Our final episode recorded live in the MarketDial booth at the National Retail Federation's "Big Show" features Amish Tolia, co-CEO and co-founder of Leap, the innovative platform that enables digitally native brands to open physical stores more quickly and with lower risk than they could do on their own..
Our final episode recorded live in the MarketDial booth at the National Retail Federation's "Big Show" features Amish Tolia, co-CEO and co-founder of Leap, the innovative platform that enables digitally native brands to open physical stores more quickly and with lower risk than they could do on their own..
In a wide-ranging discussion we learn about the inspiration for the concept, how it works and why brands like Naadam, Third Love, GoodLife, and Mack Weldon have chosen to partner with Leap.
But first we discuss the latest retail news, including what Steve calls "vexing" reports on the macro-economic front: overall sales are growing in line with inflation, which remains high, as the job market remains amazingly strong. Then it turns out it's not Yeezy come, Yeezy go for Adidas, nor is the string of bad news for Bed, Bath & Beyond ending. But in happier news store openings exceeded strong closings for the first time since 2016. We also touch on how work from home causes major shifts in retail spending, before wrapping with a discussion of the challenges finding CEO's that meet the evolving demands of retailers.
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About Amish
Amish Tolia is the Co-Founder and Co-CEO of Leap, a Platform that develops and operates retail stores for modern brands. Amish has grown Leap into an omnichannel platform that powers retail for great brands. Leap is today powering 60 brands across nearly 100 stores in markets including New York City, Los Angeles, Chicago, Southern Florida, Dallas, Austin, Scottsdale, San Francisco, Boston, Columbus, Greenwich, Philadelphia and Washington, D.C. Prior to Leap, Amish co-founded two other companies and successfully exited both of them in the last 10 years. He graduated from Indiana University and is originally from Detroit, Michigan.
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
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 eCommerce Leaders podcast, and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
We're headed to Las Vegas in March for another edition of Shoptalk. Retailers and brands can get a Shoptalk ticket for a reduced rate of just $1950 rate here using our special discount code RBREMARK1950.
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, Season 6, Episode 6, presented by MarketDial. I'm Michael LeBlanc.
Steve Dennis 00:11
And I'm Steve Dennis.
Michael LeBlanc 00:13
Well, Steve, our content for the people today is from the NRF "Big Show" in New York. And it's one of the first or last interviews that we did at the show. And it'd be our last bit for the podcast. Amish Tolia, co-CEO, and co-founder at Leap, a very interesting and different retail model. I don't know what you would call a store as a service or a store as a platform or what? A super interesting model?
Steve Dennis 00:36
Yes, something, something like that. But yeah, this idea of having a business that helps online only or previously online only retailers, open physical stores, it's really fascinating. It's been growing really, really quickly. And some interesting, I mean, I've been following them for a couple of years now. But there are a lot of nuances behind the scenes that I definitely did not understand that I think are very, very interesting. So yeah, I think that was a great interview, a great perspective, and definitely a hot trend.
Michael LeBlanc 01:08
But before we get to that, let's talk about news of the week. So, what did you call it vexing economic data? I mean, we, you know, it reminds me that, that old thing about wishing I had a one-handed economist, on one hand, on the other hand, like, there's all these signals that are like blow out sales for retail, and then employment is good, employment is bad. What do you, what do you make of all this? How do you pull this all together for the listening?
Steve Dennis 01:30
Well, I'm really hoping at some point, we can stop talking about macroeconomics on the podcast, but I feel like it's such, it's, it's so important. So, this was a big week, because we got the monthly sales number for the US. And the sales overall, were up year-over-year 6.4%, which is pretty much exactly the same number as inflation is up. So, that basically suggests on average, the transactions were flat. But you know, you, I guess it's just a point that perhaps everybody already knows that you know, averages, particularly when you're talking about a vast complex industry, can be very misleading. So, within those sales results, you had some sectors like sporting goods and health and beauty aids and things like that, which have been strong for a while and continue to be pretty strong. A couple of sectors like clothing and furniture, which had been kind of soft, seem to show some improvement.
Steve Dennis 02:14
Weak categories, like general merchandise and home improvement. And then really terrible numbers, decreases, significant decreases for consumer electronics, and appliances. So, it's kind of all over the place, in terms of which sectors are doing well. But I think the big headline is, sales growth is really pretty much explained by inflation. Then we also got some inflation data, which is a little bit better, more in the 6% range in the US. I think places like the UK are still seeing numbers like 10%, it's not really coming down. And a lot of folks, I remember right before Christmas, several people, I won't mention any names, but people that we think probably all recognize, basically said, Well, you know, inflation is going to come down as fast as it went up. And that doesn't seem to be the case,
Michael LeBlanc 02:41
No.
