On this special episode I am thrilled to be sharing an excerpt from one of the most popular Remarkable Retail podcast of our third season, where my podcast partner & best selling author Steve Denis and I host a blockbuster panel featuring three of the most experienced and insightful veterans of the luxury world: Karen Katz (former President & CEO of the Neiman Marcus Group, Steve Sadove (former Chairman and CEO of Saks) and Oliver Chen (Managing director and senior equity research analyst at Cowen and Company).
Welcome to the The Voice of Retail , I’m your host Michael LeBlanc, and this podcast is brought to you in conjunction with Retail Council of Canada.
On this special episode I am thrilled to be sharing an excerpt from one of the most popular Remarkable Retail podcast of our third season, where my podcast partner & best selling author Steve Denis and I host a blockbuster panel featuring three of the most experienced and insightful veterans of the luxury world: Karen Katz (former President & CEO of the Neiman Marcus Group, Steve Sadove (former Chairman and CEO of Saks) and Oliver Chen (Managing director and senior equity research analyst at Cowen and Company).
We cover a lot of territory, first trying to align on a working definition of what "luxury" really means today and how luxury was evolving pre-COVID. Then we shift into what's next, including our dream team's quick takes on luxury re-commerce, the role of the in-store experience, the importance of multi-brand retail (online and off), sustainability, exclusivity, storytelling and more. We wrap up getting everyone's view on why it's so hard for legacy brands to innovate and whether .com spin-outs make any sense at all.
Thanks for tuning into today’s episode of The Voice of Retail. Be sure to subscribe to the podcast so you don’t miss out on the latest episodes, industry news, and insights. If you enjoyed this episode please consider leaving a rating and review, as it really helps us grow so that we can continue getting amazing guests on the show.
I’m your host Michael LeBlanc, President of M.E. LeBlanc & Company, and if you’re looking for more content, or want to chat follow me on LinkedIn, or visit my website meleblanc.co!
Until next time, stay safe and have a great week!
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Michael LeBlanc 00:04
Welcome to The Voice of Retail, I'm your host Michael LeBlanc. This podcast is brought to you in conjunction with Retail Council of Canada.
On this special episode I am thrilled to be sharing an excerpt from one of the most popular Remarkable Retail podcasts of our third season, where my podcast partner and best selling author Steve Dennis and I host a blockbuster panel, featuring three of the most experienced and insightful veterans of the luxury world: Karen Katz, former President CEO of the Neiman Marcus Group, Steve Sadove former Chairman and CEO of Saks and Oliver Chen, Managing Director and senior equity research analyst at Cowan and Company.
Michael LeBlanc 00:37
We cover a lot of territory first, trying to align and a working definition of what "luxury" really means today, and how luxury was evolving pre-COVID. Then we shift into what's next, including our dream teams quick takes on luxury re-commerce, the role of the in-store experience, and the importance of multi-brand retail, online and off, sustainability, exclusivity storytelling and more. We wrap up getting everyone's view on why it's so hard for legacy brands to innovate and whether dot com spin-outs make any sense at all. Let's listen in now.
Steve Dennis 01:09
I'm very excited to have some old friends, the three wise people of luxury retail, we'll get a bit more perspective on each in a bit. But thanks for joining us, and why don't we just jump in and if we could ask everybody just to introduce themselves and give us a little bit of your background. All three of you are legends in the industry and probably most people know you, but just in case they don't. Karen, Would you mind starting?
Karen Katz 01:36
Gee, thanks for having me. I'm Karen Katz, I'm the former President and CEO of the Neiman Marcus Group. I was at Neiman Marcus for 33 years and led the company from early days through its digital transfer-, transformation. And today spending time on public company boards, advising entrepreneurs in the consumer space with a focus on sustainability and doing a lot of philanthropic work.
Steve Sadove 02:08
Happy to be here. This is Steve Sadove, I'm the former Chairman and CEO of Saks and was a frenemy of Karen's and we worked the industry during the same period of time and my career was both consumer goods and retail. I chaired the National Retail Federation and I currently sit on a bunch of public boards, doing philanthropy as well and some private equity and venture investing.
Oliver Chen 02:34
Thanks so much, Steve. And I'm really thrilled to be here with Karen and Steven. My name is Oliver Chen, I'm globally ranked as one of the top luxury stock analysts. I'm also an Adjunct Professor at Columbia Business School. And I grew up in Natchitoches, Louisiana in a retail family.
