Leadership is Not a Destination

Brian: [00:00:54] Welcome to Future Commerce, the podcast about cutting edge and next generation commerce. I'm Brian.

Phillip: [00:01:00] I'm Phillip.

Brian: [00:01:01] And today with us we have David Katz, CMO from Randa Accessories. Say hello.

David: [00:01:09] Hello, everyone. I'm thrilled to be here. Phillip and Brian, it's great to be on the podcast. I listen to you guys. And so I look forward to discussing all kinds of interesting topics today.

Phillip: [00:01:20] Thanks. Glad to have you.

Brian: [00:01:22] Awesome. We're excited, too. Yeah to kick things off, tell us about yourself. What's your story? Tell us more about Randa. I don't know if all of our listeners are necessarily familiar with Randa, even though it's huge. Give us a little background.

David: [00:01:35] Yeah. I mean, Randa, interestingly, is one of the largest companies that most of your audience has never heard of.

Brian: [00:01:42] Right.

David: [00:01:44] We're the world's largest men's accessories company. We also do some women's product and kids and some others. But we make belts and ties and wallets and scarves and hats and luggage and bags. And we do that under about 65 brands from Ralph Lauren and Dockers and Levi's to Tommy Hilfiger and Williamson Dickies and Ben Sherman and others. And we do that in quite a few global markets. We have 23 offices. We have 4000 associates. As an example, we're the number one supplier of belts at Nordstrom, but also at Walmart and at Target and Costco and Marshalls and Macy's and Penney's. And Amazon.com, obviously, in today's world. And we do the same thing at a El Corte Inglés in Spain and Printemps in France and Edgars in South Africa and Myer in Australia and Liverpool in Mexico and Hudson Bank, et cetera.

Phillip: [00:02:42] So one or two places.

Brian: [00:02:44] {laughter}

David: [00:02:44] So a couple of places. Right. So so again, you haven't heard of us. But one of the things will that I make a pretty good wager on is that both of you and virtually every man listening to this podcast owns some of our product and uses it on a daily and weekly basis pretty frequently. In fact, most people own several of our products. We ship nearly 75 million units of product a year. So a lot of stuff out there. And so that gives us a very interesting perspective on kind of retail transformation, on brand strategy. It's kind of an interesting mix of how we go to market. So that's kind of big picture. How did I get into this? I took the most rational, logical path you can imagine. I started as a medical student studying neuroscience. And so you see how that relates to making a better world through better belts. I kind of started off in the physiology and psychology of human behavior and ended up... My family was in a number of businesses and offered me a bribe, which I accepted, to take a one year deferment and not spend the next, you know, nine years in school without having some break. And I never went back to med school. I eventually went to business school, but I got my hands dirty kind of operating businesses that had wholesale products, brands associated, selling them to retailers, and then kind of going through the transformation that's out there today. So that's a little bit about Randa and a little bit about me. I don't know if that answers that kind of the setup there.

Brian: [00:04:20] Yeah. Well, I mean, you're also really prolific. You were just named a top LinkedIn voice for retail. You've been honored by Medium for similar writing. And now we're really excited to have you on. I know that you've had a lot to say over the years. Where can people find you? We usually do the end, but where can people find you on the Web? Where do you like to engage?

David: [00:04:46] Well, certainly LinkedIn is a platform primarily for me as a business to business discussion. But I also speak to some consumers, to job seekers, et cetera. You know, you can find me there. I do a decent amount of public speaking. So I speak mostly at trade events. So things like Shoptalk. That's coming up. And the Insights conferences that are held in Washington. I speak at some of our brand partners conferences and to retail summits and for Women's Wear Daily and and occasionally the Wall Street Journal events, et cetera. So you can kind of catch me there, but mostly I have a day job. So my day job is selling products to consumers. Most of that through our major retail partners. And I'm really fortunate that I get to deal with some of the best and brightest retailers and brand owners in the world. And they're happy to share their views with me, and I get to share some of my opinions with them. And that's what I kind of do for a living. So that's great. And certainly there's a change in that. I mean, I will tell you that when I first entered into this business, and our market shares were, say, 10% of the belt business, and the goal was, gee, how do you become 15 or 20%? It's more penetration. How do you put more of our belts into a store? How do we put another brand there? We are now for good news/bad news we're dominant in our industries. So we're the majority of the market. And depending upon channel, we can be 90 or 100% of the market.

Brian: [00:06:19] Wow.

David: [00:06:19] The good news/bad news there is when floor traffic in retailers starts to slide like it is, how do you grow your business? Because I can't exactly grow my CEO and say, "Oh, by the way, we won. I can go home now." The goal is to continue to grow. And that means stimulating customer response to buy more of our category. It's not share of market. I want increased spending in our classifications. I want a bigger share of the customer's wallet. And that takes me back to kind of my neuroscience of how do you stimulate customer behavior and go back to focusing on what drives their needs rather than simply looking at how do we improve business to business metrics? So it's kind of interesting watching how that transitions as our universe around us transitions.

