J.Crew’s partnership with New Balance – Photo: RetailWire
Are some retailer CEOs too old to learn new tricks?
Hindsight, it has frequently been said, is 20-20. So, what does Mickey Drexler, CEO of J.Crew Group, see when he looks back on his company’s performance over the past 10 years? According to an interview with The Wall Street Journal, Mr. Drexler sees mistakes he and his company are still trying to correct. What he won’t know until later is what mistakes he and J.Crew are making now that will also need correcting down the line.
In the interview, Mr. Drexler admits that he did not appreciate the rate at which technology was changing the fashion retail business. This is particularly true in the supply chain where fast-fashion retailers have created design and production models that can react within weeks to the changing whims of consumers.
Mainstream apparel retailers from Gap to J.C. Penney are working on ways to transition from traditional sourcing models and shorten the time it takes to go from the designer drawing board to the sales floor. J.Crew has moved some of its production from China to nations closer to the U.S. so it can shorten its timeline.
Mr. Drexler also acknowledged that J.Crew had gotten a little too big for its own boots. He pointed to a decision to debut the company’s upscale J.Crew Collection in 2008 while many consumers struggled from the financial effects brought about by the Great Recession.
The chain’s mainstream brand is not going the discount route, but Mr. Drexler told the Journal that J.Crew is lowering prices on about 300 items and has created an analytics group to optimize pricing on all the products it sells.
Jenna Lyons, J.Crew president and the company’s long-time creative director, stepped down from her position at the company after several years of declining sales.
Ms. Lyons was replaced by Somsack Sikhounmuong as chief design officer at J.Crew. Mr. Sikhounmuong, who was head designer for the company’s successful Madewell brand from 2013 to 2015, is responsible for overseeing the design teams for J.Crew’s men’s, women’s and crewcut lines.
Discussion Questions
DISCUSSION QUESTIONS: Why do you think so many retailers have been so slow to react to the changes shaping the marketplace over the past 10, 20 years? Do you think leaders like Mickey Drexler can catch up to the present reality?
Poll
BrainTrust
Jon Polin
Cofounder and President, StorePower
Guy Mucklow
President and Co-Founder, PCA Predict
Are some retailer CEOs too old to learn new tricks? No. Are some retailer CEOs too stubborn to learn new tricks? Yes. CEOs, by nature, are people with ability to learn new things. The difference between those CEOs who adapt and those who don’t is often mentality. Too many retailer CEOs seem to be hoping that they can get to retirement while ignoring the changes around them. Some of these retailers will survive; many will not.
Change is difficult and this is especially the case for retailers that have had success. The problem, as the article makes clear, is that at the rapid rate of change happening in the industry, going slow is tantamount to being left behind. While no one has a crystal ball, regardless of age, what leadership needs to be doing is self-disrupting and challenging themselves. This can be very difficult to do when the leadership team all has the same shared experience and that’s why it’s critical for management to seek out new and unique perspectives from people outside of their existing teams. I admire leaders like Drexler who reflect on their mistakes and try to learn from them, but in my experience there is a profound amount of inertia in executive suites and it is hard for old dogs to learn new tricks.
The determination by retailers and brands to “lead, follow or get out of the way” is helped along by consumers who vote with their feet and wallet. The asset of brand equity can be lost quickly as new demographics make choices at the beginning of their lifetime of spending, and those retailers that wake up early get the worms. Too many retailers that wish to be early adopters or fast followers are waiting for Godot, so to speak, because of the lock down on impact and experiences that will not be shared by competitors or their non-disclosing vendors. When change management responsibilities are a core expectation, innovation finds its voice.
It isn’t a matter of age! It is a matter of desire and arrogance. If you want to be a great CEO in retail or any other business, fill your room with people who are smarter than you.
As I have written before, it is as if many retailers just want all this progress to go away and to go back to “the old days.”
I agree — the industry has been very slow to accept that the retail landscape, consumers and competitors have permanently changed.
Age is only a byproduct of the root culprit that is past success.
Human nature is such that we tend to attribute our success to our decisions and actions and once we hit it big, we become notoriously linked to the strategy, business model and approach that delivered the blinding success. Our personal credibility and brand become attached to the past despite apparent changes to the demand and purchase patterns or the general business environment. We become part of the status quo and defend it to the end.
Another aspect of such hubris is the use of technology. As part of the industry and the status quo, successful leaders tend to view technology as a way to bring productivity and automation to existing processes and business models rather than as a way to bring change, to gain further differentiation or to create new value for their customers (not just more of the same).
Lastly, while most will agree to the direction of change, few will appropriately recognize and plan for the pace of change. The longer they wait to make the shift to the emerging business reality, the greater the gap, which demands a near herculean effort with a related shift in resources and investments attempting to play catch-up.
