Oct 26, 2018 8:52:24 AM
Bob Phibbs interviewed Dean Shulman CEO of Brother as he shares how observing his customers helped him have aha moments, the need to partner with your dealer network if you want to be successful and which reviews he always reads and why.
• If you're going to come up with a promotion to get units into dealers, you better come up with a promotion to help those dealers move the units at the same time.
• Observe customer frustrations and fix.
• The hidden reason you read reviews.
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Bob: Who are you and what do you have to do with retail? You've only been in it all of your life, so you don't have, like, five hours, but give me some highlights, because you're kind of a big deal.
Dean: So I was fortunate at Brother International to be a senior vice-president and board member. For the last 11 years they asked me to re-invent their original business at Brother. Some people might think of it as the multi-function printer, fax company, maybe typewriter, fax, but their original business was selling embroidery machines, and that started in 1986. And I have had the responsibility to do virtually everything, meaning, really running a company from sales, marketing, operations, product development.
I think my core strength is the ability to see what others don't, meaning that I've always been a huge fan of Steve Jobs and Apple, and trying to think different. In fact, that's the reason that I called my consulting company Think Different Marketing, because I believe that that's really what has made Brother successful with my stay there and my ability to, you know, understand especially the changing distribution channels, whether it be Amazon early on and understand that it's all about reviews.
And that if you invented something and had 4.5 stars, you could actually own a category, to Walmart, to really the dealer business, which to me is always the most exciting. Because that's a one on one relationship as you know with individuals who are really the American dream, start a business, to have a family involved in the business, to create wealth, and to, you know, really be able to manage their own lives. But the business they do, that money is to send their kids to college, to provide a better life for their children and the next generation, so.
Bob: Absolutely. Well, you know, that's the thing I...you know, I guess I have a true confessional here. I have spoken for Dean at various events over the years and I think the thing that always struck me was how connected you were to your dealer network. And I was just kind of wondering, I mean, I have a bunch of different podcast questions I ask, but you have had so many irons in the fire, you know, I have an awful lot of people that listen who are at that top level and have dealer networks.
How you were able to construct this group of passionate dealers who showed up at events, paid their own way, and again and again, that doesn't just happen, right?
Dean: Correct. One of the things I did before Brother was I had actually sold copiers for a company called Savin Corporation, and they were all dealer-based. So I had that background.
One of the reasons I was so excited about asking to take over the sewing and embroidery business because it was dealer-oriented. What did that mean? That meant that I wasn't trying to sell to a company who all they wanted to do was extract huge amounts of money, back-end money, support money, advertising money. That I could actually make a difference by working with these individuals, of which, many at the time did not have a college education. Many of them, their father was a repairman for Singer Corporation.
So one of the things that I knew was that this was a personal relationship, and back then, again, we're talking about 2006 to 2010, our competitors tried to sell these individuals a carload, a truckload, a boatload of product. And knowing from doing business with Walmart and Amazon that when you ship that level of product to somebody, they are really only acting as a secondary distribution center for you. That's not selling product.
Bob: About making your numbers not theirs, right?
Dean: And what happens after the second month when they don't sell the product?
Bob: They hate you, don't they?
Dean: And they don't buy any more. So I kind of adopted with the dealers this very simple concept, the sell in, sell out concept. If I was gonna sell into a dealer by using a promotion, I had to supply them and end-user promotion at the same time. My general philosophy was to go around and through distribution. What did that mean? Is although I knew that distribution is number one, because if you don't have somebody to sell your product, you're dead. But the reality is, as a company, if we're not engaging the end-user directly and creating that differentiation, and being able to create an, "Aha," moment for the end-user to get off the couch and actually drive to a dealer, then you haven't succeeded.
Because all you've done is moved your inventory to their inventory. So around and through meant that I would work with the dealers, mano to mano, one on one, but if I couldn't help them sell through the product then we were only not providing the real solution, but we weren't creating a future and a relationship between the two of us.