Steve Dennis 02:42
And then the job market, and this is the one that I continue to get wrong. I just assumed that at some point, not that it's going to get terrible, but that it can't get any stronger, particularly with interest rates going up, you know, everything we learned in school and have experienced in most of our careers, is that high interest rates tend to cause a significant slowdown, and we're just not seeing it. So, what is really the outlook here? What's driving some of this? I think it's really hard to make sense other than I think the narrative now, for the most part, is maybe no recession, at least in the US. And but, you know, probably inflation is going to stay on the high side, which means we're probably going to get more interest rate increases. But what that exactly means is, for every retailer, it's hard to say,
Michael LeBlanc 04:12
Well, I mean and then and you're reflecting back on, or I'm reflecting back on what Ira had to say from our Economist, the Chief Economist from Deloitte because he called that ball as well, right? He said, Listen, I think employers are going to hoard people like there's so many intersecting points here, like when you talk about inflation being very persistent. I mean, particularly in food because you've got these exogenous factors. For example, you and I were talking off mic about the egg shortage that's been caused by a global Avian flu, that's not going away. You've also got, you know, systematic environmental impacts on the growing of food that is raising the prices. So, these, you know, the price of food is predicted by my partner Sylvain Charlebois to go up, you know, five to 7% again this year, like those forces are still very present. Now, the good news is some of those categories, scores they're coming down, right? I mean, I'm not surprised that consumer electronics and major appliances, we bought so many of them during COVID. Who needs another one, right? We're not, we're not ready for a new one. So, (crossover talk) is complex. It's super interesting to try and parse it, though, right?
Steve Dennis 05:14
Well, a couple. Yeah. A couple of things. I mean, one is the thing and, and the thing that's really confusing me is I would, you know, we know, while the job market is strong, wages have not kept up with inflation, and we're now starting to lap last year's numbers. So, it's one thing you know, so last year, we had 10%, inflation now we got, say, 6% on top of that. So, the compounding effect of how much more expensive things are going, you know, going forward, compared to say 18 months ago is pretty significant. And the things that are particularly expensive are groceries and housing.
Michael LeBlanc 05:35
Yep.
Steve Dennis 05:36
And those are things like, you know, you gotta eat, you got to live somewhere. So, it's one thing if, you know, furniture is particularly expensive, well, maybe you say, well, you know, either I put that off for a little while or spend a little bit less money. But you can't do that quite as, quite as easily. So, I think for people, particularly the more economically challenged, folks, which is, you know, most, most people in, in most countries. You would think there would be more of a squeeze on some, (crossover talk).
Michael LeBlanc 06:19
Have you heard of this recession, chicken trend that is parallel to the pandemic puppy. People are talking about getting their own chickens and raising their own eggs. (Crossover talk). Which, by the way, is the recipe for disaster. Because, you know,
Steve Dennis 06:32
Well, I don't want to have any chickens in here when I'm recording the podcast, I'll tell you that much. So, don't expect that from me.
Michael LeBlanc 06:37
Nobody is here but us. But us chickens. Anyway, it's super interesting. And I think it, I think it ties into demographics. I think it ties into the aging of the population. Again, we talked to Ira about that, that this is not a short-term phenomenon. The shortage of labor is not a short-term phenomenon. And we just have to be careful, we don't wind up like Japan who had such an aging population and no new people to do the work. So okay, so, so, as you say, well you know, we're not an economics podcast, let's, let's bring this to what are the lessons for your business? What are the, what's, what are the lessons? We started this season talking about the tide going out for business. How do you tie these things together and think about this as a leadership strategy expert?
Steve Dennis 07:19
Well, I guess I'd say a couple things. One is, you know, maybe the tides are not going out so much, maybe we were wrong about that, maybe we will be able to have overall a softer landing, so to speak, and we won't see a recession, broadly speaking. But I think the key thing is, you know, your mileage may vary, right? It's not necessarily the case, like, you know, there are clearly some big differences between the US and Canada and the UK and Spain, and you can go around to different countries, and see some pretty different pictures. So, don't assume that everybody's going to kind of have the same experience. And I think more, even more importantly, is tying it to your particular sector. The tech business, you know, the tech sector, definitely looks like it's in recession, I would say, you know, the furniture business, the consumer electronics business, I mean, that has a lot of recession-like properties, it looks like it's gonna be very hard to drive the top line.
Steve Dennis 07:36
Other sectors, you know, maybe quite a bit better. Inflation is the thing that's confusing, though, right? Because you can be growing sales because of price increases, and that doesn't necessarily tie to the profitability of your business, right, that sales aren't the same as profits. And we've talked a million times about the inventory glut like I think we're gonna see a lot of retailers reporting, maybe decent sales, but not so decent gross margin performance, because they've had a marked down stuff a lot. So, it's really about digging into your particular business, and understanding what levers you can pull and not trying to paint too broad a brush.
Michael LeBlanc 08:53
I don't know if it's so complex, because I talked to a lot of retailers who did pack and hold. So, they're not thinking that they're going to take margin hits, they're just already having the stuff. You know, so their costs have been warehousing. In other words, you know, I talked to a couple of big retailers. So listen, I'm not gonna, I'm not gonna discount it off. But I've got it now, thanks to the weirdness of the supply chain. But yeah, it's great stuff and I'm happy with it. And in an ordinary cycle, you would exactly be having to mark stuff down. Now, we should talk about that ordinary cycle. Let's talk about Adidas, who is talking about writing down like a lot of stuff after their partnership with Kanye West fell apart. I don't know what we described that as falling apart but, (crossover talk)
Steve Dennis 09:40
Yeezy come, Yeezy not go so quickly. Because yes, they have a ton, a ton of inventory and,
Michael LeBlanc 09:46
Like, a lot, right, like how do they build up that inventory, like holy jumping and that's anyway, talk about the number because it's just mind boggling to me?