Phillip: [00:07:04] Interesting. I just had the same conversation with another retailer out in Seattle. We did a live podcast event at the Filson flagship store with Something Digital. We were talking... Filson, who's like this historic outfitter, you know, over a hundred and twenty some odd years in business and has a background in supplying the outfitter and supplier for people going out to the Yukon back in the gold rush days. Very interesting story. For the very first time in their business, they're getting into things like license technologies and fabrics. For the very first time they're getting into categories like shorts and short sleeved shirts that they had never been in. And they feel like sort of combating the vertical challenge by going a little horizontal with the types of products that they offer is one way for them to grow. It sounds like... By no means is that, you know, a new strategy. But for them, it's tough. Because it also causes them to have to think about who they are and who they want to be as a company. Do you think that for Randa, that you have similar sort of persona or who-do-you-want-to-be conversations? Or have you just so dominated, or thoroughly dominated, certain categories that they lead on... Like leather work happens to lead on to other things that are similar spaces in tooling or... Give me some thoughts about that.

David: [00:08:38] So I think that's a great question. And my answer is kind of bifurcating into both yes and no. Yes we've got disruption that changes it. I mean, it used to be that I would lose sleep over competitive environment, large companies who were in the hundreds of millions and billions of dollars that will enter or already compete in our space. And how are they going to take market share from us and how are consumers going to perceive us. Today, I don't lose a lot of sleep, but when I do lose sleep, it's because there's a 17 year old young lady who has a 3D printer in her garage, and she's going to invent something that is going to make much of the go to market strategies and barriers to entry and moat building that we've done over years irrelevant. I mean, as an example, we spent over 25 million dollars making sure if you walk into any department store or large apparel retailer in North America, and you go shopping for pants because you probably didn't go in that store specifically to buy a belt or a wallet or a hat. So if you went in there to buy pants, we surrounded the pant pads, the areas of the store that have pants, with fixtures that hold coordinating belts in multiple brands, colors, etc.. And so you go in to buy a pant, we've surrounded that, and we've spent all this money, and we have an in-store merchandise coordinating division where people go into the stock rooms and they take inventory from the stock rooms, and they put them onto fixtures. So every size, every color is in stock, every single day in every brand. And all that resource. It would be very hard for a competitor to do that. We have 3000 people who hit 10,000 stores a week doing that as W2 employees. And we have millions and millions of dollars of this inventory and fixtures that surrounds the pant. And if you're looking for a dress shirt, we have our ties right there. Now what happens when you're buying online or doing a virtual social shopping, is that all of that infrastructure and all of that CapEx we've spent is irrelevant. When you shop for Levi's pants online, you see another pair of denim bottoms. You don't see a Levi's belt that we make right next to it. And so it's disruptive to us. And people are coming up with models that really alter those core competencies. So, A, we're secure in one way because we've got this great market share in the traditional model. But B, that models being you know, and I think, by the way, the word disruption is overused. And, you know, I can go back to school and that was Clay Christensen. And the idea of disruption was very specific. I think we're seeing transformation, and it's an ongoing, not a one time it just happened. My grandmother came to America through Ellis Island. She shopped at a little local general store, a dry goods store. And the owner there knew her, knew her family, knew if there was a new child who needed milk and stocked it and talked to her. And then disruption happened when you got a department store in New York City.

Phillip: [00:11:45] Sure.

David: [00:11:46] And then that got disrupted when you had regional stores and then catalog showrooms and catalogs. And then Sears opens in 1910, that 1200 page Behemoth catalog where from a home you can see a thousand products you didn't know existed and if you ordered them by mail, and you put your postage on it, and you mailed it to them, a month or so later, a Wells Fargo wagon drawn by horse comes up to your house and delivers it. And that was disruptive and that was the end of retail the way that we knew it. Right? And so you look at this today. It's just an ongoing process. I mean, I would say that these changes in technology happen faster than ever before, and there's more transparency than ever before, but it's an ongoing process. And, you know, there are very few companies that can stand still, even if they're dominant in market share, and then sit back and go, "I'm done." You know, leadership is not a destination. I wish it were.

Phillip: [00:12:43] If I could ask one more question, which then I'll let Brian get back to what we had actually planned to talk about, because...

Brian: [00:12:49] No, this is good. I've got follow up questions, too.

David: [00:12:50] Oh I'm sorry.

Brian: [00:12:50] No. This is great. This is good.

