Transcript
Speaker: How does midsize retail performance stack up against smaller and larger peers? On the next episode of The Market That Moves America, we'll talk to an expert about how middle market retailers are investing in digital transformation and talent to drive growth. Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing midsize companies and help you take advantage of new opportunities.
Speaker: Welcome to the Market That Moves America. This is Doug Farron, Managing Director at the National Center for the Middle Market. And I'm excited today to be joined by Anne -Marie Thomas of Sea Bus Retail. Anne -Marie, welcome.
Speaker: Great to be here. Thanks. So today we're going to talk about a project that we worked on together. Very exciting research study that the center recently released where we looked at midsize retailers. And really what we were trying to do was understand kind of what were the maybe some of the differences between their smaller and larger peers. But more importantly,
Speaker: the factors and the investments that really drive growth for mid -sized companies. So before we start that, tell us a little bit about yourself, your background. I know you've got kind of an interesting academic background and some retail experience, so kind of walk us through that a little bit.
Speaker: Yes, actually it's great to be home. So I started out my career at the Ohio State University. I have my PhD in statistics and measurement, so I always like to say I thought big data was way cool, way before everybody else did. But as a business professional, I really used it to brand myself differently.
Speaker: So I did teach here for a few years and got into the whole publishing, et cetera, academic game. But one of the things I did is I would consult. At the time, there was a for -profit university consulting service. And I would consult with local businesses. And one of those local businesses was Victoria's Secret. And after two years on assignment,
Speaker: They recruited me and that's where I fell in love with retail. So I was very blessed in my career They're under Leslie Wexner to run all of CRM and all of the analytics and then got into more of the brand management and I was really fortunate to manage the BBW brand back to relevancy and
Speaker: But it was really the insight around the consumer that I brought to the table. So if I hadn't been paying attention, Pink would have never been born. So very exciting, fastest brand to a billion. But from there, I took my love of retail to American Greetings. They were a manufacturer who needed to become a retailer, and so they recruited me and said, how do you do this?
Speaker: And then my last kind of big company stint was I was the chief marketing officer at Netjets, Berkshire Hathaway Company. So I was super fortunate to help them figure out record -breaking profits and sales and work directly with Mr. Buffett. It was very, very exciting. But my love of retail really brought me back to building my own business. So Bella Cressida, it means beautiful growth. It is a mid -market management consulting company.
Speaker: So I always like to say we're BCG and McKinsey for people who have different scale, right, and who need a different type of firm to come in and help them with their business planning. So it's been a great career but, you know, CBUS Retail brought me back to really focusing on retail clients and it's just an exciting time to be in Columbus, to be part of retail, and to be connected to the university.
Speaker: That's fantastic. So you mentioned CBUS Retail. Can you tell us a little bit more about the organization? It's relatively new, but coming from the retail industry myself, a group that's really caught my eye and I've had a chance to participate in a few events already, but tell us a little bit more about the group.
Speaker: So CPUS Retail, the founding board, is a group of actually XL Brands folks. And what we saw in the retail industry was a need for an advocate. If you read the papers or listen to the news,
Speaker: you think Amazon is the only retailer left on the planet and it's just not true. So we formed a group really thinking about retail advocacy and we say that we do it for the love of retail and for the love of Seabus because we think Columbus is a special place for retail. But our mission is to bring people together, retailers, service providers, right? And to get people sharing ideas, right?
Speaker: So we have multiple events that we put on over the year, but one of them is one degree, we call it, and it's every couple months. And it's about 50 percent retailers, 50 percent service providers. There's not a ton of content, but the content is always about innovative thinking in retail. And we find it brings together a lot of
Speaker: old colleagues, former friends, etc. And there's a lot of sharing. And that's something we really, really wanted to accomplish a lot of sharing, you know, not just everybody heads down, how can we make the industry better, right? So we also have a conference that sits about every 18 months, it'll be June 5 and six this year, down at the convention center. And for that, we really do focus on content. There's about 120 panels main stage, but the idea is still the same.
Speaker: innovation, how do you make retail better, right? And then we also have a group of professionals like myself who service retail and there's multi disciplines, everything from marketing and strategy, which is my background to logistics, you know, to complete technology, big analytics in retail. So lots of great disciplines that come together to try to help at least the local retailers. Sure. So in my experience, it's not
Speaker: Common that all industries are willing to be that collaborative and sharing right of best practices Can you talk a little bit more about how the participants maybe in the seabust retail events and activities? That kind of openness and you talk about innovation and idea sharing. I think it's really refreshing to hear and
Speaker: that people are willing to share that. Tell us more. Well, you know, it's funny you say that because we were actually, the advisory board was actually counseled that there wouldn't be a desire for participation because it's like, you know, sharing your secret sauce. And what we found is quite the opposite.