Steve Dennis 09:54
Oh, I think they said that if they're not able to while they're trying to decide whether they want to even try to sell the stuff, you know, from an I guess, image standpoint, but yeah, they could lose $1.3 billion moving through or writing off basically all this inventory that they have leftover, so yeah, that's, that's a pretty daunting number. And,
Michael LeBlanc 10:14
What does that even mean though Steve? I mean, they got a bunch of stuff they don't want to sell who are they gonna sell it to like, what do they do with it? Like I think they might just incinerate it right. Like,
Steve Dennis 10:22
Well, my guess is that yeah, my guess is that's what they're gonna do and which, you know, it's a whole other thing. But yeah, that's, that's a very, I mean, it is the danger as much as some of these celebrity partnerships work out great. You know, they have, they're fraught with a lot of danger, as well if something bad happens. So clearly, this was a big, big mistake. And it's a huge, huge percentage of that line that has grown to be a really significant part of their business overall.
Michael LeBlanc 10:50
Let's talk about Bed Bath & Beyond a little bit. It may not be on the radar screen, but they shut down their Canadian stores. They declared and went into protection here in Canada and 54 Bed Bath & Beyond stores, 11 Buy Buy Baby stores. I'd never heard of Buy Buy Baby does that exist? Like, by the way, what a prophecy (crossover talk) what a prophecy of naming the store that went by the way.
Steve Dennis 11:14
I know. I know. Bye, bye Baby yeah. Well, I think we're gonna continue to see fallout from Bed Bath & Beyond. You know, they're obviously, they got this new financing we talked about last week. And you know, they're just trying to stay afloat and right, and right the ship. So, I think anything that takes away from kind of a laser like focus on the stores they're keeping and is a cash drain, they're going to try to get out of and so, you know, I sort of understand, you know, they've got to really, really focus on, on the core, which is, which is the US and which is the Bed Bath & Beyond format, not so much the Buy Buy Baby format.
Michael LeBlanc 11:52
Let's talk on the other side of store opening. So, we saw some interesting numbers around store openings. The store is not dead. And talk about those that you just numbers that are, might be surprising to some.
Steve Dennis 12:05
Yeah, well, our friends at CoreSight, who have been tracking this for a while, had an announcement this week that for the first time since 2016, US retailers opened more stores than they closed in 2022. And in fact, it wasn't even really close, about over 5000 stores opened and 2600 closed. So, what I think is interesting about this, I mean, clearly, I mean, aside from all the comments I make about physical retail not being dead. I mean, there's plenty of store chains that you know, particularly Dollar Stores and Tractor Supply and a bunch of other companies that are not as fully penetrated geographically, as they could be, they have a very successful formula. And so,
Michael LeBlanc 12:27
(Crossover talk), the Container Store.
Steve Dennis 12:29
Containing to, continuing to open, open stores. Having said that, there's a really good study, maybe we'll put a link to it or a good presentation that Benedict Evans does on trends, overall, that talks a little bit about one of the things he gets into is still the overcapacity, this matter of supply and demand in the US just how much retail space there still is on a per capita basis. And I think that is still an issue that needs to get worked through. But you know, you've got this issue of retailers that have successful business models that don't need to close any stores or in fact, can open them. And they've got plenty of retailers that are really struggling, that need to rationalize their fleet and may go away entirely. And when this and I still think and as part of my predictions this year, that we'll start to see the tide shift back more towards closings than, than openings. But you know, that'll be very particular to certain retailers that are formats that just aren't, aren't winning with a consumer,
Michael LeBlanc 13:52
You know, tied to that, we should talk about what's still happening with downtowns around North America, around the world. But I'm more familiar with the North American stats and you've got some stats you're talking about for New York City. I read, there's a great podcast on San Francisco that talked about this. And we know that we look at the Toronto numbers, which are still only 50 plus percent, maybe back to where it was. So, you know, this recalibration of how we work is really having dramatic effects on retailers who are seeing their demands shift from one place to another, right. The demand may not go down, but it's shifting dramatically. Talk about what you saw for the numbers for New York City and the workers that are not spending in Manhattan.
Steve Dennis 14:35
Yeah, there was an article that talked about the study that showed that New York City workers are spending on average $4,661 less per year,
Michael LeBlanc 14:38
Huge
Steve Dennis 14:39
Near their offices now obviously in New York City is a very expensive place. But if you think about it, you know, if you go into an office in a big city, chances are you are, you know, maybe going out for lunch or stopping for Starbucks on the way in. You're doing some shopping for you know, you're getting a kid a birthday present or whatever it might be at the store that's near your office or on the way to the train, staying there to go to a show or movie or go out to dinner, you know, all these kinds of things that drive your spending in a particular area, because you're in the office. But given that still, many places aren't anywhere close to being back to typical patterns. It had a very big impact. And so that, yeah, that absolutely affects where real estate is able to stay open. And, this shifts to the suburban areas where people are spending more time. So, we'll get into this a little bit. We've got Tom McGee from the ICSC in a couple of weeks, or I guess next week. And we'll be talking about that. But I think it's really, really fascinating because, yeah, you're not necessarily spending fundamentally less money, you're just spending in really different ways and really different geographies, and that may benefit, it does benefit in certain formats in certain locations.
