Mitchells Family of Stores is arguably one of the most successful independent retailers in the U.S. Since Ed Mitchells was founded in 1958 in Westport, Conn., the family-owned company has added seven other stores to its fold: acquiring Richards in Greenwich, Conn., Marshs in Huntington, N.Y., Wilkes Bashford in Northern California and Marios in the Pacific Northwest. Here, Bob Mitchell, grandson of founder Ed Mitchell who serves as co-chief executive officer with his brother Russell, talks about what makes a specialty store special even in the Internet age.
WWD: How long have you been with the business and how have you seen it change in that time?
Bob Mitchell: I joined the business in 1991 and I’ve seen a number of ups and downs. We’re in a cycle where the general economy and the stock market, which is usually the number-one gauge of our business, are at all-time high — and business is still very challenging. Since 2009, we’ve seen a recovery from our core customer and experienced growth. So I believe there are two things going on: Business does flow in cycles and our core customer has been buying a lot over the last six or seven years, but the big one is the Internet.
WWD: How can you fight the Internet?
B.M.: I believe our ability to counteract people buying things online is going to be the experience we create in the store. The number-one thing we can do is raise the level of our people and the interaction they have with the customer. I know it sounds like a throwback, but in this way, I want to run upstream from everyone. It’s not that I don’t want to do e-comm, but I see that as a way to enhance the relationship electronically and make it more convenient and personalized.
WWD: But you do have an e-commerce business.
B.M.: Yes. My secondary goal is to do more business online, but it’s very costly and lacks loyalty of consumers. The minute someone can sit home and buy things, they’re going to buy from anyone. And for us, being a smaller independent, our ability to differentiate ourselves is in the store. We were one of the first people to personalize the online piece. We’re paying all our associates for online sales so the customer can quickly interact with them while they’re shopping online. They can ask their sales associates, “Hey, what do you think of this?” because ultimately what everyone is realizing is customers are not great pickers, that’s why the return rate is so high. So when we get the sales associate in the middle of it, hopefully it can create a visit to the store. We’re promoting a reserve-in-store feature where you can go online and search all eight stores for product, click on whatever you want and have an appointment to come in store. So I’m in no way saying I don’t want to do sales online, because I think there’s a great place for that, but our strategic plan is to continue to try to use it to drive more visits to the store because that’s where we feel we can differentiate ourselves with people and the experience people in the luxury arena crave.
WWD: Does the Internet competition change the way you do things?
B.M.: What people like about the Internet we need to put in store — it’s quicker and there’s much more transparency of inventory. People are less tolerant today when you don’t have something because they’re used to finding it online and having big depth. So merchandising-wise, we’re looking at decreasing the [stockkeeping] count and having bigger depth for the store and online.
WWD: How big is online for you now?
B.M.: It’s about 3 percent of our total revenue and it’s growing between 60 and 100 percent every month. We see it to be highly promotional, but it’s one of the largest ways we’re attracting new customers. Today, unless somebody refers a client, which is the number-one way we get good customers, when people new to our community want something, they type it into Google and their first touchpoint will be our web site. So we’re really trying to focus on getting them in the stores and creating a true omnichannel experience.
WWD: You’ve used acquisitions as a growth vehicle in the past.
B.M.: Without that, we wouldn’t be growing. And I see that continuing to be part of our strategy, but one that takes a very measured approach. Each one of the downturns has taught me an important lesson. And the most important one that I learned in the 2008 time period is that if we had been highly indebted, we would have been out of business. Since that time, even with all the acquisitions, we’ve taken on no debt. I’d rather take a more-measured approach to acquisitions and fund them with existing cash flow so if we do hit speed bumps, we can survive.
WWD: First you added Richards, then Marshs, Wilkes Bashford and Marios. Who’s next?
B.M.: When we acquired Wilkes Bashford in 2009, that was really opportunistic and it was because we had the capability to do something at a time when other people couldn’t. And I think that may present itself again. That being said, our big project this year is in Seattle with Marios. In September, we’ll be opening a completely renovated store where we’re doubling the women’s square footage. That market is a strong growing market and we think we can dominate the luxury business there. So even though we are looking for other acquisitions, I think the most profitable growth will come from figuring out how to do more business from existing locations.
WWD: There must be plenty of retailers out there looking for an exit strategy and think you’re the white knight. How do you decide which stores to add to the fold?
B.M.: First of all, for us, it has to have a certain amount of scale. With the continued growth of the Internet, having lots of smaller stores is not going to be strategically important. So we need hubs of stores that can generate at a minimum $10 million to $15 million of revenue in-store, and the Internet becomes the secondary piece of the puzzle. Also, if we’re committed to be in the luxury business, we have to be in markets that are very affluent. We’ve generally done things every five years and we’re one-and-a-half years into Marios. One of the things Harry Rosen said to me years ago is that as you’re doing this, be cognizant you’re not neglecting the core stores that are funding this. Our two Connecticut stores are still the powerhouses so we’ve been looking at doing some renovations there and balance that with acquisitions to make sure we’re keeping the core business healthy.
WWD: You’ve historically always put a Mitchell at the helm when you made an acquisition.