Phillip: [00:12:53] Yeah. I love being the disruptor on the panel. {laughter} So my question to you then would be, and I don't wanna be on the spot, so tell me if I'm out of bounds. But you know, we are seeing technology in license technology like Mission belts and like those latch belt type things happening in that space. Can you continue to improve and drive technology improvement to capture those types of new innovations in the market? Or is that something that's just like... Is that another area of improvement for investment for a company like Randa or is that sort of a scrappy upstart kind of a play that is niche at best?

David: [00:13:33] So I believe you're referring to product innovation.

Phillip: [00:13:37] Correct.

David: [00:13:37] ...in a kind of an old world legacy product like a leather belt.

Phillip: [00:13:42] Correct.

David: [00:13:43] And I think the answer to that is, you know, nothing is so perfect, so ideal that you cannot reinvent, reimagine and innovate to make it better and more relevant. I think that whether it's sliced bread, and I mean that literally, or it's toothpaste, or it's footwear, or it's a belt, I think you can constantly improve and make it more valuable to the consumer. And I think the consumers needs, wants and usage of these kinds of products changes over time. And so you need to adapt to the changing market. So the answer is, I don't know that it's radical innovation. But for instance, the belts you're describing with ratchets instead of holes in them, that's a pretty different belt technology. There's no hole. There're little kind of indents in the back that click into place with a compression buckle. We introduced those a couple years ago. It's now the single fastest growing belt concept that we have. And it does make a difference. In athleisure wear and in stretch pants where you need adjustments that are finer than 1 inch holes, it actually adapts and works to people's more active lifestyle. And so that's relevant. We have a belt buckle that has a little battery rechargeable battery you can use to charge your phone. I personally think that's a little gimmicky. I don't think that that's better than other things. But we did something interesting. When you talk about product innovation, men are a little slower than women. I know the audience here is mostly men, at least from the demographics I've seen. So forgive me for saying this, but men are a little slower when it comes to adapting to fashion and apparel technology. But women have had stretch fabrics for quite a while in their athleisure wardrobes. They're much more comfortable. And I don't think they're ever going back to something that's uncomfortable, that doesn't stretch, that is just not as good a product. Men's product got into that more recently. We were slower to adapt. But now that we have it, if you have pants that stretch, but you have a belt that doesn't stretch, you have a problem. So we've created leathers and mixed materials that literally can stretch as you need them to stretch and then contract when you don't need them too. So as you move in your stretch pants, your belt stretches with you.

Brian: [00:16:12] Yes please. That's amazing.

David: [00:16:14] Yeah. Right? So, I mean, this is an example of it wasn't that relevant before we had stretch pants, but now you need them. And by the way, Thanksgiving's a great time to wear those. So, you know, these are innovations that actually make our consumers' lives better. They also, if they're more satisfied, they pay a higher average unit retail. And when you have fewer customers shopping in stores, you better capture a larger percentage of them, and you better get the higher average unit retail for a good reason. And so I do believe you can continue to do that. We have wallets now that have what's called RFID screens in them. An RFID screen... Here's something your audience can be afraid of that they weren't afraid of before. But people can scan through your wallet with a radio frequency reader, a little device that are mostly used in retailers and in warehouses to identify product. They can scan your credit cards through your wallet from about 25 feet away, and they can take your I.D. through that. And so what we've done with our wallets is we now build a film. It's a very light, metallic film that's inside the leather that is a screen. And you cannot screen through that. So no one can read your I.D. And we've gone from 0 percent being RFID shielded, let's say three years ago... By fall of 2018, more than 90% of the wallets we saw in the world will have that screen built in. And so is that a major technology change? No. But it's due to changes in the marketplace. And so there's innovation in a category like that as well. So, yeah, I do think you can... Nothing is so perfect that if you study the market carefully, and you study your consumers, you can't make it better.

Brian: [00:18:05] That's good. I want to hit on something else you talked about earlier. Just just a couple minutes back about how you absolutely dominate traditional brick and mortar retail right now with an unbelievable strategy. That strategy was just mind-blowing to me. You mentioned when someone goes and searches for jeans, they're going to have other recommendations for other types of jeans come alongside them, and other similar sort of disruptive things are happening because of Internet sales. What are you doing right now to combat some of that stuff? What are you investing in? What do you see as viable technology to help you do what you did with brick and mortar but online?

David: [00:18:53] Another great question, and I don't know that we're trying to stop that. What we're trying to do is adapt to that and use it. So, yes, very much we're trying to take the same concept, which is if you shop for a Levi's 501 or 511 jean... 511 has stretch and it's a little slimmer. And there are reasons we invented zippers, by the way, instead of a button down. So if you're looking for men's denim, or you're looking for Levi's specifically, we are using a variety of marketing technologies that are digital to make sure that during your shopping experience, and particularly once you get to the shopping cart, that we are showing you accessories that work with that particular item. And then as you leave that site, and you've made your purchase, we will continue to haunt you and stalk you with coordinating items that go with the purchase that you made.