Michael LeBlanc 16:00
Let's talk about one of our prior guest’s great interview with Hal Lawton, who has been asked to stay on as CEO of Tractor Supply. Let's talk about that for a little bit. But also, I made it, it reminded me of a great article in the New York Times where a couple of our guests were Simeon Siegel and Ron Thurston talking about the shortage of qualified retail CEOs. Pull these things together for us.
Steve Dennis 16:20
Well, I think, you know, Hal being asked to stay on a tractor supply, probably not a surprise. I mean, their performance has been amazing. I think he's definitely considered one of the best CEOs in retail today. So yeah, really, the story was just saying that his contract has been extended for several years, it's a real vote of confidence, I think for him and, and for the overall strategy. And I would encourage people, maybe we'll put a link in the show notes, go back and listen to that interview, I think one of our best and one of our best performing episodes.
Steve Dennis 16:49
And then yeah, this article about the shortage, or the openings, that currently are in place that quite a bit of retailers, and quite a few retailers and how difficult it is to find that new skill set. And this does touch a little bit on one of my predictions about the need or the desire, or maybe the hope that more and different kinds of leaders will come into these retail positions, not only diversity of experience and background and you know, gender, etc. But really this, this different perspective, and I think it is a real challenge. When you think about it, you know, we talked about the new leadership at Kohl's I guess last week or the week before. When you think about what some of these retailers need, you know, not only do you need somebody who understands product and operations and supply chain and technology, but the impact of, of digital, changing demographics, you know, it's really, really, these businesses have become very different than they were, you know, 10 or 15 years ago, and lots of leaders, I think, you know, people listening to this have been in retail for a long time well know, for the most part, the classic profile for a retail CEO is to either come up through merchandising or to come up through store ops.
Michael LeBlanc 17:28
Yeah.
Steve Dennis 17:29
And, you know, that may not be and often isn't enough breadth of experience to really understand what it takes to run a successful retailer. So, I think, I think it's really interesting. And we'll see how some of these big jobs end up getting filled.
Michael LeBlanc 18:18
Yeah, it's super interesting because if we think about people, and how hard it is to find people and how important it is to keep great people. It's never unimportant in retail, but it's now replaced, I think it's now replaced supply chain as the, as the most significant challenge at a global level for retailers.
So, you better have someone like me when I think of Hal Lawton and I think of all the pictures he often posts on LinkedIn when I follow him on social media with him in the stores, him talking to the people, him connecting with the people that make it happen, right. As the old saying goes, no cash registers in head office, right, you get out and see the people. So, I think that the people component of being an amazing CEO is, as you know, more important now than ever. So, I think that that really jumped out at me as well.
All right now just before we get to our excellent interview with Amish Tolia from Leap, a few words from our presenting sponsor.
Michael LeBlanc 18:38
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Steve Dennis 19:59
Well, we're excited to welcome Amish Tolia from Leap to the Remarkable Retail podcast. Welcome. How are you today?
Amish Tolia 20:04
I'm doing wonderful.
Steve Dennis 20:05
And we had a little issue getting you into the building. But we're here and ready to go. So, we will, (crossover talk).
Amish Tolia 20:08
It's exciting to be here.
Steve Dennis 20:10
We'll go from there. But,
Amish Tolia 20:12
Great energy,
Steve Dennis 20:15
We generally like to start off by having our guests give us a little sense of their personal and professional journey. And then we'll kind of dive into what Leap is about and what where you're up to.
Amish Tolia 20:22
Great, great, great, great. Well, thank you guys for inviting me to join you guys. I'm excited to tell you about the story. I'm originally a Midwest guy, born and raised in, right outside of Detroit, Michigan. And since, you know, growing up there, I had a fairly entrepreneurial background. And this is now about 18 years later, the fourth company, my co-founder and I have started together,
Steve Dennis 20:33
Oh, all together, (crossover talk) I didn't realize that.
Amish Tolia 20:38
Yeah, exactly. And so, my co-founder, and I Jared, he's also a Midwest guy from Columbus, Ohio. And we met at the University of Indiana. And that's actually where we started our first business. We were in a consumer t-shirt printing business. And, you know, we were college kids and two and a half years later, we ended up figuring out how to hack our way to a scaled business model. And we run about 46 college campuses, and actually sold the business at the time of graduation. And that parlayed into a quick stint on Wall Street as Wall Street analysts. And that was of course 2008.
Steve Dennis 21:00
So, you know, (crossover talk).
Amish Tolia 21:05
Yeah exactly. Foreshadowing there in the conversation. My, yeah. My third day on the desk, Lehman at actually, you know, Lehman fell. And I looked across the desk at one of the MDs, and I asked, Does this happen often? And he looked at me cross eyed and said, Go back to your desk, kid. And so anyways, we did about 18 months on the street there, and we ended up departing and leaving to start our second company, which we launched in Chicago. We built that company for about eight plus years. And it was a unique sort of marketing services business. And we got it to an interesting scale. And a lot of great insights from it, a lot of great learnings. About halfway through that company's journey, though, it was acquired by a large eCommerce company called customink.com. And so, my co-founder, Jared and myself, we co-lead Growth Accustoming, for about four years from 2012 to 2016. It was actually where the idea or sort of the beginnings of Leap really came from, in the sense of one of the projects we were sort of supporting and helping bring to life was figuring out how to get Custom Ink in the retail world, right? It was a,
Steve Dennis 22:49
So, it wasn't that you were trying to create the Leap business. And we'll get into details, what it's about, it was more about you kind of backed into it, because (crossover talk),
Amish Tolia 22:56
Yeah, you got it. I mean, we were 100% an eCommerce business where, you know, all of our growth had come from, you know, where mostly growth for eCommerce businesses came from, in the early days, right, search and socials and direct response TV. And we needed to figure out what was the next lever, the next channel of growth.