B.M.: Having a Mitchell on the floor is an added value; it makes clients feel great. But we broke that originally in California in Palo Alto. And with Marios, the entire executive team is still running the company there. So we’re learning that skill set. Both of our head merchants are non-family members now: Dan Farrington, who started here in high school, and Ellen Finlayson, who’s been here over 10 years. Five or six years ago, Russell and I as co-ceo’s said one of our key initiatives was to develop non-family executives.
WWD: Is that hard with companies you acquire?
B.M.: When we’re acquiring companies, one of the most important things is to get the culture to align and that takes time. We’ve learned things from Marios and Wilkes Bashford that we’ve brought into all the stores. It’s not just a one-way street. We want to hear from them, too. There’s no question we’re still family intensive and I think that’s still one of our greatest strengths, but we do really want to build a team and having the best people in each position in the company is something we’re totally committed to.
WWD: Eventually it had to happen. There are only so many Mitchells.
B.M.: Yes, and people have different skill sets. I would never be even 20 percent as successful as I am without having Russell as a counterbalance. It’s unique that the co-ceo model has worked so well, but we recognize what each of us is good at. Russell has really led the data discipline piece. It’s not very sexy but it’s important.
WWD: What’s your secret weapon?
B.M.: As everyone is questioning what’s really going on, we’re doubling down on people. I read so much about everyone wanting experiences, but when you go to a luxury store, what are the experiences you remember? I know everyone is really hot on restaurants and barber shops and stuff like that, but if you ask me what I remember when I go to a great place, it’s the people. So our short-term strategy is to try to enhance our existing people and continue to add top relationship-driven people. I think it sounds corny, but I truly believe people come to us to feel good in a store. If we can’t make them feel great in the store, they’re going to buy online or from someone for price. You have to have an exciting, dynamic environment. Anyone can build a beautiful store and fill it up with beautiful merchandise. The differentiator is the people and the experience of them knowing you, and trusting you and adding value.
WWD: Is technology also important to you?
B.M.: Customers are the center of our universe, and while we don’t talk about it much, we’re a very data-driven company so we believe in information-based decision-making. In the front of the house, we do anything we can to make the customer feel great. Behind the scenes, we’re highly analytical, data driven and disciplined. That doesn’t mean we can’t be merchants and take chances, and when we believe we have an opportunity, we’ll invest in it, but being disciplined and conservative allows us to seize opportunities when they come along.
WWD: When your grandfather started the business, it wasn’t luxury. You’ve inched up the mix and prices over the years.
B.M: It’s something we talk about and debate all the time, but our driving force is to be in the upper-tier luxury business. Even though it may mean fewer customers, the competition in the opening price point or contemporary business is going to continue to get harder and those clients are much more apt to buy on the Internet. The scary part is that as we’ve traded up, we’re dealing with fewer and fewer people. So over the last 15 months, the number of visits is down and so is the average spend, so even our core customers are spending less.
WWD: Why is that?
B.M.: In men’s wear, it’s explainable by the continued casualization with people wearing fewer suits and jackets. But we had a period of four or five years where even if you didn’t wear suits often, with the new fit, people were buying. In women’s designer, a lot of the brands haven’t transitioned fast enough to the changing lifestyle of the woman. Cucinelli has been the big winner in women’s because he’s dressing them in a casual, luxury way. The men’s business needs to look more like the women’s business. It’s not just suits, but getting people to dress for all parts of their lifestyle in a more luxurious way. It will be difficult to make up by selling sweaters and shirts and pants instead of $3,000 suits so that’s a continued challenge in the short-term that we’re going to face.
WWD: What’s the percentage breakdown now between men’s and women’s?
B.M.: It’s about 55 percent women’s and 45 percent men’s. About 20 percent of our total business is jewelry and that goes into the women’s bucket. One of the ways that our acquisitions have been successful is finding the low-hanging fruit. Even though Marios was in the jewelry business, it was way underpenetrated, so we knew we could add several million dollars in jewelry. It’s begun to work and is going to work even further when we open in Seattle. Wilkes Bashford when we took over was 80 percent men’s and 20 percent women’s, and now it’s close to 50-50, and they had no jewelry. That’s how we can add incremental revenue, and with our data discipline, we can also run the business behind the scenes more efficiently.
WWD: What else do you do well?
B.M.: We execute on what we say we’re going to do. With high-end clients, if you say their alterations will be ready on a certain day, they better be ready. It sounds really simplistic, but how many times do people just not get it done.
WWD: Are there any other retailers you respect?
B.M.: Lots of people — there’s always something to learn from other people. So, people in the Forum Group, and Harry Rosen have taught us a lot. My dad always credits Harry with the real push into European brands. And I think there’s a lot still be learned from the department stores. The biggest strategic challenge that the industry continues to face is on price transparency. That’s where the Internet can potentially wreak havoc on people. No matter how much money you have, if someone can show you quickly on your phone that you can buy the same thing at 20 to 30 percent less, loyalty becomes much more difficult. What a lot of the larger stores are finding is that promotional activity is like drugs. The more you take it, the more you have to continue to do it. So we’re looking for vendors who want to protect price transparency. Some of the brands are dong a really good job, but they have to be even more disciplined. It used to be easier to hide from, but with the Internet, it’s too apparent.
EDITOR’S NOTE: Independents’ Day is a recurring feature devoted to the tools specialty stores are using to survive in an increasingly complex retail world.