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Michael RelichCOOCrate and Barrel
With the post-holiday drumbeat of major brick-and-mortar retailers reporting declining comparable store sales and Amazon opening more physical stores, among other pressures, the brick-and-mortar sector’s very success and survival will depend in large part on how they hone their omnichannel strategy. eMarketer’s Andria Cheng spoke with Michael Relich, COO of home furnishings and furniture retailer Crate and Barrel, about the challenges facing the industry and why his company has bucked the trend.
eMarketer: Department stores and apparel retailers have been among the hardest hit in the brick-and-mortar sector this holiday season as consumers buy more online and shift their spending to gadgets and experiences like travel. You spent 12 years at fashion retailer Guess before joining Crate and Barrel in 2016. Why is fashion the laggard?
Michael Relich: Fashion has become commoditized. The likes of Forever 21, Zara and H&M are winning. It’s all buy now and wear now. Almost every style is available to every retailer. It’s a matter of being faster. Many apparel retailers are still on an old-fashioned design process that’s extending the calendar.
What guys like Zara do is they’ll work with factories. A lot of retailers are still doing [design to product delivery] in 40 weeks. Zara does it in 13 weeks or as quick as six weeks.
The retail landscape is horrible. Macy’s is having constant one-day sales. Mall traffic is declining. You are gonna see a big shakeout. Customers are changing their purchasing behavior.
eMarketer: How are the industry shakeout and changing consumer behavior affecting your sector?
Relich: We have posted positive monthly [same-store sales] for months. Consumers are buying full-priced items and using fewer markdowns. A lot of people are spending more on entertainment, home and travel. When people buy for their homes, they are a little less price conscious. The home sector also isn’t as volatile as apparel retailers [where a big part of the inventory is fashion items].
eMarketer: On the other hand, if I only need a couch every five to seven years, how do you drive traffic and frequency of purchases?
Relich: We have a sizable housewares business. Customers buy for entertaining. The sweet spot is to get the housewares buyer to become the furniture buyer.
eMarketer: How much has the improving housing market contributed to your sales gain?
Relich: The home sector does well when the housing sector is doing well. On top of that, we probably have done well because we got a much cleaner assortment and a clear merchandising strategy and focus on key and best-selling items. Crate and Barrel also has a decent omnichannel strategy. We have a relatively large ecommerce penetration.
eMarketer: Elaborate on that. What kind of consumer behavioral change are you seeing when it comes to their shopping for bulky furniture online? How do you respond to that change?
Relich: We see people buy furniture online. We introduced buy online and pick up in store and buy online and ship to store [without any shipping fee]. We are trying to use that to drive store traffic. When they come in, we give them bounce-back coupons.
They use our stores as a showroom first and can see an extended assortment online. We actually see a lot of transactions start in one channel and finish in another. Brick and mortar is good for us.
eMarketer: The home furnishings and furniture sector isn’t immune to online competition. Amazon aside, Wayfair is a notable example.
Relich: There’s definitely competition from others. Wayfair has no physical presence. Customers still like to showroom. We work really hard on omnichannel strategies like buy online and pick up in store. We can drive customers to come in to the store and buy more.
eMarketer: Where do you think the industry has missed the mark on the omnichannel strategy?
Relich: Retailers need to align incentives around omnichannel. Too often, stores are given credit for stores sales and ecom is incentivized on ecom sales, which lead to less of a seamless experience. Consumers don’t care about how you are organized. You got to make it seamless.
eMarketer: Big data analytics is a big buzzword in the industry. How relevant is that to Crate and Barrel?
Relich: We know we have a lot of web traffic. What we are working on is linking browsing data to actual customers and taking online activity to physical store activity through machine learning. Now we do very simple [customer] segmentation. If I can start to take browsing history, social media history and tie that to your transaction history, I can start to do very specific segmentation. We want to make sure we are top of mind.
If you can master the data, you can really target customers with what they want and optimize your marketing.
eMarketer: You started your career as a programmer before moving on to becoming a CIO [chief information officer] and now COO. How essential is having a tech background in today’s retail world? What are you looking for when you hire someone?
Relich: When I was CIO, I hated to be branded just as a tech guy. I tried very hard to be a business guy. Now having a technology background is a huge benefit because technology is ubiquitous. But all managers I hire have communications skills. You need a CIO who can tune in to the business and speak in business terms.
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