Failure to recognize the accelerating pace of change, having realized wildly past successes and a lack of fresh perspectives from outside the immediate industry in the C-suite combine to create a perfect storm for retailers that have been at the cusp of a consumer-driven mobile technology revolution.
There are many reasons why retailers have been slow to react to changes shaping the marketplace over the last 10 to 20 years. One of them is the change itself. Looking back 20+ years ago, Kohl’s was a new concept. Today it’s Amazon. That’s a huge difference. So retailers reacted first in their comfort zone, which was competing with other stores. But then came the Internet. No one at first knew what that would mean and how that would change not only how we shop but how we live our lives. Over the last 10 to 20 years, we saw many changes in our economy, changes in lifestyles and the drastic shopping pattern differences we have seen with Millennials. Lastly many retailers took on too much debt, especially those purchased by private equity firms, so the only investment they could make was to continue to open new stores because, up until recently, it was the one guaranteed method to increase sales.
I think we need a little time for the retail industry to catch its breath, with each retailer taking a good hard look at themselves — evaluating their product, consumer demand, customer service, omnichannel experience, etc. and focusing on what they need to improve one step at a time. Going ahead 10 to 20 years, we are going to see the blend of today’s newest retailers like Amazon with the surviving older retailers creating shopping experiences we can’t yet even imagine.
Technology walloped many companies, not just retailers. Technology changes so fast that it is almost impossible to keep up with it. Established retailers, like other companies, got stuck doing the same thing year after year when there was little need to continually reinvent the company. Technology has changed that. And it has changed consumer expectations. Retailers need to constantly be soliciting feedback and truly listen to what consumers are saying, as well as monitor changes in the marketplace. The pace of business is faster than ever, making it harder to successfully compete.
It has very little to do with age and more about the fact that traditional retailers and brands don’t possess these skills in their toolkit. They are competing with new entrants who are tech-first and who are often able to operate with minimal margins (or losses) funded by institutions that are betting on massive growth. Most traditional brands and retailers don’t enjoy that flexibility — thus making it difficult to even hire talent to augment the lack of skills they have in order to morph to a more modern retailer.
Past success is oftentimes not a good indicator of future success. Retailers have witnessed this in substantial ways and many retail CEOs are paying the price for their complacency and possible arrogance at ignoring the changes technology was bringing to the way their customers shop and their overall purchasing habits.
Are retail CEOs to old to change? Maybe some are, but I would say it has more to do with their ability to accept rapid rates of change. This is an industry that was used to change being measured in decades not weeks or months. Those that have adapted quickly (e.g. fast fashion brands) have thrived where others (e.g. department stores) have faltered. Retail CEOs need to take a step back and objectively look at their past success and recognize that imitating those actions today and into the future is no guarantee of future success. Innovation and customer experience are what reign supreme today and retail CEOs need to adapt quickly.
CEOs that underestimate trends and do not recognize emerging opportunities quickly enough are definitely present across today’s retail landscape. It may not be that they are “too old to learn new tricks,” rather it’s that they are paralyzed by inaction or confused by the various pathways in front of them.
About 18 months ago I started referring to these retail operations as “establishment” retailers — unwilling to change or unknowing which direction to turn. Establishing a vision and breaking the status quo to achieve it is not for the faint of heart. However, as credited to Lewis Carroll’s classic Alice’s Adventures in Wonderland, “If you don’t know where you’re going, any road will take you there.”
Having worked for a once-great retailer (Macy’s) and many others as clients, retail lacks great leadership for this century. I agree with Gene Detroyer in his comments that there is still too much arrogance and myopia in the industry.
That arrogance and myopia is in contrast to retail leaders prioritizing customers not just as a marketing strategy, but as a fundamental business strategy. I’ve lost count of how many retail executives, when asked whether they perceive Amazon as a threat, have dismissed the notion by saying “we don’t compete with Amazon.” Darwinism in industry as in nature.
Just yesterday there was a story citing a study that revealed that nearly half of retail (42 percent) has no plans to offer same-day delivery.
Maybe more retail executives should pay attention to Amazon’s stock price and, even better, read Jeff Bezos’ letter to shareholders from 1997.
No one is infallible and the current retail environment is testing everyone’s strategy. There has never been a more critical time for retailers to “know thy customer” than right now.
When consumers say they want personalized experiences, they are saying “If you give me what I want when and how I want it, I’ll buy from you.” And that’s the key; being laser focused on meeting the customer’s expectation on every decision point.
Age is not the problem. Complacency is. In retail, and a lot of business, only the paranoid survive.
