even there, popular items are out of stock.
The Air and Space store was singled out by outside consultants as a success, but even there, popular items are out of stock. (By Sarah L. Voisin -- The Washington Post)
By James V. Grimaldi and Jacqueline Trescott
Washington Post Staff Writers
Wednesday, July 25, 2007

Smithsonian museum stores are lackluster, underperforming and poorly organized, and the business unit that oversees the retail division is in "substantial turmoil," outside consultants told the museums' managers in a confidential report.

Though the Smithsonian created a freestanding business unit to boost profits from the stores and other operations eight years ago, the shops are now so poorly run that the Smithsonian said this week it is considering hiring an outside vendor to run the museum stores.

The 80-page PowerPoint report obtained by The Washington Post says the retail unit suffers from bloated staffing and lack of experience.

The retail division should be overhauled, the management restructured and the items for sale revamped to better mirror the mission and experience of the Smithsonian's museums, according to New York management consultants BerglassGrayson, hired by the Smithsonian to evaluate the idea of replacing the managers of gallery shops with an outside vendor. "It is mandatory for Smithsonian to explore outsourcing," the March report concludes.

To evaluate outsourcing, a request for bids to run the institution's roughly 30 museum stores will be released by mid-August and proposals are due in late September, spokeswoman Linda St. Thomas said.

The consultants say weak marketing, dull presentation and the absence of in-store events plagued the shops. The retailers poorly stocked hot-selling items, such as $60 orange NASA flight suits at the National Air and Space Museum store and $30 crystal-growing geode kits at the National Museum of Natural History. Popular tribal-crafted $14 dream catchers are displayed in a second-floor store at the National Museum of the American Indian, while the museum's more accessible first-floor store showcases pottery, jewelry and tapestries priced at hundreds of dollars.

Smithsonian visitors over the weekend echoed many of the report's findings. After spending $40 at the Indian Museum, Jessica Molina of New York said Saturday, "I thought they had a lot of nice things, but a tiny bit expensive -- too much for my pocket."

Yet the 20-year-old student spent $180 at the National Air and Space Museum next door, where she found more value when shopping for family and friends. "Air and Space had a lot of variety of things at reasonable prices," she said.

The study found the Smithsonian shops' 2006 operating profit of 15.3 percent from sales of about $42 million fell far short of the industry standard for similar specialty stores. Profits could jump to 30 percent "with an extraordinary amount of improvement," the report says. That would require cuts in overhead and changes in store design, inventory, purchasing and management.

Income from business ventures is crucial for the cash-strapped Smithsonian, which receives only part of its funds from the federal government and does not charge admission to its museums or the National Zoo. The report paints a picture of poor management that is at odds with the image of a business culture promoted by former banker Lawrence M. Small, who was forced to retire as secretary of the institution in March over reports of lavish spending.

Smithsonian Business Ventures chief executive Gary M. Beer has criticized key parts of the consultants' report. The firm was selected from two finalists by officials from the business unit and the museums. In a 23-page reply, Beer said the consultants misapplied the way the Smithsonian accounts for overhead when comparing the museum shops' operating profit with other major retail companies. He also said it was unfair to compare the Smithsonian's shops to larger retailers, such as Urban Outfitters.

St. Thomas concurs. "The industry standards they used are public companies which are 10 to 60 times the size of SBV revenues," she said. St. Thomas said a comparison of museum stores done last year by the Museum Store Association suggests the Smithsonian's gross profits are better than average. "It shows we are doing something right in the Smithsonian stores," she said.

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