Brian: [00:19:50] That makes sense.

David: [00:19:50] So we're trying to kind of take that experience we did in mortar and brick and also be able to do it digitally. But the other thing that's important on this one is that although we all talk about eCommerce and online sales, the vast majority of retail in general, but particularly apparel and accessories, and it's somewhere between 85 and 90% and sometimes more depending on the classification, is sold in stores. The biggest shift is you're influenced by what you see online.

Brian: [00:20:21] Right.

David: [00:20:22] And whether that's social media or you're walking into a Walmart or a Nordstrom or a Macy's or a Kohl's or wherever you shop... Or Old Navy or Gap or Banana Republic... When you walk in, your smartphone is in your hand and you're checking reviews and recommendations and curation and style guides and pricing. That transparency and ubiquity of information says we need to be online, giving you information, even if you're going to buy it when it's right in front of you in the store. And that's something we're also spending a lot of time on.

Announcer: [00:20:54] Now it's time for our weekly segment called Future Policy, brought to you by Vertex SMB. As always we're joined by Deputy Assistant Secretary of State, Danny Sepulveda.

Danny Sepulveda: [00:20:54] So this is actually a really interesting case before the Supreme Court that the Court is expected to adjudicate by the end of June. And the question is whether or not the Department of Justice can compel Microsoft to disclose information that it holds on a server in Ireland. The Department of Justice has gone through all the proper procedures in the United States to get a warrant and to go to Microsoft and say, "We have a warrant for information on someone we suspect of a crime." Microsoft has said, "Well look, that information resides in Ireland. If you want that information, you have to ask the Irish government to allow us to provide that information because we have to comply with Irish law." To which the Department of Justice says, "No, that's not true. You don't actually have to go to Ireland to get the information. You can disclose it from here by pulling it back out of the Cloud." The scenario here is a vary bad one, because no matter what the outcome, it has really challenging implications for the operation of the Cloud internationally and for the architecture of the Internet. Let's say, for example, that Mircrosoft wins the case, and the Department of Justice cannot acquire information that it has legal authority to acquire because the information is held outside of the United States. Now it could be anything, right? I mean, we don't know. In the worst case scenario, a terrorist, or maybe a much less serious form of crime. There is no question as to whether or not if that information were held in the United States that it would have to be turned over to the DOJ. So let's say that Microsoft wins, that would create a competitive incentive for folks to sell services to clients on the grounds that they will store it overseas, and therefore that inforamtion will not be accessable to American law enforcement. From a public safety perspective, from an international security perspective, that would be a bad outcome. Let's say the Department of Justice wins. Any private sector in the United States with a physical presence who is accesible to the Department of Justice would then be subject to having any information they hold anywhere in the world subject to access by the Department of Justice. So that takes away your security concerns, but it adds new concerns. And the most concerning of the new concerns, for me, would be that the world would react to that. India would say, "Well, if the American government can reach into Ireland and pull evidence, why can't the Indian government reach into the United States and pull evidence for crimes commited in India?" The answer will be, "Because we don't let you." That would encourage data localization laws around the world. And India would just say, "Ok fine. Then we'll force any communications with Indians to be stored in India, or some copy of that, to be stored in India." And that breaks the economics of Cloud and the utility of data and there're a whole lot of reasons why that's a bad idea. So given that both outcomes are poor, there's a group of Senators that have introduced a new piece of legislation called The Clarifying Overseas Use of Data Act, which says it would eliminate the court suit. It would accept the DOJ argument that the United States having gone through a proper procedure and courts, the United States government can access information held by any American Cloud service anywhere in the world or any company that has a physical presence in the United States is subject to American law to their information held anywhere in the world. It would ameliorate the countering problem by saying the government would be allowed to engage in new executive agreements between the executive of the United States and the executive of another country that would allow either party, either the United States or, let's take India for example, and India to say, "Ok, we don't have to go through the government anymore as long as we've gone through our own jurisdictional legal proceedings that we can ask a company, or not compel, but ask a company, and the company will be allowed to comply with that request to bring information from abroad into the given jurisdiction where that information is held." What's interesting is that the Silicon Valley companies, the Cloud companies, the Cloud providers, the private sector tech community has really kind of rallied around this solution, and our friends in Electronic Frontier Foundation and the Center for Democracry and Technology, a number of privacy experts raised very serious concerns about it. And their concerns are the Cloud Act, in which these executive agreements would not put into place sufficiently strong standards by which a foreign goverment could access someone's information. This is a really interesting debate over the power American markets and the power of American government to compel changes in law and behavior around the world by the fact of the power of our market. The amount of information that travels or is stored in the United States as a function of how Cloud is managed is so large that many countries around the world, at this point, have real enforcement challenges because they lack access to evidence. For everything from child abuse to terrorism. Where we're headed is a real debate over the degree to which we can compel changes in law abroad in exchange for allowing governements abroad to access people's information here and thereby perserve the Cloud as an international instrument. Or whether the only alternative from a law enforcement's perspective that those countries will have is really a data localization alternative. It's one to watch. It's one that I think I'm going to keep updating you guys on as time proceeds, and one that I really encourage you all to look into the debate, and see how you feel about the question and where you might want to weigh in with your legislatures.      

