To conclude their conversation about digitally native brands and bricks-and-mortar retail, CEO Terry Montesi and Chris Knott, CMO for johnnie-O and founder of men’s fashion brand Peter Millar, discuss the “clicks-to-bricks” trend and the role real estate plays in helping apparel retailers maintain relevance. Chris shares what he sees as the future of brick-and-mortar retail and how technology and experience will impact retail in the coming years.
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For more information about johnnie-O, visit www.johnnie-o.com
Transcript
Terry Montesi: Welcome back to Trademark Property Company’s podcast, Leaning In. This is the second part of an episode, and you can find part one on the podcast page. Thank you for tuning in.
On today’s episode. I finished my conversation with Chris Knott, the chief merchandising officer for johnnie-O and founder of Peter Millar. We discussed the importance of bricks and mortar to the omni-channel and digitally native brands, as well as the key to apparel retailers maintaining long-term relevance with their customers. Chris also shares his thoughts on the future of brick and mortar and retail places. Thank you for listening.
If you have a perspective, Chris, help us understand the importance of brick and mortar and omni-channel to folks that are selling online. I know you started as a wholesaler, unlike some, but I’m guessing with y’all’s decision to go brick and mortar, you’ve done some studying and you’ll have an opinion for us.
Chris Knott: Absolutely. That’s a great question. I think one thing you’ve got to realize is that a lot of companies that start out online only. They priced their infrastructure and all their costing is built for online, right off the beginning. So, I know brands that have done this and they struggled to go back and do wholesale because when they said originally, “hey, we want this shirt to be $148” they were just thinking that they’re going to always sell it direct to the consumer. So now if you want to go and put it into a retail store, you’ve got to divide that by 2.5, and then that’s really what your wholesale needs to be. Well, if you didn’t do that right from the beginning, you backed yourself in a corner.
We’ve priced our line as a wholesaler, so now when we sell something online, our margins are very good because we’re really a wholesale company with the way we price it. So, if my internet buyer or web buyer can come in here and buy all this great stuff at first cost, then that margin pays for all of that digital advertising you’ve got to do, and the catalogs you’ve got to send to 3 million homes. All that stuff is not free. And then the returns and the shipping and everything that goes along with it. So just being online is a fast way to go out of business, if you don’t do it. So, what I think, with your question is being omni-channel gives you a chance to buy it out on all the apple.
And really what we want to do is by having these partner stores like this is we want somebody to say, “hey, if you want to see what johnnie-O looks like instead of being a little small tail on the corner of the men’s store, which we’re more than willing to keep selling to that guy, and we’ll service the heck out of him and treat him like we’ve always treated him, we want you to see the world that johnnie-O that we’re spending all this money to developing because what we find is that we may not have gone up our first year and sold shoes at great wholesale because nobody was expecting us to have shoes, but we’re going to do $5 million online and shoes this year. Well, that means the consumer wants them.
So, when a consumer walks into and sees that shoe department at the Fort Worth johnnie-O’s store, we’re going to sell a lot of shoes versus two shoes sitting in a mix of 20. So that’s the difference in driving your brand and controlling your brand statement. And that’s where we’re at right now. We do a great job with it, direct to consumer, to their household. Now we want to do it in the right retail spots across the country. And to me, a strong brand does have a mix of all those components. But we’re not cutting out our wholesale account. Some brands have gone in and opened a store and told the guy that’s been buying the brand forever, “hey, we’re not going to sell to you anymore.”
That’ll never happen while I’m here. YI would leave that job before I allowed that to happen because those are the guys that got us here. We’re trying to say, “hey, we’re building a brand. How can this help you sell more? What can we do to get more people in your store?”
Montesi: You obviously I’m guessing experienced that at Peter Millar when they started opening retail stores, it did not dilute the business at those wholesale accounts.
Knott: It made it stronger. I don’t even know that I believed that at the time, but I was told it would do that and it did do it, and they did a very good job at it. They did it in a very similar way where they partnered with retailers in a town and they gave these retailers a great opportunity. And I think they’re all thankful for it.
I think a lot of those retailers would just prefer to have a couple of branded stores right now and not have to deal with the others because they’re thinking, “I understand how this brand thing works now”.
Montesi: I’m going to ask you to comment on the retail industry with a couple of questions.
So, what do you see as the key to apparel retailers, women and men, maintaining relevance with their customers – brick and mortar relevance with their customers?
Knott: I think for one thing, you’ve got to figure out who your customer is. Let’s define true luxury; to me, that’s the Hermès, the LAR pianos, the Gucci’s – those guys, they have a very unique position. They can make their own rules. But then when you come down from there to me is where it gets very congested.
