For years, Distribution Video and Audio had a successful wholesale business buying and selling truckloads of VHS tapes, movie DVDs and music CDs.
Run by Ben Kugler and his sons, Brad and Ryan, the company known as DVA bought excess inventory from Hollywood studios and sold it to Blockbuster stores and other major retailers, from Target to Walmart.
Then consumers turned to Netflix, Redbox and iTunes, and media sales plummeted. Video rental stores and record shops closed.
To survive, the Kuglers introduced new merchandise, from clothing to coffee makers to coloring books. A large percentage of their business shifted to entrepreneurs who bought inexpensive goods and resold them on eBay and at flea markets.
The next phase in the company's evolution comes Friday: Kugler's Golo Outlet, a retail store at 31555 U.S. 19 N in Palm Harbor, north of Curlew Road.
The 12,000-square-foot store seeks to capitalize on the success of DVA's warehouse sales, held in early December for the past six years. The three-day sales attracted about 8,000 people and generated "six-figure sales," CEO Brad Kugler said.
"We thought, this is so good and customers keep asking for it, why don't we open a retail store?" he said.
Kugler, 45, spent two years developing the concept and finding a site. He wanted a high-visibility location along U.S. 19 near the company's main office and warehouse on Candy Lane in Palm Harbor. (DVA also has warehouses in Clearwater and Burbank, Calif.)
The store sells movies, CDs, electronics, clothing, household goods and toys at 50 to 90 percent off retail price, from $8 Martha Stewart scrapbook supplies to $5.99 Starbucks travel mugs.
Most items are new, although some were returns from the original retailer or come in dented boxes. Used Apple iPads and iPods are tested and refurbished by company technicians and, like anything in the store, can be returned within 30 days with the receipt.
Like dollar stores and other discount retailers, new merchandise comes in weekly and has limited quantities. Sometimes the store has five of an item. Sometimes it has 5,000. The most popular are the "dump bins," huge cardboard boxes loaded with DVDs and CDs (without cases) and random knickknacks for a buck. Packaged DVDs start at $2.
"People love to hunt and peck, and they love to brag to their friends, 'Look at what I got for this price?' " Kugler said.
Founded in 1988, the company finds itself in an unusual position for retailers. When the economy falters, business grows thanks to cash-strapped bargain hunters. As the economy improves, business slides.
DVA, with a staff of 52, had sales of $23 million in 2010 and $20 million in 2011. The average item sells for double what the company paid for it, with much lower margins on electronics.
Kugler hopes the Golo Outlet will boost revenue by building a clientele of shoppers who come weekly to check out the new inventory. Qualified wholesale customers will continue to get goods tax-free.
Shoppers like Gary and Karen Lake were fans of the warehouse sales and visited the store during its "soft opening" this week.
"They have a wide variety of goods and extremely low prices," Gary Lake said. His wife often spent five or six hours at the warehouse sales shopping for Christmas gifts.
Kugler plans to add two stores by the end of 2013, one in southern Pinellas County and another in Hillsborough. Others could follow in Pasco and the Plant City/Lakeland area. He likes the idea of selling goods that otherwise would end up in a landfill or be shipped overseas.
"Here, it finds a second life," he said. "I have yet to see one person come in here and not buy something."
Susan Thurston can be reached at email@example.com or (813) 225-3110.