Bob: Well, I think that's really huge, because, as you know, I speak to an awful lot of different brands, and I think that's finessing the model. I think that a lot of times they're not connected, right? We have this promotion and it isn't that idea of sell in and sell out. Maybe it's, like, sell in and then, "Oh. Now, we have to come up with something," but you made it so that it basically became a doughnut. That both sides...the product's in the middle, but both sides have to win. We're not just gonna dump it on them, and then burn through our dealer network, right?
Dean: Exactly right. And the key was for us to... You know, we had great product, which was also a real advantage. Our product worked out of the box. Many of the competitors back then, now, they've all kind of stepped up, because they were forced to, a lot of their product, even though they were selling 3,000, 5,000, 10,000, they didn't work out of the box. Highly mechanical, highly electronic, but Brothers' manufacturing was such that ours always worked out of the box, because we were completely vertically integrated.
So the advantage was introducing new technology. Here you have an industry, and I had this expression where people would bring up all these objections or they would have all these suggestions, and my question always was...this was kind of a play on words. I would say, "Sew what?" S-E-W, right?
We would go ahead and just make sure that we had to create an, "Aha" moment. We had to make sure that we were going forward to engage that end-user. I didn't know anything about sewing but I did know about how to do business, and I noticed that people were, you know, what I call the bob.
They were going up and down with the sewing machine, and because the general population tends to be older, a lot of the women were wearing progressive lenses or close-up glasses. Anyway, so the prices of displays were dropping and I said, "I don't understand." I said, "You have a camera, why can't you put a camera and put in a big display instead of using these small LCDs?"
Bob: Oh my gosh, cool.
Dean: And that way it makes sense. That was our first break-through, was being able to put this camera so you could actually see what the needle saw. Another example, you probably know this because I'm sure you've seen it on TV. Do you remember when somebody used to hang this device on the wall or they'd push it on the wall, and it would lay a red line down the wall and it was for hanging pictures, and it was an infomercial?
Dean: So I also like to build things. Not very well, but I like to build it and fix it. So I go to the store and there I see a miter saw with a built-in laser that puts a line down the wood. Now, why does it do that? If you've ever built anything, most people fail to take into account the thickness of the blade.
Dean: So when you cut two ends of it, you could be an eighth of an inch or a quarter of an inch off. That shelf isn't fitting.
Bob: That's why I don't make things anymore.
Dean: So the other thing I saw when I was watching people sew...and this is why I say, you know, I see things that other people don't, is I asked people, "What's the hardest part about sewing?" Again, we're talking a little bit, you know, six, seven years ago. And the answer was sewing straight. So they use these chalk marks, and they use, you know, protractors and I thought, "Well, why can't we just put a red line on the fabric and then just follow the red line?" And that's how that came about.
So those are the things I think that also made our product very unique. So that, what does a sewing machine do? It just sews, whether it's a $49 machine or a $3,000 machine. So we had to differentiate our product by creating things that make the product easier and is very unique.
Bob: Well, if I can build on that, because I think it's knowing the customer. You know, it's interesting we're recording this as the death knell is about to fall on Sears everybody's convinced. And I was talking to a man just yesterday, and he was talking about how, "You know, when my kids were growing up back in the '60s we would go through and we would call for our orders or use the catalog, because we had three small kids. And then we could go to the catalog pick-up desk, and I was done in 20 minutes and I had my sanity."
And he goes, "They stopped doing it and we stopped being a customer." I thought, "Holy crap. That's kind of the whole point," you're [inaudible 00:12:20] by millions of cuts and one of them is understanding that, "Oh, we didn't really serve our customer here. We made it convenient on us," and now the joke, of course, Dean is that Target and Walmart, everybody's touting, "Oh, buy online, pick up in-store it." Yeah, we used to just call the store, order from the catalog, and pick it up.