Steve Dennis 02:49
This is especially exciting for me because as many of many in our audience will know I worked at Neiman Marcus a long time ago, I worked for Karen, briefly and I do remember the days when Karen and Steve were, as he mentioned at CNC frenemies. But it's nice that we can all get along here years, years later. But anyway, let's, let's jump in. I thought maybe just kind of level set the discussion. Maybe a couple of broad questions I'd like each of your quick take on. There are a lot of definitions of luxury, I think. And just I'm curious when we talk about the future of luxury retail, what, what do you include in luxury? How do you think about luxury as a category or a sector? Steve, you want to kick us off?
Steve Sadove 03:31
Well, it's a much more complicated question than you, than you might think because everyone's definition of luxury is different than, you know to a lot of our audience we're thinking about very high-end luxury, the Louis Vuitton's and the Gucci's, etc. But more broadly, I think the accessible luxury the coaches, the cores of the world are luxury. And, you know, I would include experiences and products that people feel good about that they're aspiring to, at both the higher and moderate ends. So, it's not just about very high-end luxury.
Steve Dennis 04:05
Alright, how about, how about you, Oliver? I guess you have to have a definition, at least in terms of what you cover.
Oliver Chen 04:10
Yes Steve, as I think about luxury, I think one good point is time and, and time is the ultimate luxury in terms of retail, really enabling people to reinvest their time and think about how to spend meaningful time. Second, you know, echoing what Steven said, as experiential and emotional. There's, there's a very strong emotional component where luxury goods can transcend price. And, and they should, and they will, if, if they're executed really well. Those are features and then I think we have a real evolving sense of luxury with stratification and versatility and health and wellness, where these are important new chapters. And, and luxury is also constantly changing in my opinion, and needs to be culturally relevant.
Steve Dennis 04:58
Karen, how about you, disagree? Agree?
Karen Katz 05:00
Well, I think Oliver and Steve said it extremely well. I, I would only add that I think luxury is in the eye of the beholder. And we each, you know, we each hold what is luxurious to us, differently based on our the life experiences we've had and the way we want to live our life. And so, I think it can be, as Steve started out a very challenging, very broad answer to what is luxury.
Steve Dennis 05:30
Alright, well, fair enough. Well, so the next kind of broad question, and then we'll dive into some more specifics. And really, I'm thinking here, pre-COVID. Obviously, we've seen a lot of digital disruption across all of retail, I guess we can argue as to exactly when it started. But certainly, way back when, when I was working at Neiman Marcus, we were in the early days of getting that started. Saks, I think was, was certainly investing in eCommerce and a lot of things digital, but what, what would you, what would you say has been the arc of disruption that's affected the industry? What's, what's most important and what were you seeing as important before we really entered this, this more recent, recent period?
Karen Katz 06:09
Yeah so, I mean, I do think that, as you said, this digital transformation in my mind in luxury has been going on for a long time. And although some people were not on board with this, pre-COVID, I, you know, Neiman Marcus, we launched our website in 1999. So, I mean, it's been a long time that not just Neiman's that many other people have been selling luxury goods online. I think that the big change, and this is certainly something that I personally felt passionate about was, I think, in luxury retail brick and mortar. What was unique about the experience of shopping in brick and mortar was the way luxury retailers put an emphasis on developing relationships with their customers and clients. And I think the big change in luxury retailing during COVID was how to take that idea of developing relationships from brick and mortar and developing relationships online. And that change of going from transactional luxury to now relationship luxury in eCommerce. And I think that, that takes the form of online personal shoppers, live streaming, you know any of those kinds of things. I think that that was a big change that was starting to take place pre-COVID but I think really launched forward during COVID.
Steve Sadove 07:42
(crossover talk) I will go where we're Karen's went with it that, that this is not that it's new during the pre or post COVID. It's an acceleration of what has been going on for quite a long time. My guess is that, you know, just take overall commerce, com-, overall commerce went from 12% of commerce to 18% of commerce was digital during the pandemic, and you saw probably a three year acceleration of the rate of growth, underlying and I think that in the luxury sector, that was even more so, because you had to make the change, because it was so dependent on that experience in the store and transforming the online experience for personalization analytics, and creating that unique experience really was accelerated.
Oliver Chen 08:27
Yeah, in addition, I would say, in addition, that the connected experience has heightened in importance, meaning linking desktop to mobile to end store and making sure that that's seamless. I also think this idea of context and personalization, and how to personalize at, at scale is really important. And then community building and storytelling. And the interesting thing is the evolution of storytelling in-store digitally through apps, through gamification, and transforming what that means with technology, but stories, heritage, this emotional innovation connection to the to the creative artists and artisans behind luxury. That's really important as well.