Brian: [00:29:07] So let me take this in a little bit of a different direction now. So Randa, like we've talked about the beginning of the show, isn't necessarily a brand that everyone knows. It's sort of the brand behind a lot of brands. And Richard Kestenbaum who was on the show earlier, probably about six months ago or someone like that, he just came out an article called Ingredient Brands and how important they were and so on. I wouldn't necessarily classify Randa as an ingredient brand, although there may be technologies that you have that sort of are part of that. And I'll let you speak to that. But just brand as a concept is really like beginning a shift these days. It's easier to go direct to consumer. And there are other reasons why brands are shifting. We see brands like Brandless come about and really kind of change up the idea of what a brand is. How do you see brands evolving? And the idea of an ingredient brand, is that something that Randa is a part of? And is that part of your strategy going forward?

David: [00:30:17] Well, thank you for asking six questions embedded in one.

Brian: [00:30:22] {laughter}

Phillip: [00:30:22] Yeah. That our spiritual gift.

David: [00:30:23] Yeah. Thanks a lot. And I'll try to address the bucket of those. First, I think Richard is A) He was a terrific guest on your show. B) I love reading his stuff in Forbes and online. I think his concept about ingredient brands is fascinating. I believe what he was talking about with that was the Intel Inside concept and Gore-tex and Dupont, Kadora and the things that are elevation that are not necessarily the branded product, but there the things inside the product that makes it more valuable. And yes, we do have... We've invented a few technologies and have a few patents on what we call exact fit technology, which is one of the things that a belt does to adjust to your size. And we have that in other product categories, and we do put that inside other brands of products. And so we have some of that. But I think the bigger, broader question you're asking is what's the meaning of brands today, and how is that transforming and morphing in this new retail and compressed supply chain environment? That's a really interesting question. You know, the word "brand" itself was originally that big hot iron with your logo on it that you shoved on the side of livestock and you branded them. And in a way, you know, we still identify ourselves and associate with our herd or our tribe, if you want to call it a tribe, of similarly branded others. And I think brands still have a connection and a connotation and a curation and expectations that are associated with them that give you membership and validation. Now, with that said, it used to be that you associated yourself with a brand like Ralph Lauren or Calvin Klein or Lululemon. And by buying that particular brand, you were A) assured of a certain lifestyle, coordination and matching that it fit your lifestyle, and B) a certain quality value formula. I'm going to pay a certain price, and it has a certain value because of that brand. And the third was, "Others who look at me are going to identify me because of the brand that I wear. And by choosing this brand, I fit into this herd or tribe." Now, that was the way marketing was before, because you only knew a few dozen or 100 some odd people that you dealt with on a regular basis, and you couldn't ask every single one of them, "Is this me? Is this good? Did you ever buy this product? What do you think of it? Do you think this would look good on me? Do you think this is my lifestyle?" But today, with social media and online information and shopping, you can go on and see on Instagram or Facebook or Amazon.com or Bonobos or wherever you're going to look. You can see thousands and thousands and hundreds of thousands and millions of people what they think of a product. And they can tell you the product review, and what they think of the quality, and if they think the price was fair, or was it less expensive at TJ Max. They can tell you whether or not this looks right for your particular kind of haberdashery lifestyle where you are a fashionista, or if it really fits somebody who's a Silicon Valley coder and it has to be Silicon Valley cool. They can tell you that. And you can get that information from the palm of your hand or by asking a virtual assistant without brand validation through traditional branding. So if it didn't say Ralph Lauren or Lululemon or Diane von Furstenberg, but these social connections that you've now made, these new online friends and mentors that you have, if they say it's valuable and it looks great and coordinated, is that enough branding for you?

Brian: [00:34:16] Right.