Speaker: People are energized by other people's experiences, ideas, expertise. And that was that was the hypothesis that really Steve Morris, who's the chairman and the head of asset strategies group, and myself really had we said, I'm not
Speaker: We've been in retail for over a quarter century. I don't believe it, knowing the people that we know. And we've found that to be the case. Now, people aren't sharing their numbers, etc. But they are sharing their strategies.
Speaker: Especially when you're talking this Amazon age and digital transformation and all this stuff make people, everybody is like, hey, how do I get ahead? Right? And it is all the, the other thing is, you know, the idea that when the tide rises, so it all boats, right? I think people are thinking that too, because you can't out Amazon Amazon.
Speaker: But what you can do is create a brand and really focus on the consumer. And if you build it and you focus on the consumer, they come, but they want the experience. And so how do I give her that experience? So that leads me into my next question. Throughout your various career experiences and then hearing from some of these other retailers, what are some of the, I guess, evergreen aspects of retail that
Speaker: maybe in the speed of everything that does change rapidly, maybe things that haven't changed. You know, it really is about the ever changing consumer and knowing them intimately. You know, Sam Walton, brilliant, right? If you're not sure what to do, why don't you go talk to the consumer? And it's true. And it's not talk to the consumer, it's listen to the consumer. And you can listen to the consumer through behaviors and big data and analytics, and you can talk to them. And the retailers who are doing it well,
Speaker: They're the ones who, they know their consumer. The ones that are struggling, they forgot about their consumer. Makes sense. Let's shift gears a little bit and talk about the study. Yeah, absolutely. So I know the National Center, very, very excited about this study where we had a chance to look at the retail industry. What was attractive to CBUS retail in terms of specifically looking at maybe the middle market and how it behaves a little bit differently from maybe larger or smaller competitors and peers?
Speaker: Well, I think the first thing was partnering with you and being part of OSU because one of the things that CBUS Retail wants to do is also have a university outreach so that we can help form the retail leadership of tomorrow.
Speaker: That was attractive, but I think the other thing is that when you look at what is happening in retail and there is a seismic shift, the bigger they are, the harder they fall. It's not like consumption is going away, so somebody is going to pick up that consumption. When we talked about the middle market retailers, we said, they can be faster, they can be more nimble.
Speaker: Maybe it was a hypothesis, right? But they also don't have the money to invest in technology. So maybe that's not right. Maybe they can't get ahead of the consumer. So I think we had some hypotheses. We had some questions and we thought, gee, you know, if there's something that's going to emerge that's not a behemoth, it's going to come out of the middle market because that's what drives our country.
Speaker: Great. So working with some of your experts and some of our faculty here at the college, we were able to design a study that looked at several different types of retail. We looked at fast moving consumables, we looked at specialty, we looked at food service. The key findings really took us to a place, and as you just mentioned, we had some hypothesis, but we really wanted to kind of test those out.
Speaker: The key findings really led us to see that digitalization and digital transformation are what really are driving growth for the fastest growing retailers. Why do you think this is such an important differentiator for these companies? Well, it really gets back to our evergreen tenant. If you look across different types of consumables, the reality is the consumer today, no matter the generation, although as they get younger, it's more of a demand,
Speaker: They don't think in terms of store, phone, Internet. They don't think about that that way. They think about their consumer journey and their consumption, and they're going to buy what they want, when they want, where they want.
Speaker: And they don't want to really be told what to do and how to do it. So if you pay attention to that, you're going to really focus on that frictionless experience. And it's hard, right? Because it costs a lot of money to create this frictionless experience. But the consumer really doesn't care about that. They just want the experience. And I will say that Amazon has done an incredible job patenting the one click forever.
Speaker: making folks really think it's it's a 24 -7 marketplace and so they they're gonna do what they want to do when they want to do it but they still want an experience there's there's a reason stores and malls still exist but they don't want there to be a difference be you know between shopping online because a lot of times I hear people talk about the convenience
Speaker: But can you talk about the difference between convenience and experience? What separates those? Yeah, I think, listen, I do think there's a convenience factor, but depending on the brand, there's an experience online. So I think about what Apple was. The reality is Apple built an experience online that they were, a personal experience online that they were able to translate to their stores.
Speaker: And it's not like people were going in there to buy something inexpensive. They were going in there generally to buy something very expensive. But even with everything Apple's been through, if you looked at the stores every holiday,
Speaker: I mean, I can't imagine their traffic was on. It might have been down. I don't know. But they were pioneers in connecting everything without the customer having to think through it.
Speaker: You talk about convenience. You're really not talking about a brand then, right? It's I'm clicking on Amazon to get my basics, right? That's convenience for sure. But when you have an actual brand and you know your consumer, you have to figure out that consumer journey. You have to personalize it. And again, that takes a lot of investment in technology. Yeah. So the Apple example is a great one.