I believe the greatest sin most CEOs commit is not leaving behind successors for modern retail. So, by successor, I mean someone who “thinks like Bezos” (Day 1), not just someone who can carry on what’s already there.
Why didn’t Target’s CEO think of creating AI that goes on people’s kitchen tables (Echo) and runs all sales info through them? Why didn’t Walmart’s CEO think of using drones? Who’s going to take over J.Crew? L Brands? And not just take over, but have the vision to compete with the likes of AMZN, Alibaba or even Warby Parker. Now that we’re in the thick of this new age of retail, that needs to be a consideration for every board, every CEO. Who’s next? And how do they THINK? Can they “think
like Bezos”?
What happens at the top is pure human nature. One gets to the top position by performing. In many cases, senior managers are under short-term pressure, so they repeat the successful process that got them to the top.
I cannot tell you how many senior executives think they know everything, based on them getting the top position. Since they know everything, the mind is not open to new ideas.
I have observed two approaches that have helped companies’ long term. First, allocate a budget for failure. Put some money and time into ideas that could have great payoff. If it fails, thank the people and go to your next great idea. Make failure not a career ending event, but learn from the post mortem. Second, look outside your company. Answer the questions: What company is growing faster than you and why? How is your industry changing? How are your customers changing? If you have not been following Amazon for at least 5 years, you simply do know what is going on.
Yes, too often senior management is living off the past and company results show it.
This seems to be a variant on an issue discussed week or so ago and as I responded then, I would say now that many aren’t slow to react as much as they guess wrong on where the future is heading. Alternately, many “successes” guess right … there’s a difference between being good and being lucky — as the saying goes — but the distinction is often lost in critiquing performance.
Of course there are many people who really aren’t good … and often that doesn’t become apparent until too late.
I agree that age is not the issue, but experiences and built up systems that helped create success need to be constantly updated and challenged. Of course smart leaders in retail can evolve and not just catch up but lead. It takes courage, emotional intelligence and lack of ego to question your own assumptions and make significant changes.
The main question of why many retailers have been slow to react is a factor of stubbornness on some level, the real pace of change accelerating and that we are told to learn and lean on past experiences and then try to scale and replicate the successful experiences. With the pace of change it is now more valuable to look ahead and be in a state of constant testing and learning as opposed to doing yearly reviews and then applying last year’s learning to the next 5 year plan.
I think this particular response from the recent “NVIDIA (NVDA) Q1 2018 Results – Earnings Call Transcript” speaks to the issue of change. The entire transcript is worth a listen/read. The world is transforming again — it’s not a place for peacetime CEOs.
Jen-Hsun Huang – NVIDIA Corp.
“Now that’s kind of a first inning thing. The only trouble with a baseball analogy is that in the world of tech, things don’t – every inning is not the same. In the beginning the first inning feels like – it feels pretty casual and people are enjoying peanuts. The second inning for some reason is shorter and the third inning is shorter than that and the fourth inning is shorter than that. And the reason for that is because of exponential growth. Speed is accelerating.
And so from the bystanders who are on the outside looking in, by the time the third inning comes along, it’s going to feel like people are traveling at the speed of light next to you. If you happen to be on one of the photons, you’re going to be okay. But if you’re not on the deep learning train in a couple of two, three innings, it’s gone. And so that’s the challenge of that analogy because things aren’t moving in linear time. Things are moving exponentially.”
======= The entire response to the question:
Jen-Hsun Huang – NVIDIA Corp.
Let’s see here. It’s a great question, and there are a couple ways to come at it. First of all, AI is going to infuse all of software. AI is going to eat software. Whereas Marc [Andreessen] said that software is going to eat the world, AI is going to eat software, and it’s going to be in every aspect of software. Every single software developer has to learn deep learning. Every single software developer has to apply machine learning. Every software developer will have to learn AI. Every single company will use AI. AI is the automation of automation, and it will likely be the transmission. We’re going to for the first time see the transmission of automation the way we’re seeing the transmission and wireless broadcast of information for the very first time. I’m going to be able to send you automation, send you a little automation by email.
And so the ability for AI to transform industry is well understood now. It’s really about automation of everything, and the implication of it is quite large. We’ve been using now deep learning – we’ve been in the area of deep learning for about six years. And the rest of the world has been focused on deep learning for about somewhere between one to two, and some of them are just learning about it.
And almost no companies today use AI in a large way. So on the one hand, we know now that the technology is of extreme value, and we’re getting a better understanding of how to apply it. On the other hand, no industry uses it at the moment. The automotive industry is in the process of being revolutionized because of it. The manufacturing industry will be. Everything in transport will be. Retail, e-tail, everything will be. And so I think the impact is going to be large, and we’re just getting started. We’re just getting started.