Michael LeBlanc 23:11
Right.
Amish Tolia 23:12
And so naturally, retail became that and we, and we learned sort of the, you know, a bit of the hard way that retail hasn't really seen a tremendous amount of innovation, just as it pertains to how you think about building and scaling the channel over time, right. And so, after we departed Custom Ink, in about 2017, we put a bunch of ideas on a whiteboard, and we were, you know, somehow got back to the world of hey, maybe there should be and can be a more scalable, more efficient version for the retail channel. And, anyways, that was basically our backstory and how we got to 2018 when we launched the company.
Steve Dennis 23:54
And so, for our listeners, that may not be familiar, just describe what the fundamental Leap business model is about, kind of the scale and scope at this point, and then we can kind of dig into more particulars.
Amish Tolia 24:05
Yeah. So, for, for, forever. I mean, it's, you know, the barriers to entry in the brick-and-mortar channel had been pretty high, right? Lots of upfront sort of CapEx, lots of ongoing sort of corporate overhead that you need to build and scale over time. There's just very little flexibility in the channel, right, your long-term commitments, building big teams.
Steve Dennis 24:13
Right.
Amish Tolia 24:14
Right. And that just felt literally right at odds with where we are in kind of a modern commerce landscape. And so meanwhile, there's some, some, you know, of course, inspiration in the world of, you know, how easy it is to start an online storefront. I mean, just take Shopify, for example, in five minutes, we can license a storefront and then it's really up to us to figure out what we want to sell and how we get traffic to the storefront.
Steve Dennis 24:33
Yeah.
Amish Tolia 24:34
Right. And so that was a lot of the inspiration. Could we create a version of Shopify offline?
Michael LeBlanc 24:37
That's neat.
Amish Tolia 24:39
Right. So, a platform approach, one that had some unique advantages that you know, no one brand has on their own right, and I can kind of dig into that in a moment. But yeah, the short of the long is we've built a platform business that brands utilize to deploy physical retail stores, right? It could be one location, it could be many locations over time, right. And, and, you know, the literal manifestation of it is, you can walk into any of our stores today. And it's one brand, one store. So, you walk into the store, it looks like a brand, it's their flag outside, but it's actually our location, we signed the lease. It's our team, we staff, and we operate the store, it's all of our technology in the store. And it seamlessly integrates with their eCommerce to work in concert with their eCommerce. So, of course, their shoppers can have a really seamless and efficient shopping experience online, offline.
Michael LeBlanc 25:47
You know, I had the, on Saturday, I was walking through with 50 CEOs from Canada on a retail tour.
Amish Tolia 25:50
Cool.
Michael LeBlanc 25:51
And so, part of that retail tour said, we're gonna go look at Leap stores.
Amish Tolia 25:54
Oh, cool.
Michael LeBlanc 25:56
And they were just, what is this? Like? What are you talking about like,
Steve Dennis 26:01
Sounds like a marketing problem.
Michael LeBlanc 26:05
You know, we're on a bus and I'm going, we're going to look at these Leap stores. So, we're doing a walking tour in SoHo. And so we went, the first one we went to was Malbon Golf.
Amish Tolia 26:12
Oh, cool.
Michael LeBlanc 26:14
And so, I, as I said to them, then we went to orcu-, ORRTU. And so, I said, you know, I basically explained what I know about the model. I know and I know more of it now. And the stores were interesting. So, there's some Leap documentation, right?
Amish Tolia 26:20
Yeah. Right.
Michael LeBlanc 26:22
How to drive sales, how to do this, how to do that. So, I understand the platform you create, and I had tons of questions from the retailers like how did they set their eCommerce up? I said no, the people who are doing this, they're generally pretty good at eCommerce.
Amish Tolia 26:28
Yeah.
Michael LeBlanc 26:29
They just don't understand the store.
Amish Tolia 29:32
You got it. Right.
Michael LeBlanc 26:25
So, what services do you offer them? You described, you know, a higher lease and all that stuff. But I saw some materials about how to drive sales and loss prevention and stuff like that. Unpack a few of those for us.
Amish Tolia 26:54
Oh, absolutely. Well, how cool that you went, saw some of the stories and of course, I've got some questions in return. How was your experience, right?
Actually, Malbon Golf is one of my favorite, favorite locations of ours. Now, I think we're actually in New York City by some measure, somebody was trying to explain this to me inside the company the other day, we're probably the largest soft, good retail operation in New York City, measured by store count, if I'm not mistaken, you've got, you've got it. You think you got two shops at Hudson Yards? The store (crossover talk) in Hudson Yards. There's a couple there. I think we're coming up to 33-34 locations in New York City on its own. And so anyways, uh, yeah, to let me kind of tell you how it works a little bit, right?