So all these great retailers, whether it was Penney's or Sears or a million other ones who let that vision go and didn't see the common frustration of a young family as a competitive advantage kind of hurt themselves, right?
Dean: Absolutely. What they saw was the failure to see multiple changes in the marketplace, whether it be an aging demographic, the changing in financial capability as baby boomers' got older, but some of their income became more disposable, because their kids had left. And I think that the whole nature of realizing very early on...and as I said, I joked about this, is Amazon, we had a discussion about whether or not we should really develop our website. And I had seen earlier on and I said, "Well, wait a minute." After I talk to all these people, I said, "Why would you invest a lot of money in a company website if, in fact, we know that for product the number one search now for product is Amazon?"
So unless you're gonna offer something unique like, for instance, maybe you're in the medical business or you're...it's a technical report or a technical...the company websites have little use today if you're selling product. If it's a service I get it, if it needs videos I get it, but the reality is Amazon is the number one search engine now. And what does everyone look for? The number of reviews and how many stars it has.
Bob: So true. So true. I'm actually doing a webinar here in about another hour with Podium, and Podium is a whole system of working with your POS system to basically text your customer to get Google reviews, because the more reviews you have on your site, the better, and they are a Google partner, so they are finding amazing success where, you know, most retailers are hoping to God I've got two or three. Well, if you had hundreds, suddenly you have much bigger creed than you've ever had.
So it is a new market. I think just understanding that's...we're willing to take anonymous strangers' advice if there is a lot of them, right?
Bob: Yeah. I think that's it...
Dean: And as a manufacturer, I would read the reviews...again, this is just, you know, me. I read the reviews for the opposite. I wanted to know what the bad reviews were, because that's where you find out the gems of how to fix your product or how to make it more interesting. The positive reviews is where you grab those unique descriptives that people use so you can offer those same descriptive [inaudible 00:15:45] for a new potential customer.
Bob: Yeah. I think that's wonderful. I think that's great. I've got to switch gears on you a little bit, what would you tell a friend who comes to you, "Dean, I have finally had it with corporate America, we're gonna open our own retail store." So there you are and you guys go out to coffee, what would you tell this person?
Dean: I would probably tell them that not only is it...that brick and motor is so difficult today, is to whether or not they can turn it into an internet play, and use social media and those people who are advocates about your product. Because the margins will be significantly higher, you won't have the real estate issues, the regulation issues for what you need to do in your store. And even in my local town parking's a problem.
You know, does people wanna walk to it? And then the size of the product that you have, are they gonna have to put it in their car? So I would really strongly recommend that anyone who has a good idea and really wants to develop a business, it's not impossible to do retail. But it is very difficult and it's also because if you're gonna get into the retail business, take Best Buy, for instance. Best Buy was almost dead. They recognized that with technology products, that you can't just buy those on Amazon or online, because many of the people who are buying it, let's say over the age of 40 don't have the skill set or the time or patience anymore to figure the integration of all of these devices.
Bob: Very true.
Dean: So they went out and started the Geek Squad and acquired a company. Even IKEA just went ahead and purchased a company. I'm trying to remember the name of it, but basically, they have all these individuals part-time, and, of course, there's only two things that are horrendous to assemble. And then I'll mention the third one. The first one is a barbecue.
Bob: So true.
Dean: Never ever, ever buy a barbecue without paying the money for them to assemble it.
Bob: No, very true.
Dean: The second is a bicycle, right? So now, the third is ready-to-assemble furniture.
Bob: I was gonna say IKEA, exactly. Yeah.
Dean: Horrendous. So now, they bought a company, and a friend of mine just used them in Brooklyn. She had a TV. They will come and they charge you by the hour, very reasonable. They will hang the TV for you. She bought a complete dresser that was all ready-to-assemble. Of course, you lay it out. There's 400 pieces with a line-drawing done by a three-year-old.
