Nov 16, 2018 12:31:56 PM
Bob Phibbs interviewed Steve Sadove, former CEO Saks 5th Avenue and Mastercard Senior Advisor on predictions for Holiday Retail Sales, Black Friday and what table stakes are for retailers of all sizes.
• Buy online, pick up in-store, have a single view of a consumer, a single view of the inventory - those are all table steaks.
• The consumer is out there shopping.
• Black Friday isn't about the deals, it's about the consumer mindshift.
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Bob: Steve Sadove is a Mastercard Senior Advisor and you're the former Saks Fifth Avenue CEO.
Steve: We had a lot of fun. I ran Saks for a long time.
Bob: So how did you get started in retail?
Steve: I was a retailer by training. After graduate school, I had gone into marketing in the consumer goods world and spent the first 17 years of my career at General Foods, which is now Craft as a consumer person, ran the non-pharma businesses at Bristol. And along the way in the mid-'90s Saks went public and Saks was owned by a private equity firm. It was a public offering and I was the outside director. And so over the next couple of years, I was the director at Saks and then Saks got sold to a southern department store chain called Profits, which changed its name.
I joined their board and after a few years, two things converged. Bristol-Myers decided that it wanted to become more of a pharma company. So I was asked by Saks if I wanted to join the management of Saks. Over the next several years worked with a great guy, Brad Martin, who was the CEO of the company. Brad retired, I became CEO and then over the next many years ran Saks as the CEO and chairman. And, ultimately, led the company through the recession and we covered very, very nicely, and about five years ago we decided to sell the company to Hudson Bay, which owns Lord & Taylor, Hudson Bay and Saks now.
I became very involved in the retail industry. I chaired the National Retail Federation and now I've left Saks, but still very involved on the executive committee of the National Retail Federation. I advise Mastercard as well as do some investing and sit on Park Hotels which owns Hilton properties as well as Movado Watch Company. I love retail and I love the people, the industry, and what's going on. And I have a great time with the Mastercard Group because it's a wonderful company doing some amazing work in analytics.
Bob: This should be a banner year. Macys' just came out with earnings and their sales were up almost 4%, They'd done a lot of digital initiatives. I think is going to be probably the best holiday we've seen in a generation. Would you agree with that?
Steve: I think it's gonna be a very strong holiday season. If you look at the Mastercard's spending pulse forecast, it's for a 5% growth for the holiday season, which if you look at it 2 years ago it was 3%. Last year, it was 4%, this year it's 5%, and if I look at the last 6, 7 months of data, we're seeing probably the best consumer environment that we've seen since 2012.
Bob: Yes. I would agree.
Steve: This is very healthy and it's cutting across all categories, whether it's electronics or hardware or apparel was up 8% plus last month. I mean, I haven't seen that in years. So it's healthy...consumer confidence is high, the unemployment rate is low, people are shopping, you're seeing...you saw as you mentioned Macy's came out with some good numbers this morning. Home Depot came out with some good numbers yesterday. We're seeing this all reflective of the strong third quarter in those numbers, but I look at it more from the consumer sense out of the Mastercard numbers saying, "You shouldn't be surprised by those numbers because the consumer is out there shopping."
Bob: Well, and they're confident and that's the key. And, to me, frankly, in this environment, I think an awful lot of okay retailers could come off looking great. Because, frankly, the shoppers are inclined to want to go out there. We all know these things can't last.
Steve: You're absolutely right. I think that it really is indicative of a good consumer environment, and you're right that you have to be careful because there are going to be winners and losers over time. And the real trick is who's making the investments that when things do get tougher that they're going to be able to play because a lot of the investments when I was running a company which this was at the beginning of the period of omnichannel retail.
Those investments were big and at the time very risky. Now, I think buy online, pick up in-store, have a single view of a consumer, a single view of the inventory - those are all table steaks. Everybody has to have them.
And if you're not doing that, I think you're a loser in this environment. But just doing that isn't going to get you the win, and I'm convinced that the next stage of this is gonna be those that really make the investments in data and analytics to be able to do personalization, whether it's artificial intelligence. Really understanding the consumer segments and be able to target their marketing. And that's going to require a lot of understanding of data, much more so than they've had in the past.
Bob: Well, that's true too. And before we talk about the data, I have to say I'm kind of a people guy. I'm the brand that people come to with their brand and say, "How do we make that emotional connection in our brick-and-mortar stores?" And I think that luxury has gotten lazy myself, I think when I go in an awful lot of luxury brands and boutiques I think they still kind of expect this kind of standoff-ish and I'm not sure what it is...unapproachable salesperson is perfectly okay and I just don't think that's going to hold up in 2018 or 2019.