Michael LeBlanc 09:11
You know, Karen and Steve, you both kind of gave me a layup for the next question. And the next question was going to be around, you know, what I see often described as innovation in the sector is really been around a long time. Karen, you and I launched, I launched Hudson's Bay eCommerce in 99, you launched Neiman Marcus in 99. Many of these things that are sometimes called innovation, they've been around a long time. Tell me about Karen, what you, you see your view as genuine innovation? Maybe it's because of the COVID era or maybe it's because of a crisis. But is there anything you could call out that you've seen as customer facing innovation from the sector? And then all Oliver, I'll go to you and say, well, if not, you know what, what's holding everyone back? Why does it and why does it take a crisis for luxury brands and legacy brands to innovate? Karen, you go first.
Karen Katz 09:56
Yeah so, I think it's a really good question. I, I'm, you know, I'm not a believer that (inaudible) silver bullets. And, and so I don't think that there's any one thing that changed, you know dramatically because of COVID. I think, you know, Oliver always expresses it well, all of these, you know different complex ideas that are finding their way to kind of, you know, mainstream, but, but I will say pre-COVID, I think a few things are becoming very, very evident. And I think that, you know, this was on the list of things you wanted to talk about, I think reCommerce, luxury reCommerce is here to stay. And I think that it's becoming a, a large part and will become even larger part of the luxury landscape. And I think how everybody thinks about that is going to be on, on people's mind and on their priority list moving forward. So, I think that that's one thing, I think that there was a lot of talk in the years leading up to COVID, about the kind of the death of multi-brand. And in fact, I think one thing that has happened during COVID, is that the strength of multi-brand has proved itself again, and again. And although I think department stores are, you know, in one place in their very, very, very long lifecycle, I think what's still matters is that they are multi-brand places. And I think, you know, the landscape, whether it's, you know, Net-a-Porter essence, matches, you know, in Mytheresa revolve, any of those kinds of companies, they're all multi-brand. And I think the customer still wants that, if really good retailers know how to edit for their customers. So, I'll stop with that, but those are kind of two, you know big things that I, I like to spend a lot of time thinking about.
Michael LeBlanc 11:54
Oliver, let me pick up on that thread a bit, so to speak, and literally in virtually, I was reading the EY Global Customer Index last week and it talked about a customer that is more thoughtful, and they described, I think something like thoughtful consumption, more thoughtful buying, and more. And that, you know, that dovetails in what Karen was just saying about the resale. How do you view from your lens the, the resale market and luxury’s role in that as, as conscious consumption? I've heard it all (crossover talk).
Oliver Chen 11:58
So, we're, we're really enthusiastic and excited about that. And one of the themes we have is less is more, you know, does it does anybody really need any of this? And, and what about no retail, retail and retail as a service? The other issue, which we see is like we're living in a world where everything's available to everybody at all times, and places. So, what really is exclusivity? So, we look at business models like Supreme, like Kith, like the real, real StockX and others. And this all embraces different forms of both experiential as well as the closed loop economy and rethinking the afterlife of the goods. So, there's many issues this opens up but, one of the big opportunities for all of retail is post-purchase, you know, what happens? What's the thread composition? And you know, you it's better for society, if you're not actually making a new object. We're living in a generation at a time, where Gen Z and Gen A cares most about mission and purpose. And that directly ties in the storytelling as well. So, we're going to see increased and heightened significance of supply chains and pollution and fabric, platforming and dying as being major issues.
Michael LeBlanc 13:41
Well Steve, I'm going to ask you the hard question. Now taking this and, and your own thoughts on the future of the industry. Where, where are we going? I mean, there's lots online competition, you've got more conscious consumption you've got I don't know whether it is less or more focus on discretionary goods, you've got younger customers that may or may not want to go to the sector. Have we seen the last luxury department store built in North America and Western Europe? As you get your magic eight ball or your put your prognostication hat on, where do you see the luxury industry going? And, and are you optimistic for the future in the, in the short, medium, or long term?
Steve Sadove 14:17
Oh, I'm very optimistic about the future of luxury. I just think that it's going to be continued to evolve and be different that there is a lot of fragmentation, there's segmentation. When you say, is there going to be another department store? What are we defining as a department store?
Michael LeBlanc 14:31
Good question.
Steve Sadove 14:32
Because you've got marketplaces that are evolving, you have segments and marketplaces that focus on luxury. And those are going to continue to evolve you have the role of concession, which has become increasingly important in the luxury space in the department store. But my guess is you'll see an evolution of the concession within the marketplaces. Affiliates in some ways are evolving and becoming more important so I, I view all of these, whether it's resale, whether it's rental, whether it's the marketplace, the brands controlling their own destiny so that they're presented in the way they want to be, all of this is a part of the ecosystem. And there is a role for the traditional, you know luxury department store, it may evolve also would be different. You already see the changes going on at Saks with the separation of the .com and the full line of business, but you're going to continue to see changes, but I think the net of it is that consumer's love brands, they love luxury, they're aspirational and Karen's right, it's whatever your own definition is. And I think that the luxury space is a very good place to be.