Dean: And guy came over, he came with his little bag, and by the way, this is a part-time job. It's a gig. He was a student and this was a gig for him, and he just came over and in one hour, looked at it...I think he actually was an engineering student. And he looked at this jigsaw puzzle, assembled it, said thank you, and left. What a great business.
Bob: Yeah, great model.
Dean: So full services. I think brick and motor for an independent today is really challenging, because how do you get people to get off the couch in this one-click environment that you can return the next day, get delivery the next day.
Bob: Well, you bring some good points. I think that, you know, ultimately, if you're not doing a better job than somebody else you're gonna have a tough time. And to your point, you know, there's also a new customer out there that we didn't see 5 or 10 years ago, which is using your store as a closet. You know, Best Buy's having a terrible time with I guess, you know, millennials are going in and getting the sales pitch on the best video film equipment. Buying it and filming the wedding and then returning it the next day. So there's a whole different element of service and, you know, the young woman nowadays can also rent the shoes, the dress, the purse, the jewels, and she doesn't have to own it.
Unfortunately, you and I get along awfully well. We could talk for hours on this, but, you know, those are also big deals. I think that last year the narrative wanted to say, "Retail apocalypse, everything's dead." I think, clearly, that's not happening, we're hearing millennials and gen Z wanna go out and go shopping, which is different than online to your point. If I'm gonna go online, I'm buying. I wanna get this pen with this ink, or I wanna get this part, whereas the joy of shopping does seem to be coming back, at least, when I walk through downtown areas in particular. And even in malls, I'm noticing an awful lot more bags. So I think that's always a good sign.
Unfortunately, we're coming towards the end of our time. What would you be excited about, about retail? What do you think you could tell me, something good about retail, because a lot of your dealers are gonna listen to this and a lot of people, you have so many insights to glean, but, you know, why do we stay in that? What would be good?
Dean: I think that the sewing embroidery dealers are so unique, because number one, they have not only an enthusiastic customer, they have an obsessive customer. And as long as they can continue to engage them, and that's their ability, number one, they provide service because they're mechanical, electronic machines. So that brings them back to the store. People are always looking to upgrade just like Apple to the latest and greatest. So we're selling, and embroidery customers, bringing in fabric which a lot of them got out of and so did Walmart, Walmart decided to get back in.
Dealers started bringing fabric, they're now diversifying, which is the next thing, right? They brought in cutting machines, they brought in long arms, they have now all different kind of accessories beyond that of just needles and feet. So the smart dealers I think have such a great opportunity because they have a huge, loyal, dedicated customer base. So anything they introduce, they have a customer who's almost interested. They don't have to start like introducing a new product, you're trying to find out, "Who's the right audience? How do I reach them?"
They've got 10,000 people they've sold, 50,000 people, they've sold. Well, that's good when you're selling high-margin, high-value product. And I think now is one of the best times I think for dealers, because of the quality of machines and because of the recognition and the level that the dealers through one generation or a second generation, and some help by the manufacturers have really become very professional well-run organizations.
Bob: I would agree with that. And I would say no matter what your product is, that's the key. That, you know, you're looking for what other ways can I serve this demand that...you know, it kind of brings us all the way back to how we started talking about, you know, knowing your customer and knowing what their frustrations are. And then being able to say, "How do I put my arms around a bigger part of their life when they come in contact with the main product they're coming in for, whatever that's gonna be, and then excelling at it?"
So I think that's really good. So how can they find out more about you, Dean? I know that you and I are connected on LinkedIn, what would be a good way for people to find out more about you?
Dean: Yeah. So you can go to LinkedIn and just look for Dean Shulman. If you want, you can always send me an e-mail direct at email@example.com.
Bob: Perfect. Well, again, I have enjoyed our chat together, and you certainly have so many great ideas it's not a wonder that you have been able to lead these strong teams through such a changing time. And I appreciate your time today.
Dean: Great. Thank you, Bob.
Podcast Episode 119: Dean Shulman, Brother | Small Town Retail Rewards
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