It's still gonna be the brick-and-mortar can do something that online can't, and that is to provide people a feeling that they matter. And if you can craft that, that means a lot of training, right? I mean, that's a lot of investment into people, isn't it?
Steve: No question about it. I mean, think about it this way, 80% plus of transactions are still taking place in the store. And stores aren't going away. And when I think about omnichannel experience it's, whether it buy online, pick up in-store, or shop on your mobile and then go into the store to pick it up or return to the store, the store interaction and the experience that you'll have, whether it's at a low-end or a high-end is still critical. And there are a lot of tools that you can develop that are going to enhance that experience, whether it's going to be beacon technology or chips that identify when Steve walks into the store and they know that he's a big customer.
So the general manager in the store comes down to say hello. I mean, these are things that you could be doing and if you're a high-end retailer, I think you need to be doing because, as you were talking about, the experience is so critical to building the loyalty.
Bob: Agreed. And Saks got bought up by Hudson's Bay and isn't Hudson's Bay having kind of a bit of a trouble digesting all of this now and figuring out the different cultures that come together? I mean, are there two different ways that their customers shop in those stores or are they all the same?
Steve: Well, clearly, the luxury shopping experience is different than the moderate shopping experience. It's not saying that you can't manage different portfolio companies differently and be successful. It's not easy, we made a decision early on when we were trying to do it with the Saks and the Profits and the Parisians of the world that it was difficult to do, but it's not impossible. But, clearly, they have a challenge, Saks I think from the second quarter numbers is performing pretty well right now. So it's doing better, but you've got a demanding consumer and the expectation is not just in the store, but online for an experience that is gonna be...I look at Amazon even though that's not luxury, they set the standard for what the experience the consumer wants online, whether it's gonna be a quick checkout, one-click shopping, how the product is presented, what you bought before, these are items that you might like.
These are all the kinds of...and one day or several hours shipping. I mean, these are, again, the expectations of the consumer.
Bob: Well, and to your point, at luxury level with all the tools we do have, it would be incumbent on a store manager or someone to be able to use that data and be able to come down and say, "Hey, you know, thank you, Steve, for being a customer and having been with us for five years." But let's face it, an awful lot of data is dark to most retailers, isn't it, Steve? I mean, they know it's there, it's just what do I look at.
Steve: It's massively complex. So that's not the training of a lot of retailers, it's not the world that they grew up in. I know one retailer that I was just speaking with, has hired 200 data analysts within the last year or so. So that's the new world, that's why I'm saying what omnichannel was 10 years ago that's where the world of data and analytics is going today. But you're absolutely right, that they haven't up until now and very few of them, have really captured it.
You think about it, it's interesting, Amazon's coming from one direction and moving more in towards...they're opening up brick-and-mortar stores. They come from the analytics side, a company like a Walmart is going the other way, which is they're coming from the brick-and-mortar and adding the other kinds of capabilities that you've seen out in Amazon. I think they both can be winners, but you see this convergence. The internet company, only companies are now much more becoming brick-and-mortar companies.
Bob: Well, because they don't make money online. There's too much with free shipping and both ways and, you know, punishing margins etc., right?
Steve: We also see when an internet company opens up brick-and-mortar stores that it helps their internet business. Oftentimes you see 2, 3X volume on their internet store.
Bob: Yes. I would agree. What do you think was one of the most worthwhile investments you made while you were at Saks?
Steve: I think the most important investment was the recognition of the omnichannel and the investment in building the web business and all of the technology that allowed the inventory to be moved from one channel to another. Understanding the consumer across channels, and that became a very big business. But I think those investments were probably the most important.
Bob: Yes, I would agree, but they didn't all pan out for every retailer. Sears was early to table with Shop Your Way and they were going to know all these digital initiatives. They were way ahead of most people, and they should have been Amazon, right? I mean, they had warehouses and they had the distribution points, they had the brands, and yet they still missed it.
Steve: Yes. The dilemma is you got to do both, you got to be able to make the investments and the technology, and you've got to have the experience and the store. And you have to keep the stores fresh and remodeled and you have to have the inventory and you have to have the brands. I mean, this is a tough complicated business, so you can't just hit on one cylinder.
Bob: Yes. And I like that idea about you have to keep the stores looking fresh because I think most customers come into a brick-and-mortar store to answer one question, what's new? So when it always looks the same or the merchandise, the departments are always in the same place, but that's a lot of not only looking at the data but just kind of having to go by your instincts as a merchant, right? To know where to put those assets.