David: [00:34:18] And so I think what we're going to find is that there are going to be A) a very small number of powerful national and global brands that still means something valuable. But we're going to have hundreds and thousands of digitally native brands and very focused brands that are going for a niche of customers. For young Latino moms who live in Southern California. There's going to be a brand that you may not have heard of, but it's incredibly relevant to them because they can find those people online instantly. And there's going to be something for people who took CS5 computer science at Harvard, and they all have their modern version of pocket protectors. And there's going to be a brand for that that they love that everyone... And so you're going to find brands in that kind of context. And then you're going to find things that are just highly reviewed, great values, and they don't necessarily have a recognizable brand at all. And so I do think we're seeing a transformation of how people look at what brands are supposed to do and how they value them. I don't know if that answered the kind of bucket of questions, but...

Brian: [00:35:25] Oh yeah. It did. That's exactly what I was thinking. You know, I think we know we're in agreement. I love the talk about hyper personalized brands. I think, especially when we look at generic branding from Amazon, and we see a lot of these like smaller niche brands pop up that advertising on Facebook... I think everyone that's listening to the show can probably agree that they've been flooded by brands recently that they've never heard of or experienced. I think we're still probably a little bit early on in how well we've been able to market those brands and actually address the markets that we want to address with them, because I get hit with ads for things all the time that I'm not interested in any way, shape, or form. But I think the future of where we're headed here with this is exactly what you've said. Hyper personalized, hyper focused, just the absolute swath of brands for every little segment. And it might even get as actually Nic Vu, from Adidas, said that they were getting us targeted at Adidas as a specific city block.

David: [00:36:43] Yeah.

Brian: [00:36:44] And I think geographic area is certainly one factor. But, you know, we're gonna be able to get even more targeted. People might even target specific Reddit groups or specific, or specific...

David: [00:37:00] Sure. I think those are micro communities... It can be geographic. It can be, particuarly on Facebook, it can be interests. It can be others within your hobbies that you have, or your political associations, good or bad. You know, I think that we can now target people's interests and unique needs because their needs are very different, and they have multiple needs at different points in their life and during their day. And they may be very dressed up and buttoned up and formal when they're at work, but very casual and into sports when it's a Saturday, and football's going on. And they might be something very different when they're out at a garden party with their friends. And so to be able to target them in their different and varying interests and the experiences that are valuable to them is going to change the way we look at branding. I think people don't want to be one of a million. They want to be one in a million. And I think what technology does is it lets us identify that distinct uniqueness. And, you know, if I go back to my grandmother, right, I mentioned that, you know, she comes over Ellis Island and there's this general store, and the proprietor of that store knew what the family needed and knew what you needed. I think data mining and big data analysis, when it's used properly, brings us backwards 100 years to where the proprietor, which is the owner of the data and the aggregator of this information knows those changes and knows you well and provides you with what you need in a timely fashion. On the method of delivery and that credit card or payment method of your choice, which is how that proprietor would do if you needed a little... "Hey, I'll deliver it and I'll put it on your tab."

Brian: [00:38:55] Yeah. I think also we're able to collect new types of data, too. New data points are happening all the time based off of, you know, personal tech and other things that are coming about. One of those, and we talked about this a ton on the show, is data related to your body. You know, obviously, you're in the accessories business. Have you had any experience using body data to help craft better products or address your customers needs in a deeper way?

David: [00:39:25] In a limited way, most of our products do not have the variety of body metrics that are required that apparel needs. So in the belt business, we need to know your waist size and that's data that's very valuable to us and it varies geographically by age, by channel of distribution. And we look at that data constantly to make sure we have the right assortment sizes in inventory. And that's powerful. But for the most part, true body sizing and data points are more valuable in fitted apparel than they are in most of ours. What we do find is that data is telling us, and we use some new technologies similar to that kind of data mining for VR and AR, for virtual reality and augmented reality, to say if you're wearing this outfit and you take a selfie of yourself, we can augment and drop a tie or a pocket square or a hat or a belt onto what you're wearing to show you what that will look like based on machine learning. We're just starting to use AI on this, but it's mostly machine learning that says based on what we identified from that image, based on data we have...

Brian: [00:40:37] Wow.

David: [00:40:37] Because remember, when you're our market share, I'm kind of agnostic to what belt you buy, what brand it is, what store you bought it at. I just want you to buy more belts.

Brian: [00:40:47] Right.

Phillip: [00:40:48] Right.

David: [00:40:48] So the problem is we make many thousands of styles of belt. So how do I recommend to you exactly the belt you need based on what you're wearing? And we're starting to use AR to do that. We look at you, and then we can superimpose a belt that's going to coordinate or match what you're wearing. And that's kind of another form of data mining. It's not really the body metrics you're talking about for us other than, yes, we have other sized products, but for the most part, that's not a critical data point for us.

Brian: [00:41:20] Wow, that's unbelievable. Is that something that's actively available for consumers to use right now?

David: [00:41:26] We're in beta on it now and hopefully the next time, if I don't totally screw up and you guys invite me back on the show, I'll be able to share the next time we do this.