Now that’s kind of a first inning thing. The only trouble with a baseball analogy is that in the world of tech, things don’t — every inning is not the same. In the beginning the first inning feels like — it feels pretty casual and people are enjoying peanuts. The second inning for some reason is shorter and the third inning is shorter than that and the fourth inning is shorter than that. And the reason for that is because of exponential growth. Speed is accelerating.
And so from the bystanders who are on the outside looking in, by the time the third inning comes along, it’s going to feel like people are traveling at the speed of light next to you. If you happen to be on one of the photons, you’re going to be okay. But if you’re not on the deep learning train in a couple of two, three innings, it’s gone. And so that’s the challenge of that analogy because things aren’t moving in linear time. Things are moving exponentially.
Many retailers have been too slow to react to changes shaping the marketplace over the last decades primarily for human reasons. Remember the old reasoning, ever too prevalent in many large corporations, that goes, “because it has always been done that way…” When you are going up against a formidable competitor who believes every day is Day One, the “way it has always been done” is the quickest route to irrelevance in the era of the digitally empowered customer.
And aside from human reasons, I will also make the argument here that technological reasons are to blame. Many large retailers are highly reliant on legacy systems and applications that are hindering their evolution and growth. They know this, but sadly many have still not made the tough and often times costly decisions to change it. Can leaders like Mickey Drexler catch up to the present reality? I would say yes, but it would likely take some serious coaching and guidance from employees that are more digitally-savvy and represent the future of their brands. Would he and other retail CEOs be up for that? We shall find out….
First, it seems J.Crew caused many of their own problems. And we’ve seen it often in their category — it’s difficult to maintain a coherent AND meaningful brand for a retailer like J.Crew when fashion style trends move so fast.
What about the bigger CEO question? I think the mix preventing progress is more toxic: CEOs are distracted by shiny baubles while bureaucracy keeps their organizations stuck in old ways.
For this reason, I hesitate to say CEOs are stuck in the old days — and attitude from shareholders that rewards CEOs for shiny bauble syndrome. So many “clever tech” or “store entertainment” moves have no strategic base — show no insight into making retail stores a place more consumers want to shop.
Consumers are the driving force of change in the fashion retail business. It’s the people, not the technology. The speed of tech’s evolution is often part of the equation when it comes to the challenge of understanding changing shopper behaviors, but the underlying lack of focus still comes back to the misunderstanding of consumers, not tech.
This is particularly true in the supply chain where fast-fashion retailers have created design and production models that can react within weeks to the changing whims of consumers. Remember, the average shopper doesn’t know if something took eight weeks or eight months to design, manufacture, ship, and get to the selling floor. The solution is to make shopping fun again, and to empower consumers to feel that they are developing their own sense of style, selecting items that feel special to them.
Furthermore, the new reality is that consumers have many choices and retailers can’t be greedy about margins when there are widely available proxy options for any given item. With their smartphones in hand, shoppers can easily find a suitable alternative in a given shopping moment, so, as Mr. Drexler notes, making prices competitive from the onset is a smart move.
The survival rate for new businesses is alarming. Studies, old and new, have shown that even with a complete and proven business plan, rigid discipline and hard work the odds for success are against your winning.
The first ten years of the 21st century did to the retail industry what the industrial revolution did to manufacturing. We should remember that among the most successful industrial giants there was a group of men that did well like Edison, Ford, Carnegie and dozens of others that were old men even by today’s standards. These successful men and women were aware that you must spend money to make money. They also never hesitated to take advantage of new or unknown technologies to get them what they needed for success. This included finding people that when placed in strategically imperative positions were more than adequate for the tasks at hand.
Advertising was a tool to inform the market that they had what they needed or wanted for the correct market threshold pricing. Today we hire a piece of paper with no idea what is going to walk in the door. Our advertising sells dreams and much of the time delivers disappointment and nightmares.
There is nothing about running a successful retail business that looks like 1999. Seventeen + years into this century and every company out there is a new business with new rules, ways and means — like it or not. A look at the most significant failures over this past decade will clearly demonstrate that age has got nothing to do with it.
I don’t think it’s a question of age. There are a lot of factors behind why retail can be slow to change — one is knowing when it is time to adopt a new technology. For a large retail chain with a lot of stores and systems making changes can come at a huge cost. It seems that most retailers, though, underestimate how quickly customers will take up certain developments (mobile for example) and then are trying to play catch-up. There can also be a disconnect between those at the top and what the customer wants, especially if those at the top aren’t regularly visiting their stores. This makes it harder for retailers to be ahead of the curve.