So, if you're a brand today, and you know, your manufacturer, or whatever, it might be footwear, apparel, you know, home furnishings, etc. And you're predominantly an eCommerce merchant, right? You sell your goods online. But, of course, due to a whole host of different factors, it's getting pretty tough online, right?
Michael LeBlanc 27:07
Sure.
Amish Tolia 27:08
And saturate, (crossover talk).
Michael LeBlanc 27:11
The easy days of the platforms are over, right.
Amish Tolia 17:16
Right. I mean, you know, being able to quote unquote, hack Facebook and get customers at fairly low prices, those days are kind of (crossover talk).
Michael LeBlanc 17:21
Yeah.
Amish Tolia 17:22
So, naturally, it becomes, okay, what do we do next, right. And so omni-channel is kind of the, the future and naturally in, you know, our world where we sit right at the nexus of that, right, we enable for omni-channel. And so, through our data, we see the brand's online data and the store data. So, we can see the omni-channel customer behavior and see kind of, you know, what the value is of that customer over a 12-month period or a 24-month compared, you know, period, when compared to an eCommerce only customer? You know, the metrics are really astounding. They're awesome, right?
Michael LeBlanc 28:34
Yeah.
Steve Dennis 28:35
So, do you actually, just a quick question, do you actually help with store location? Oh, absolutely.
Amish Tolia 28:39
Oh absolutely. Right. So, how it works is that brands come basically to the front door of our website, and they go through an underwriting process, right? So, they'll tell us about their business, they'll integrate their eCommerce to our back end. And that will spin a number of different algorithms on our end, right? Because we'll look at their eComm data plus all of our BrandZ comm data plus our local operating data, which is from our stores, right? I mean, when you've got 34 stores in New York City,
Steve Dennis 29:18
Sure.
Amish Tolia 29:19
Which are clustered between SoHo or the West Village or the Upper East Side, you have a lot of intelligence around what's happening on the hyperlocal level, right? What are people shopping for? How much are they spending? Where are they coming from, time of day, you know, so you overlay these datasets and that's, that helps us get a lot of intelligence around. Hey, is a brand new, good fit for retail in the first place, right unit economics of their business, their assortment, breadth and depth, right. That's part one. Part two is if, if we get a good amount of confidence that hey, their brand is gonna be a good fit for retail, then where do we think they're gonna best perform, right? And so we'll simulate their business and one of our clusters, right, okay. We think that this brand has the product, has the, you know, unit economics to be in a SoHo location or a NoHo location or Williamsburg, Brooklyn, etc.
Michael LeBlanc 29:32
Yeah, yeah, yeah.
Amish Tolia 29:36
Right.
Michael LeBlanc 29:37
Because I think Hanky Panky is one of yours as well, right.
Amish Tolia 29:44
Right.
Michael LeBlanc 29:45
And they're off. They're not in SoHo. They're off in the West Village, right?
Amish Tolia 29:59
Actually, we got to locations on the platform and ones on Third Street in Williamsburg and the others on Bleecker Street in New York.
Steve Dennis 30:05
But it has also tended to be the case that there's certain parts of the country right where these DTC, new DTC brands tend to be, right. So, that helps you,
Amish Tolia 30:09
Totally, (crossover talk).
Steve Dennis 30:12
Have knowledge and focus.
Amish Tolia 30:15
So actually, it's part of our strategy, to be honest, I mean, it's a core part of our strategy to cluster our store locations, right. And when you, when you, when you create a lot of density, you just create unfair advantages for yourself and the brands.
Michael LeBlanc 30:26
Sure.
Amish Tolia 30:27
Right. I'll give you a couple examples of what that really looks like. So, when you create density, we can cross pollinate our shoppers across all of our store locations. Oh, because you bought this, you know, hoodie from Malbon Golf, you might want to pair it with this denim from Fred Segal, right. And so, we can cross pollinate shoppers based on their shopping behaviors. And actually, it's a fun stat across all of our locations.
Now network wide, we're just about a, just north of 100 locations 60 brands on the platform across the markets where we operate, 11 markets we operate. In 2020 to about 10% of total network wide sales was a direct result of our, our marketing efforts, Leaps marketing efforts, that was a first-time customer to the brand.
Michael LeBlanc 31:13
Now unpack that a little bit for me. So, from a customer experience perspective, I go shop at this great Golf, I have no idea Leap is behind it. And then I get an email about another store.
Amish Tolia 31:18
Correct.
Michael LeBlanc 31:19
It's connected, is like how do you smooth that transition? That's a bit that could be jarring if you're not careful, right.
Amish Tolia 31:29
Totally. Yeah. So, you could shop at, you know, call it Malbon Golf powered by Leap. And so on, in the store experience there are some, as you call that, right? There's some subliminal messaging that allows the customer to know that actually, Leap is the merchant, and you happen to be in a Malbon store powered by Leap. And actually, at the time of transaction, the, the, I don't know if anybody purchased anything, but we should probably take the back, (crossover talk).
Michael LeBlanc 31:52
We're moving too fast. To get in the nuances of these tours, if they start buying stuff, I'm dead. Because I gotta keep on moving. You know,
Amish Tolia 32:00
I get that. So, so the actual transaction, (crossover talk).