Phillip: [00:41:35] I assure you that nobody could screw this show up more than we can. So...

David: [00:41:40] Well, I may give it my best shot. We'll see.

Brian: [00:41:41] {laughter} I did like six questions in one question. So, you know...

Phillip: [00:41:47] I'm kind of interested in sort of where you see technology leading us, which is I know we're sort of skipping around here. But, you know, looking out into the future four or five years, are you bullish on technology sort of leading the way into new areas of customer engagement? Do you see people sort of over investing in technology as we see it today?

David: [00:42:17] Well, I again, I think that's a wonderful question and a complicated answer. I think that we have a double edged sword here. I think it's very easy to get distracted by bright, shiny objects. And, you know, I speak every once in a while and recently about that mall robot that was this wonderful security robot that could identify pickpockets and, you know, spills on the floor. And there it is running around a mall in Washington and it takes a nosedive into a decorative fountain. And on Twitter, there was some great social comments about, "Hey, we feel your stress robot, but there's still reason to live." And, you know, here's a shiny object somebody thought was gonna be valuable, and it was just a shiny object. And I like what Brian Cornell, who's the CEO of Target, said. He looked at the store of the future and his comment was, "Just because we can build something doesn't mean we should build something." And instead, he said, "Let's build more stores with smaller footprints that are closer to customers that are easier to shop." Let's get to that. Peter Drucker has this great quote that I use, which is "There's nothing so useless as doing incredibly efficiently, something you didn't need to do at all." So, you know, I think when technology provides a better experience for the customer and for your associates and peers, then it adds incredible value. And if it doesn't do that, then I think it can distract your human and capital resources in a direction that is just it's fun to talk about on the golf course, but it doesn't move the needle for your consumer. I think if you look at Amazon, they're a great example of having lots of interesting technology. They have more patents in the fashion retail business, I think, than anyone else. But they're very focused on let's put our technology in places where it values consumers the most. Let's make it faster, easier, more convenient and not just cool.

Brian: [00:44:15] Yeah, I totally agree. I think Amazon's a really good example of applying technology in ways that's not just for the sake of technology, but in ways that consumers can actually leverage. Obviously that's what everyone's saying right now. But I think your point stands, and it's really, really been echoed on this show a couple of times. Sucharita Mulpuru was another strong advocate for exactly what you're saying. And this is really good for our merchant listeners. Don't just go build something because it looks cool.

David: [00:44:50] Right.

Brian: [00:44:52] Even if it's something that might be really enjoyable, if it's not helping your customers accomplish something that they really need, then it very well may not have the ROI that you're looking to achieve on it. That said, you know, I think a lot of companies, KPMG and others, have been looking at retail in 2018 and calling it sort of the Year of Entertainment. What do you think about the role of entertainment in retail experiences? And do they contribute to the bottom line? Does entertainment have a place in retail in the next couple years?

David: [00:45:36] Wow, yeah, I didn't see that one coming. I think that you've got to be careful when it comes to entertainment. So what you're really balancing here is customer acquisition, stickiness and time they spend with you versus conversion to retail return on investment, and lifetime value of that customer. So you're trying to figure out if you're more entertaining, and you give them something they'll spend time on, will they ultimately enjoy your brand and find delight in it and therefore spend more time with you and shop with you and buy your products more often? And I think that it can. I think that if you look at what Starbucks does. I don't know if I'd call it entertainment, but, you know, you spend I don't know, hopefully a minute getting your coffee and then you spend an hour sitting there and on your laptop and then kind of spending time in their experience. They just pulled... I think that one of the things that Howard Schultz did that was brilliant was he pulled a lot of the products they used to sell off their website.

Phillip: [00:46:36] Yeah.

David: [00:46:37] You can't buy them online because that's not the experience of Starbucks.

Brian: [00:46:40] Right.

David: [00:46:40] The experience is smelling the coffee and being with the people and having a barista make your coffee and then opening your laptop and sitting at a table. And therefore, it dilutes the, and I don't if I call this entertainment, but it dilutes your experience to do it online. So let's not give them it that way. And I think that took a lot of courage. And I think that's going to work. I think every once in a while, having, you know, if you look at Abercrombie simply spraying more fragrance and having scantily clad young men to draw young women shoppers into the store for entertainment didn't prove to be an experience where they were going to buy more of the product. And so I think you've got to be careful of are you entertaining for the sake of just entertaining? And by the way, once your entertainment gets boring or not relevant, they go somewhere else to be entertained.

Brian: [00:47:30] Right.