Speaker: that you're seeing out there, retailers that are doing a really good job at making these connections. So as a recovering CMO, here's what I can tell you. Let's call it 15 years ago. The mantra was build the in -store base over something like holiday, and then separately build the e -commerce business.
Speaker: And so what would happen is you would have different promotions and in many cases different products online and you'd have in store and what you ended up with was really upset customers. So a lot of retailers have learned that lesson so if I looked at like
Speaker: Arie or A &F, BBW, their promotions over holiday were exactly the same. They weren't going to tell the customer where they had to go. But when I think about truly frictionless experiences and something that's personalized, Zara, Sephora, I mean, they're killing it. They know their customers, and it's not just behavioral. What they figured out was that people wanted to come into the store
Speaker: But you had to create more of an atmosphere, more of an event. And they've done that incredibly well, and they're up there. So one of the challenges for midsize retailers might be some of their constraints, right? You may not have the resources of some of the retailers that you just mentioned. So how do you think
Speaker: that mid -sized retailers can take advantage of maybe their nimbleness in the face of a constraint challenge like capital or all the other priorities they have in running and growing their business. That was one of my personal hypotheses is that yes, they weren't going to have the resources in terms of
Speaker: money, but they could move faster than some of the organizations you and I have worked with. How many committees do I have to go through to get my maintenance spend for my e -commerce business, let alone do anything creative? My comment on that would be, focus on making sure you have the best talent in -house that you can,
Speaker: so that you can leverage those resources most efficiently and invest in what you can on the consumer experience side and it will pay you back. Sure, sure. And you mentioned Amazon earlier, it's kind of the elephant in the retail space, right?
Speaker: How should mid -sized retailers be thinking about, and as you said, not necessarily competing, but how do they grow in the face of this dominant player in the space, and how can they deliver in a way that provides that experience you've been talking about?
Speaker: Well, I think the one thing about Amazon is, you know, it's, you can't compete. We're mere mortals, especially the midsize companies. They have to make a profit, but, but Amazon is innovative. Okay. So paying attention to them, paying attention to what they're doing.
Speaker: is super important. And by the way, it's like having your own structural manual for what you should do right in front of you. So that whole idea of patterning them, figuring out what they are doing that could be surprising and delighting. And investing in that incrementally.
Speaker: is really how I would see that is paying attention, learning, making sure, again, you get back to the evergreen piece, know your consumer first, right? And try to follow their lead in terms of what they want you to invest in.
Speaker: So another one of the key findings in the study looked at talent. Such a critical aspect of any business but particularly for mid -sized retailers and those that are undergoing digital transformation. Talk a little bit about maybe some of the challenges or trends even that you're seeing within companies as they think about their talent base.
Speaker: Yeah, so it's a mantra that I've had my entire career, talent and culture are everything. That's how you build a brand. You build it from the inside out. But what I would say is that talent, we're back to that talent wars, if you will, time frame, which is great if you're the talent. Not so great through that.
Speaker: But what has happened is I believe the pace of education has not necessarily kept up with the pace of technology. So you're scrambling for resources or folks who can help you in big data and analytics or who are true digital natives.
Speaker: You're scrambling you're scrambling to get them and so that part you know again part of the University Outreach is we want to partner with universities to make sure we're putting together the best talent for tomorrow there is And I wouldn't say that just about retail I think that's a general statement that we just haven't prepared folks and and so you know the way I think about these organizations if you have the best
Speaker: leadership team you can right building the best culture you're able and then investing and I don't mean necessarily dollars but investing in developing the people that you have coming in you have you have a bigger chance of hitting a triple versus a single
Speaker: Yeah, makes sense. So my last question, what advice would you give to middle market retailers that are looking to kind of accelerate their own growth in the next two to three years? Where would be areas to focus? Yeah, so again, I said invest before, and I really mean it as more of a focus area. So what are your critical initiatives? And your first critical initiative should be
Speaker: Your leadership team so your talent at the very top make sure they're aligned make sure they're the right Leaders you know the right people to march toward a vision And make sure they're good managers right so I think if you start there You're going to start to build a culture that can help catapult you forward and and that's going to be everything for your brand and
Speaker: But you're going to have to find some ways to really strategically think about your financials so that you're investing as much as you can in the consumer experience because they will pay you back.
Speaker: Excellent. Well, Anne -Marie, thank you for joining me today. This has been a great discussion. I would invite any of the listeners who are interested in viewing the full report, the Middle Market Retail Report, to go to our website. You can download it at www .middlemarketcenter .org if you're interested in learning more about Seabus Retail. Do you guys have a website? We're almost there. Okay, almost there, getting ready to launch. So that'll be up soon. And again, I would invite
Speaker: you to subscribe to the Market That Moves America podcast on iTunes, Stitcher, and wherever a podcast can be found. And until next time, thank you for joining. Thanks, Doug.