Michael LeBlanc 32:03
They love the golf club covers, though. Yeah, they're (crossover talk).
Amish Tolia 32:05
They're really cool. I gotta say they. So, the transaction that actually when you look at your credit card statement, you'll actually see Malbon Golf, powered by Leap,
Michael LeBlanc 32:11
Okay.
Amish Tolia 32:12
Right. And so, at that point, we start building kind of an awareness with the brand, etc., etc. And so, you know, it's, there's some cadence, it's like t plus seven days later, 14 days later, 21 days later, you'll get some messaging, hey, because you, you know, Thanks for shopping at Malbon Golf in SoHo, check out other awesome modern brands stores in the local neighborhood.
Michael LeBlanc 32:31
Right.
Amish Tolia 32:32
Right. Or, you know, if we have and there's the versions of that, where if we have enough buying behavior of a shopper, we can actually take them down a journey, which is okay, we understand enough about your buying behavior. You know, you buy a lot of, you know, athleisure, you might want to pair it with, you know, shoes that fit really well, Oliver Cabell with athleisure, right.
Michael LeBlanc 32:52
And for the merchants in the stores, loss prevention, all that you hire the people, all those like, there's tactical things, because the people, it seems to me that the brand is pretty well, plus or minus eCommerce. It's the, you know, the hard part's, as you know about running stores, right? What do loss prevention do? How do I even handle that? What do you do to drive sales? And all stuff, you provide some of that guidance?
Amish Tolia 33:10
Absolutely.
Michael LeBlanc 33:11
To the associates, that's a big, seems like a big value.
Amish Tolia 33:17
So, everything is now standardized, right? I mean, there's SOPs in place from pretty much anything, right? So, from how we receive inventory, right? And how a branch should be thinking about hangtags, right. Everything's done to our requirements, because it's just the only way we've been able to scale a business, right? And so, like, LP, it's pretty straight. I mean, we're not a big box retailer, right. We're not talking about 200,000 feet across X number of locations. But these are 1000 feet.
Michael LeBlanc 33:36
Yeah, they're small, some of them are very small.
Amish Tolia 33:39
Right. I think our average square footage across our 1200 locations is about 1200 feet, give or take, right. So, they're small locations, and, you know, assortment wise, you know, we're talking about a couple 1000 units of, of, of goods, you know, between front of house and back of house. But nevertheless, I mean, you know, there's of course, SOPs in place on how we manage a bunch of things like LP, right?
Steve Dennis 34:07
When, when retailers come to you or these brands come to you, is it generally the case that they have very big aspirations for store growth? And this is their way to kind of get started? Or is this more kind of just, we'll probably just have a few stores. So, it's not worth it, because, because I can imagine some companies are like, well, we'll use you until they figure it out, right? And they'll hire people as opposed to.
Amish Tolia 34:25
Yeah,
Steve Dennis 34:26
We're never gonna get or chances are, we'll never get really big in physical retail, you know, the Warby Parker versus some other stores have one or two kinds of marketing locations.
Amish Tolia 34:38
A lot of our aspiration with Leap has always been trying to figure out how to turn the channel into as much of a performance channel as you possibly can, right? You can flex it up, and you can flex it out based on performance, right. And so, there's a number of different advantages that we bring to the table that no one brand would get on their own, irrespective of them figuring it out, quote, unquote, on a four wall basis,
Steve Dennis 34:58
Right.
Amish Tolia 34:59
So, the data network effects, right? So, we have a ton, all of the intelligence we have, from a national perspective to a local perspective, no one brand has that on their own. And so, we can make better decisions, right? Where to put a brand from a location perspective, what to assort in the store, how to think about marketing, how to think about operations, etc., right? That's part one, the customer cross pollination is part two, right? The density that we create as part three, when you create a lot of density, you just have economies to scale. And so, brands become benefactors of economies to scale, they wouldn't have on their own.
Steve Dennis 35:19
Sure.
Amish Tolia 35:20
Right. So, a number of these things didn't add up to, you know, not to mention the fact that they don't have to build the corporate SGMA, the overhead, you don't have to sign a long-term lease, they don't have to put up the CapEx. So, when you take all these things into account, it's actually they don't just launch one store with us, they actually think about how we end up scaling this thing on the Leap platform over time that works for both parties,
Steve Dennis 35:40
Right, right.
Amish Tolia 35:42
It works within the platform constructs and works for their business. And so, we've actually found the inverse. Some of our, you know, some of our brands now are, you know, they started dabbling their toes into retail on their own.
Steve Dennis 36:00
Yeah.
Amish Tolia 36:01
They realized, oh, wow, this is really tough (crossover talk) we're not built to do this.
Steve Dennis 36:07
That is not quite as easy as (crossover talk).
Amish Tolia 36:09
And then they found Leap. And now the next thing, you know, I mean, I think one of our brands went from zero stores to 10 stores in one year, just last year.
Michael LeBlanc 36:14
You got me thinking about the short term and thinking about Okay, listen, it doesn't work for everybody, right? So, how short term or short term? Can I sign for one year? Can I sign for two?
Amish Tolia 36:18
Yeah.
Michael LeBlanc 36:19
And do you evaluate and say, Listen, love your brand, this isn't just, you know, you got a piece of the action, or you get a percentage of sales? So, you've got a business model as well.