Steve: I think retail is a combination of art and science. There's a art that is about the feel, the merchant has to understand the trends and understand...and there is some data that can support that, but, in the end, it's a blending of that science, the analytics with the art. And I certainly would never lose sight of the importance of that feel aspect, and treating the customer well and the art of the business...
Bob: All right. That's right that you can't just figure, "Oh, we'll have another 1,000 people in our store tomorrow," because every trip that is saved by somebody on Amazon Pantry or using a subscription, there's one less chance they go out of the house to come discover you. The stakes are not going to get any lower, they're just going to go up.
One of my favorite questions to ask is I want you to think of a friend of yours and comes up to you and they say, "Hey, Steve. I'm gonna quit my day job and I'm going to open a retail store." What would you tell them?
Steve: Well, I would tell them that you better have something...I'll call it a hook, that is differentiated. What's differentiating could be on product, it could be on experience, it could be on price, it could be on any number of dimensions. But what makes you unique and why the consumer's going to want to buy something from you versus somebody else because if all you're going to do is be the same as other people or other stores, you're going to lose. So that would be where I would just say, "What really drives the difference in what you're selling?"
Bob: I would agree with that. And what do you think about Black Friday? Is it dead, is it as some are saying, "It's now Black November," because they all come out with their big deals early. Is there still something to that social aspect of getting up early on Black Friday and going to the mall or is that becoming less and less do you think?
Steve: It's a very interesting question, and I spent a bunch of time with the Mastercard team on this one. And if you look at their forecast for the season, it's really interesting because if you look at the top 10 projected shopping days for the holiday season, actually, the Sunday before Christmas is projected to be as big or bigger than Black Friday. And Black Friday being number one or number two. I would look at it as being this is the holiday season that's running from Thanksgiving through the end of the year, it's not even ending at Christmas because the week after Christmas is critical as well.
What's so important about Black Friday and I don't think that it's become less important. The importance of Black Friday is it's the kick-off of the season, and it changes the mindset of the consumer to get excited about going shopping again. And to be in their, "I've got to go," creating a sense of urgency. "The deals are there. I've got to start getting things for the family. What's on my list?"
And it's not so much about getting up at 3:00 a.m. I used to do that with my kids getting up at 3:00 a.m. and hit the electronics store or whatever it might be, the first thing. And we had our list of the stores we had to hit by 6:00 or 7:00 in the morning. I'm less concerned about that now because I can shop online on Thanksgiving Day and the data would show you a remarkable increase on online shopping that day, for example. It's creating the need and the environment that it's a buzz around shopping and that thing goes through Friday, it goes through Cyber Monday, and into the next several weeks, there are a couple lows.
But it's an extended period of time, that's what's changed dramatically.
Bob: Yes. I would agree with you. And I think that it's a nice mental note that we're in this different season and your job is to make it merry and fun because if you start off with, "I hate Christmas music," on November 22nd, you're gonna miss it because the nice thing is this year we've got five weekends. I mean, that's always a great thing for retailers. We've got really not only is consumer sentiment up, but we have, to your point, the Sunday before Christmas is the 23rd. That's an amazing weekend that I would just encourage anyone listening to this today that do you staff for the rush you don't staff for what your convenience.
You don't schedule your employees just because, "Oh, I only have some people who can work here." You better put everybody you can on that, because if the store looks like crap, you're probably only gonna get crumbs when you have the whole feast, would you agree?
Steve: I agree. I was telling somebody yesterday that the notion that Sunday before Christmas could...the Mastercard estimate that it could be bigger than Black Friday, and they weren't even thinking about staffing their store on that weekend as heavily as Black Friday. And that's just an aha. Four of the top shopping days in the season are gonna be the Saturdays, and you've got to make sure that you're staffing, you're providing the experience, you've got the inventory out, those are all the things that I would be thinking about if I were still running one of those stores.
Bob: Absolutely. Well, we're towards the end of our time here today, Steve. Can you tell me something good about retail?
Steve: That's a great question because I think it's an ever-changing industry. It's a great career and what I mean by that it provides one out of every four jobs in America retail-related. And people think about it as being clerking, and that used to be the historical thought about retail. Well, the reality is it's about technology, analytics, supply chain, there are so many aspects about retail that are exciting that I find it to be one of the most interesting times for someone to be thinking about a career in a ever-changing industry.
Bob: Absolutely. And how can they find out more about you and, certainly, the Mastercard survey?
Steve: The Mastercard survey's been released now. It's pretty easy to track me down on LinkedIn.
Podcast Episode 122: Steve Sadove, CEO Sakes | Black Friday Isn't About The Deals
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