So, you’ve got to keep staying unique. You’ve got to stay focused on your brand and not try to be everything to everybody. I’m a big believer that when you throw too big of a net out there, you start to lose the guy that’s like inherently your guy, and we’re not a surf brand, and authentic surf shops buy our brand, because authentic surfers wear true surf brands; we just happen to have a surfer dude holding a surfboard. That’s our iconic logo. I see this brand as becoming like the next great iconic American brand. And here’s why, and I said this 15 years ago when we tried to buy this company.
People love California, the world loves California. That is why they film all the car commercials there. It’s just a very unique, beautiful place where the weather is good every day, in Southern California the landscape is beautiful – and it’s funny, California is now so shut down and it’s hard to even do a photo shoot there right now.
You need permits and COVID and everything. Our team did a fabulous job at a photo shoot up Wilton Connecticut, but it’s just amazing to me looking at the same clothes, the same models, how different the photo shoot looks with pine trees and green grass than it does with eucalyptus trees and cliffs in Southern California. It’s just a different vibe. I just think brands have to be very good at what they do, and they have to continue to improve. And you’ve got to move off of things that aren’t good. Keep moving in the direction the consumer’s going. And you’ve got to communicate with them. You’ve got to stay connected with your customer.
And it doesn’t mean discounts. It just means knowledge is King. I did a little seminar last week with the staff and I gave them all tape measures and said, “look, you walk up to someone with a tape measure around your neck and you know how to use it – you became the expert. Just like a doctor with a stethoscope, you just became the expert in a room and you own that person unless you screw it up. Even if just measuring is waste”. And they’re like, “really?” I said, “yeah, because everybody’s gotten away from that”. But those are old school things that still work in today’s times.
Montesi: It’s interesting, you just addressed a little of the next question. Everyone over the last few years have been talking about experience, whether it’s in a retail store or even online, or in our case at a shopping or mixed-use environment. Give us your feelings about that experience in retail, its importance, and what does that mean?
Knott: Yeah, to me, I think smaller is gonna be the future, small is the new big, for example your little Macy’s marketplace store over there. I think it’s a very cool idea for them to try to do that. I think high service is always great, but the community living is going to become a factor.
I think people want to be a part of their community and that’s happening right here in a little town I live in. People want to walk to the brewery; they want to ride their bike. So that mixed-use whole thing, but I also think amenities are going to be big. And I look at it and I tell this story all the time.
If you’d asked someone five years ago about a hotel, they want to talk about how big their room is. Well, now it’s more about, “hey, the room could be small, as long as the bathroom’s really nice and they’ve got a cool workout room and they’ve got a great bar too”.
Montesi: Maybe a co-working area.
Knott: Yeah. So, to me, amenities are going to mean everything to any kind of space that we deal with.
And I also think that by putting the right brands together in centers, the customer makes the brand, and you’ve got to know who your customer is when you’re putting these centers together. Because I think the consumer will call you out on it if you don’t do it right. I think you’ve got to make sure to be very selective about who you put together so that it all meshes together.
Montesi: Last question, as we look forward to the brick and mortar retail business and the retail place business you were just discussing, what do you see as the future? Everybody’s talking about it, they’re so worried about brick and mortar retail, where do you see it going? And what do you think is important from a landlord perspective, retailer’s perspective, and where do you see it going? And as you think about the customer and whether they want to do business online, or whether they still want to go in stores?
Knott: Well, it’s something we haven’t really talked about, but I think open air natural flow, that whole experience is not going away because if somebody at home working on Zoom all day, or they’re in their office, like I’m sitting in a boardroom right now, it’s nice to get outside – as long as it’s not raining – and go stroll around.
So, I’ve seen that trend happening for a long time. And I think that the bigger malls’ challenge is going to be, how can we afford to create some of those experiences without knocking the whole place down? I’m a big consumer, buying stuff all the time whether it’s for rental properties or personal, whatever.
There are certain things you just don’t have to go to a store to buy anymore if you’re savvy on the internet. If I need some hand sanitizer, I don’t have to drive to the store to do that. So, I think these stores that are big that are trying to cater everything to everybody, they’ve got to figure out who they’re going to be. And I think they can do it in a smaller footprint.
For me, I don’t need 4,000 feet to tell my story. I needed the 1,300 feet that I just rented from you, and I can tell my story all day long in that space. And something else that’s very important that nobody ever talks about is that two people can run that store. Technically, if somebody called in sick, one person could run it. So, as it’s gotten harder for people to work retail, because they can sit at home with the computer and make the same amount of money, it’s going to be important just for recruiting people that work in retail. And then you want their experience to be like, “hey, I go to the work and I’m in this great place. I’m walking over to the coffee shop on the river. I can do this. I can eat outside”. That’s going to be part of it too. The people that actually worked in these stores.