Michael LeBlanc 15:45
Well, it's a magic question, right? What is the department store? We did a whole episode on that.
Steve Dennis 15:49
So, I want to come back on just a second on this, this spinout separation question. But just going back a little bit to where Michael was going around, around innovation. We talk a lot about this on the podcast, you know, why, why does it take a crisis for retailers to innovate, but, but also, why do legacy companies seem to struggle with being more innovative? And Karen and Steve, since you, you've both run a large, well established retailers? You know, what's your perspective? I guess, from a cultural standpoint, or from a process standpoint, what, what does it take in your mind, for these larger, older retailers to get out there in front of, front of these trends, rather than as I think we see a lot of times maybe you disagree, but my observation is, a lot of times these retailers often respond too late to some of the most interesting innovations or they're afraid to compete with themselves or they don't invest enough. But what's your perspective on whether you agree with that, and what some of the struggles are to making it happen in a, in a more established retailer?
Steve Sadove 16:53
Well, I guess I can jump in if, you know, think about it. And Amazon started as digital first, a legacy company like Saks started as brick and mortar first. And it's very and you have people who run these companies who have grown up in the either the digital or in the brick-and-mortar world to change and get people to think differently to change a culture is not an easy thing to do. Everything's converging right now, the brick and mortar is moving to the middle. If you're a DTC company or opening up stores, if you're a, if you're a brick-and-mortar company, you're moving more digital. And it's a focus. it's the people who are running the companies, how they were trained and developed. Culture change isn't an easy thing to do and, you know, clearly, clearly crisis creates the opportunity for disruption. But to get a big company, like a Macy's or a Neiman's or a Saks to change overnight culturally, is one of the most difficult things to do. And it's a lot easier when you start if you're trying to play in the digital space, have you started as a digital company?
Steve Dennis 18:03
Sure.
Karen Katz 18:04
You know, I would also just add that I think the choices of the way to innovate these days are bountiful. And I think that large retailers, as they're having hundreds of ideas coming their way, it's up to some group of people to try to prioritize which ones will have short, near and long-term impact on the business. And I think that, that process in itself, in a large complex company is just not easy. And, you know, frankly, on a very large healthcare board, and we have the same challenges, you know, it's very large, many, many opportunities, in terms of how to innovate the business. And I think the real challenges is, how do you prioritize which of those innovations coming your way, really are going to make the impact for the consumer? And I, I think that, you know, part of it is bureaucracy, part of that is, you know, you've got this large business that, you know, it's not quite as easy to take risks with, and I'm not here defending department stores by any means. But I think that the innovation is, like I said, it's just bound to fall there is so much interesting, exciting things going on. And I think it's, it's increasingly challenging to try to figure out which of these innovations should be prioritized within a company.
Steve Dennis 19:41
Yeah, you know, I think that makes sense. All right, so final question. And I almost hate to ask this, this question because I've spent, I guess, a good chunk of my career working on channel integration issues multichannel way back when, when I was at Sears, multichannel when I was at Neiman Marcus and then at Omni channel, I call it harmonized. But anyway, it seems like the one thing that it seemed like retail learned over the last 20 years is that thinking about channels is not so helpful. The customer is the channel, it's a blended blurred world. Yet, we have this pressure that some companies are getting the spin-out their, they're .com, Saks has already done it. Oliver, I'll start with you just in terms of the Wall Street perspective, is this just kind of a misunderstanding of, of how retail works? Is it a moment in time where we're seeing these very high valuations for digitally native sort of brands? What, what's your, your take on it? And then we'll, we'll talk about whether it makes sense or not, (crossover talk).
Oliver Chen 20:38
I think we're at a, we're at an interesting junction where you have a lot of heritage retail, Macy's, Kohl's, and others, which are rapidly transforming the high digital penetrations, you know, trading at, at fairly modest to lower multiples, relative to 100% digital models trading at, you know, double the PE valuation. So, there is a dichotomy there. There's opportunity, each public company has to strictly look at what maximizes shareholder value. And, and what does that mean? It means, you know, how do you maximize the stock price to giving different scenarios. And this can happen, separations may or may not be able to happen, depending on execution, which means setting up the appropriate rules and organizational structure across different divisions, anything's possible. That being said, we believe in Bricks Plus Clicks, can you still do Bricks Plus Clicks, with or without two companies? Yes, you can.