David: [00:47:30] Or is it really brand building? I mean, I used to spend time on QVC and HSN and quite accidentally, and I mean this, we used to have a professional show host we hired who would go on air to do our products. And then one day they got caught in traffic and somebody goes, "Who's going to host the show?" And I go, "I guess we'll have to postpone." And they go, "The show must go on." And they shoved like an IFB in my ear, but makeup on my face, and threw me onstage.

Brian: [00:47:54] Awesome.

David: [00:47:56] Which by the way, you know, then they needed a hook to pull me off stage. So that was another problem we created. But when you're on there, you have all of these digital monitors that face you, that show you incoming call volume, the number of people who are clicking through the site, looking at your product, the number of conversions while you're talking. And when you're doing $10,000 a minute, you actually have enough data that you can look at this. And so what you start to find is when I was telling an entertaining story, and if you want something really goofy, at one point I dressed up like a doctor, because when I was premed student, I had like a lab jacket, the stethoscope. So I put that stuff on, and I was selling a luggage product at the time. And I had our engineering department saw the luggage in half and stitch it together loosely. And I put it under a white sheet, and I rolled it out onto set on QVC on a gurney. And as the doctor, I said, "Let me show you the anatomy of a healthy suitcase." And I pull off the sheet and I use a scalpel on air to open up the suitcase and cut it apart and show you how it's built in the lining and the frame and that this... Really entertaining. So what ended up happening was viewership started going up. We had more people watching. And no one was ordering because what happened was it was a great story. It was storytelling. It was entertaining. It's funny, but it doesn't encourage purchase. And so this balance between entertaining and stickiness and somebody's watching you juggle vs."Let me show you why juggling is relevant to your lifestyle and why if you work with us, you'll be able to juggle better, and these balls are easier to hold. And therefore, your experience of being at dinner parties is going to be more engaging to the people there. That's one thing. Just doing it for fun, there's this balance of you're entertaining, but you're not selling, and you're not building a brand experience that you can carry forward. So I think when done correctly, I think the Starbucks experience can do that. I think what Apple does at their retail stores is brilliant with the Genius Bar and interacting with the product and having all these young people who love the brand talk to you about the brand and how easy it is to shop for. I think that's great. I think when Levi's builds a denim bar and a tailor shop into their stores, that will customize your pants for you. And it's all about living in your Levi's and the heritage and personalizing them. That makes sense. When a denim bar similar to that was put into J.C. Penney, it just was a holding space that didn't generate extra traffic or extra dollars. Now there are other things Penney's could do. But you know putting a coffee shop into your store or putting a barber salon or a haircut into your store, whether you're Toys-R-Us doing it for kids or something, that may not really engage your customers in a way that's going to help your brand and increase conversion over time.

Brian: [00:50:56] Wow. That's a great answer. I love that.

Phillip: [00:51:02] Mic drop, yeah.

Brian: [00:51:02] Yeah, it fits exactly what I think... Phillip preaches exactly what you're talking about all the time. If it's not engaging people and it's not making them understand why they're your products actually are valuable for them, then why are you doing it? Like you can't just be entertainer.

Phillip: [00:51:25] That's the famous quote from Ian Malcolm, Dr Ian Malcolm, on Jurassic Park when he's like, "Your scientists were so preoccupied with whether or not they could. They didn't stop to think if they should." And that's my...

David: [00:51:41] That's your Jeff Goldblum impression?

Phillip: [00:51:42] It was a terrible Jeff Goldblum. Definitely verging on Captain Kirk, but will forgive it for a Friday afternoon. Awesome. Whoa. Gosh, that was amazing. Great to have you on the show. Thank you so much. I'd love to have you come back, David, at some point.

Brian: [00:51:59] Absolutely.

David: [00:51:59] Thank you. It was a lot of fun being on your show. As I said, I'm a good listener and an avid listener to your show. And I thank you for inviting me. And I look forward to coming back. And, you know, I look forward to hearing what your audience thinks of the discussion that we had today. But also in general, I think these topics are relevant to a broad range of industries, and they're incredibly timely. So, again, thank you for having me. I appreciate it.

Brian: [00:52:23] Thank you so much. Well, thanks for listening to Future Commerce. As always, would love to have five star review from you on on i-Tunes. So hop on there and please subscribe to listen. Also, if you want to just listen to the most recent episode, you can always say, "Hey, Alexa, play Future Commerce podcast" or whatever digital assistant you have in your home. We love...

Phillip: [00:52:48] Spotify. We're on Spotify now.

Brian: [00:52:49] Spotify. We're on Spotify now. Yeah. You can ask Google to play on Spotify or whoever. We love having you listen to the show. Retail tech is moving fast...

Phillip: [00:53:00] And Future Commerce is moving faster. Thank you. Thank you, David.

Brian: [00:53:04] Thanks, David.

David: [00:53:04] My pleasure.

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