Montesi: That’s great. Is there any other question, any other topic you wish we would have addressed today?
Knott: No, I was just curious as to where you see it headed.
You guys are building all this stuff. If you’ve got one on the drawing board right now, was it already what we’re talking about or have you gone back and changed it since COVID?
Montesi: That’s a great question. Thanks for that. And by the way audience, I did not tee him up for that. That was authentic.
Knott: I’m very, very interested in that.
Montesi: So, I’ll ramble for a second.
We’ve seen during COVID our most successful places and most resilient places have been those that were highly amenitized with great public spaces, public art, and outdoors. And you mentioned a great mix and a great mix, like our Market Street Woodlands project that has really been very resilient during this time.
And as we’re looking at future places, we’re very focused on mixed use, we just got into multifamily business. We are very committed to mixed use. You mentioned it, we just think people want walkable, they want outdoors. They want to walk outdoors. They want to be walkable. The malls we’re working on – you mentioned that, you already figured it out – we’re working on adding fresh air, we’re working on taking roofs off. If we’ve got a great indoor space with natural light, adding an indoor green, taking advantage of that, making it feel like you’re outdoors and then adding public spaces to malls and maybe taking the roof off of a part of them, et cetera.
So, we believe it’s highly amenitized in the future. All about being walkable. We hired some folks from Crusoe and established a guest services platform. And so, our team at the gallery [I think this might reference a building but I’m not 100%] is about to roll out a really special curbside program that’s going to enable all of the retailers to do it better than they’re doing it today, almost anywhere.
And so, it’s really just learning from the customer. So, I think it’s all going to be about service, it’s going to be about both ends. They both want to be at home and order, and go pick it up and then if they don’t like it, be able to run in the store and maybe see what else there is. And so embracing omni-channel, enabling omni-channel, and hosting the retailers in a way that shows that we do get that as opposed to battling it and being scared of e-commerce, it’s just become a great time to be a consumer in the 21st century. This last 10 years for example with Amazon, a lot of people view as the enemy to brick and mortar and in some ways, it is, and in some ways somebody was going to do it, they just happened to be bigger and better at it than a lot of people. And so, we just have to adapt our places to be either part of the omni-channel experience or such a great experience that you can’t get at home, that we’re driving people to our places, by how well we are taking care of them and making them feel great in our public realm; between the front door of this store and the front door of that store, we own the public realm.
We own how we make them feel from the time they enter the parking lot or parking garage. Are they treated well? Is the signage good? Does it feel safe? Do we have good security, good lighting, et cetera? So that’s where our head is. Actually, you mentioned something earlier, that you have an opportunity to come out of this stronger.
We’re believing this is going to be our best year ever. Last year wasn’t for us, like it was for you so I’m jealous, but we think that even though we are constantly thinking about the future and evolve or die, this forced us to do it and adapt more. Like you said, we’re doing three years of adapting and evolving in one year, and investing more in the future, getting in multifamily, even deepening our commitment to guest services and really getting involved.
We think it’s going to be a great time to acquire some great retail at good pricing. So, it’s an exciting time for both our companies. Thanks for that question.
Knott: Yeah, that’s a great question.
Sometimes you’re talking to a retailer and they may be at the end of their career and they’re still – I call it pushing the rock up a hill. You look at a kid today getting out of college. They’d rather have an Apple Watch than an expensive watch that that your dad would’ve given you 30 years ago just because it’s got technology, or the way the Tesla has really made an impact on cars.
To me, the technology piece of what I do and what you do and everything that’s going on out there – technology is just getting better and better every day. You look at TVs, I’m always amazed at how everything in the world has gone up in price, but TV has gotten bigger and better and they’re greater.
So, technology seems to be a big factor in everything we do, like it or not. But it’s definitely a game changer.
Montesi: Yeah. We’ve talked about technology a lot; building of technology infrastructure and our new projects to enable everything that might want to happen in the future with 5G and artificial intelligence, et cetera. It’s crazy.
Knott: You’ve got a lot to keep up with.
Montesi: We do just as you do.
I really appreciate your time, Chris. This has been fun. And I look forward to seeing you when you come back to visit the store sometime soon, we’ll get the golf clubs out.
Knott: Sounds great. I’ll be there.
Montesi: Take care of yourself, and thank you again for your time.
Knott: I enjoyed it, thank you.
Montesi: Me too.