Steve Dennis 21:39
Three, 300 service agreements or whatever?
Oliver Chen 21:41
Yeah, I mean, three to 500 and also just understanding the economics of each channel, and the customer doesn't need to know or doesn't want to know that this is happening. So, those are all execution slash leadership hardware, software, supply chain, infrastructure questions as well.
Steve Dennis 21:57
Karen or Steve are you willing to take on the elephant in the room? I don't know, Steve if you would, (crossover talk).
Steve Sadove 22:01
(Crossover talk) will take it, I, I think that every circumstance is different and you have to decide what's right for an individual company. I think what was interested and you, as Oliver said, you have to start with the consumer, and the consumer has to have and want a seamless experience. So, anything that you do to separate companies, in theory moves you away from that, so you've got to find a way of executing so that it is seamless to the customer. I think that the Saks example, was an interesting way where they were able to add evaluation, it was a $2 billion valuation raised half a billion dollars that allowed them to make some investments in their dot com business that they otherwise hadn't done, whether it was in technology or inventory. And so, if there was a reason for that made sense for why they needed to do it, in order to be able to get the resources, maybe you know, you can make an argument, it makes a lot of sense if they're able to deliver on a seamless experience for the consumer, it doesn't make sense for somebody and by the way, in the you know, we talked about luxury marketplace. And you can make an argument that a Saks as a luxury marketplace, there's a reason for being for that. And you can maybe you can argue it for Neiman's as well. But it doesn't make sense for everybody. And some companies, you know, Macy's is being pushed to do it. I don't know that it makes sense for them or not, because they're already a top 10 Internet, eCommerce player. And they're putting adequate resources that they believe I think into the business. So, if they if there's something unique that it allows you to do, it may very well make sense for a specific situation.
Steve Dennis 23:42
All right Karen, last word goes to you.
Karen Katz 23:45
Yeah, well, I'm a believer that you got to, you got consumers at the center of that, and he can make it work and still service the consumer, I'm all for it. But, you know, you think about three to 500 service agreements, we were just talking about the complexity of these large businesses, you know it interrupts kind of how much innovation you can get done when you're making a business even that much more complex, but I live with the consumer and it's if we can make her happy, then we're doing our job.
Steve Dennis 24:14
Well, the one thing I think we can say for sure is AlixPartners and the investment bankers will be successful pursuing this strategy whether the customer or the retailers will like it ultimately, I guess, I guess time will tell. Well, we're going to have to leave it there. Thanks so much for joining us. Sounds like we're all pretty optimistic about the future of luxury and just kind of keep staying on top of the customer staying on top of the innovation. We'll put some links to so people can learn more about what Oliver, Karen and Steve are up to. And thanks for joining us. Hope you have a great holiday season.
Karen Katz 24:46
Happy holidays.
Oliver Chen 24:47
Season's Greetings, everybody.
Michael LeBlanc 24:49
If you like what you heard, please follow us on Apple, Spotify, Amazon music in your favorite podcast platforms. So, you can catch up with all our great interviews subscribe, so that it just automatically shows up. Tell your friends and, and also in new insights and new episodes will show up every week. So, tell your friends because that will help us share the word the good, the would, the good wisdom. Now be sure and check out and be sure and check us out on our new YouTube channel. Not so new anymore we got a couple episodes up there and just look for Remarkable Retail.
Steve Dennis 25:20
And I'm Steve Dennis you can check out more of my work at my website, stephenpdennis.com or on Forbes, or on Twitter. And please check out my second edition of my book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’, available just about everywhere books are sold.
Michael LeBlanc 25:39
And I am Michael LeBlanc, Producer and Host of The Voice of Retail podcast and bunch of other stuff. You can find me on LinkedIn, learn about me on meleblanc.co.
Alright Steve, great episode. Look forward to chatting again next week. Be safe and have a great rest of your day.
Michael LeBlanc 26:03
Thanks for tuning into today's episode of The Voice of Retail. Be sure and follow the podcast on Apple Spotify or wherever you enjoy podcasts so, you don't miss out on the latest episodes, industry news and insights.
If you enjoyed this episode, please consider leaving a rating review as it really helps us grow so that we continue to get amazing guests onto the show. I'm your host Michael LeBlanc, President of M.E. LeBlanc & Company Inc. And if you're looking for more content or want to chat, follow me on LinkedIn or visit my website at meleblanc.co.
Until next time, stay safe. Have a great week.
SUMMARY KEYWORDS
luxury, retail, Karen, Steve, customer, department store, innovation, Oliver, Saks, digital, evolving, company, podcast, people, consumer, brands, mortar, Neiman Marcus, brick, important