Amish Tolia 36:23
It's an aligned business model.
Michael LeBlanc 36:27
Right.
Amish Tolia 36:28
And we basically say, Listen, this is not working out. So, you know, we're gonna part ways. And is that kind of sunset of that deal is kind of based on time, (crossover talk).
Amish Tolia 36:41
There's actually two parts to this. One is, naturally, we're underwriting and launching brands on the platform that actually think about retail at a commercial scale, right? So, that's a big piece of the puzzle, right? We want to, we want to, launch and operate brands that are thinking about getting to four stores, 10, stores, 50, stores, 100, stores, etc., over time. And so now in our world, if we deploy a brand into a particular location, and let's just say hypothetically, it wasn't working that well right. They're using our data, they're using our merchandisers, they're using our marketing capabilities, and their effectuating change to try to drive lift in a store to see improvement. And let's just say, six months pass by and it's still you're not really growing, right pass a certain threshold on a monthly sales level, a monthly sales perspective. At that point, we think about, okay, maybe it's probably not a good fit for this location, right?
Michael LeBlanc 37:05
Right.
Amish Tolia 37:06
And so, it's generally conversation, right, and (crossover talk).
Michael LeBlanc 37:10
It's not an email.
Amish Tolia 37:13
Right, exactly. And we can pull the brand out of that location. And we'll deploy another brand into the same location, and that happens very quickly, that happens within two to four weeks max, (crossover talk) right? So, we have that kind of flexibility from our modular fixturing systems to the demand liquidity from a lot of different brands that want to be in these premium locations, right.
Steve Dennis 37:58
So, some of our listeners may be familiar with Neighborhood Goods. We've had Matt on the podcast recently, Showfields, I know they're a bunch of pretty good-sized pop-up agencies. Do you consider them competition or just sort of compare and contrast what you do versus what, (crossover talk) those folks do?
Amish Tolia 38:15
Yeah, now I mean for starters, we love anybody that's doing something fun and interesting in the world of, you know, the future of retail.
Michael LeBlanc 38:21
Yeah.
Amish Tolia 38:22
But for those folks, by no means I mean, you know, actually, our brands are users of the Leap platform. And also use Showfields, or they may use Neighborhood Goods. I mean, they're very, it's incumbent upon brand building organizations, today to think about growing their points of distribution.
Michael LeBlanc 38:38
And there was one brand I thought that I specifically read, they said you could find it both in our own store and in Showfields, because there's multiple points of presence, right?
Amish Tolia 38:42
Yeah, exactly. Right.
Michael LeBlanc 34:44
Listen, it's a really cool model. So, if people want to learn more about it, go to the website, are you, are you a LinkedIn guy, like talk about that, or do you have, (crossover talk).
Amish Tolia 38:53
Yeah, they can reach me on LinkedIn, they can send me an email, they can, you know, come to our website. I mean, we're, we're open for business. I mean, the business is growing incredibly fast. And,
Michael LeBlanc 39:03
Typic-, it's typically in these things that the last question is, you know, what's next? But it seems, basically, it's not to put words in your mouth, you basically got the model, you're gonna, you’re just gonna go scale it and spread the word. That's next right. (Crossover talk) all right.
Amish Tolia 39:17
I mean, we've, it's the business that has been around for four and a half years. And,
Michael LeBlanc 39:23
Yeah.
Amish Tolia 39:24
You know, we were fighting to keep up every day, right? I mean, we've got a lot of demand from some great brands. And we're, you know, we went from 2020, mid 2020, with a dozen locations to in two years, literally two years, 100 locations and 60 brands. And so, now it's all about quality and, you know,
Michael LeBlanc 39:34
Sure.
Amish Tolia 39:35
But yes, we will be continuing to scale the model and continuing to launch new brands, etc., etc.
Michael LeBlanc 39:43
All right, fantastic. Well, listen, we're thankful for joining us here at the NRF Show. We're sitting here in the MarketDial booth. So, we had a bunch of fun with you. Plexiglass is behind you, but this is great.
Amish Tolia 39:47
Thank you for having me.
Michael LeBlanc 39:50
Well, thanks for making the effort to get up here. It's a big place,
Amish Tolia 39:55
Don't sweat it.
Michael LeBlanc 39:58
And I look forward to keeping in touch and best of luck as you move forward.
Amish Tolia 40:01
Thanks a lot, much appreciate it.
Michael LeBlanc 40:04
If you like what you heard, please follow us on Apple, Spotify, or your favorite podcast platform. So, catch up with all our great interviews, including “Organized for Growth”, our interview with Satish Malhotra, CEO of The Container Store.
New episodes of Season 6 presented for another season by our friends at MarketDial will show up each and every Tuesday. Be sure and tell all your friends and colleagues in the retail industry, all about us.
Steve Dennis 40:25
And on Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 40:40
And I'm Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one. You can learn even more about me on LinkedIn, and you can catch up with Steve and I in person at Shoptalk in Vegas March 26 And a month later in Barcelona at the World Retail Congress, April 25.
Until then, safe travels everyone.
SUMMARY KEYWORDS
store, retail, brand, retailers, business, locations, people, sales, leap, eCommerce, big, platform, scale, bit, inflation, podcast, customer, growth