DealBook 2017: Life Lessons and the Ever-Changing World of Retail

give it up for Mickey Drexler this is a very special conversation for me I have had had the pleasure and a privilege to know you now for quite some time yeah a long time and I have wanted to have to sit with you to talk about the state of retail your life and perhaps some lessons in where all of this is headed given your history at the gap creating Old Navy resuscitating and really I mean it wasn't really a situation you created Banana Republic I mean was it well no it just purchased that was it was a turnaround yeah effectively and then what you did with j.crew and made well all remarkable things however I want to start with the tough stuff okay as you may all know Mickey according to this headline it says j.crew CEO Mick see Mickey Drexler fires himself would you see that this this came out I'm looking right around when you fired yourself oh really okay yeah says he will remain board chair what's it like to fire yourself well it is that what happened it's not 100 percent accurate but being in the retail business for the last well I've run companies for 37 years and the last two or three years have not been fun whatsoever and I was a I didn't kind of find myself but I kind of stepped down and became chairman the board and I agreed that I wanted to go and they were fine with it as long as they hung around for a while so I kind of was over the last year or two planning to fire myself so it finally happened July 10th of this year and I I don't know if I fired myself but it's okay not the first time I've been fired so so you were fired no I wasn't fired I'm actually the largest shareholder individual that doesn't say much at j.crew because my partner's TPG and Leonard green owned about 90 and I owned timbers the company so help us understand you just said the last couple of years have not been fun nothing fun it has not been fun for virtually all of the people in the quote-unquote traditional retail business for sure it's been miserable I mean I don't want to see that as a headline but it's not you might have just made it yeah just I better watch what I say guess I realize there's so much press here but anyway hasn't been fun and it hasn't been fun because what meaning when did you realize that something was turning well you know there's always signals and always ability to connect dots but over the last two years or so no matter what what you did it seemed to be falling more so behind than moving ahead you realize when when there was this huge growth in sale and you know in this device here in my pocket actually is every brand in the world I could shop right now any brand check the prices buy it at the cheapest price so so there's no protection on price and you realize when the traffic in the in the malls and in stores were dropping you realize when there was not that much differentiation and product but mostly every day you looked at numbers and they reinforced that in most cases for example made well which is now a ten-year-old company is an extraordinarily fast growth business smaller not really a legacy brand very much focused on making the best jeans in the world we try to think we do and so that that business has been growing but it's also not as I call a legacy business that's been around that long a time and it's guaranteed in the fashion business is the only time where I've seen it that usually fashion brands or anything that's fashion II kind of has this life term and then it kind of gets hit hit a wall and then it usually comes back the difference now is it's not coming back that's that easily anymore or it's not coming back and you think that's a function of Technology and and and by the way I'm pointing at your pocket because you had your iPhone there you used to be on the board of Apple yes when Steve Jobs is running the comp right and Laurene Powell Jobs gonna be joining us very soon oh good did you guys ever talk about the coming age of this happening well I don't I think you know it took the speed of it you know we talked about it for sure but and everything was moving in this direction but I don't think anyone was prepared or I wasn't prepared for the speed of which it's happened although in this funny sense if I look back in my career and I know we don't have that much time but thirty years ago when I started running and Taylor I recognized I got out of department store business because there was no protection of your inventory against price and then you had a drive 30 or 40 miles to the nearest discounters there was not this device that gave you every price worldwide and you can spend it and there was no Amazon of course so for me I moved out of the business of being a branded buyer because I didn't want to depend upon someone else's brand Steve when when we joined together he went on the gap board I went on his board knew that he couldn't if he couldn't control his brand and the environment he would not have a future Apple business so then he went into the retail business owned his distribution now of course he sells others but but himself but I think I think we all kind of knew it was coming just the speed of it how much of though is this about technology disrupting the business and how much it is about the change in behavior of consumers which is to say what we wear matters how we appear matters or mattered I should say and maybe perhaps people are more willing to take their dollars and buy the phone well I couldn't agree more with what you just said the latter how much has to do with consumer change of the behavior you can't just blame technology because technology's part of retail you know retail today is seamless between online and bricks-and-mortar the fact is one cannot argue with a customer and his or her tastes and trends so in my personal opinion and this is all my personal opinion there's a trend going on which says clothes are just not that important or as important as they were and if you go through the audience and I always do this at the office when I went to the office every day is how old is what you're wearing and what's the latest trend in the world and what's this that and the other thing so I think a lot of it has to do with the fact that it's less important it has to do with the fact that everyone's I don't want to keep reaching in my pocket here but everyone's kind of obsessed with spending time on this they're not really hanging around and the I used to call shopping centers the local villages but you don't have to go to the village to see other people if if you're on your device because that's the new way of meeting and seeing and having relationships the hot thing over the last several years was this idea of fast fashion those eras of the world and people said that's what was really taking market share is that still the issue or is it really that the just the dollars are not even going do you said about new clothes too even that kind of Mattel you know again in my opinion at the end of the day is more inventory and I think in economics and I wasn't a great economic student but I think the more inventory even if the man stays the same it pushes down prices so I think there's been deflation in the industry I think the fact that if I'm a customer and I'm used to seeing thirty off today 40 off tomorrow Black Friday is coming and they'll be giving away inventory I think the fact of the matter is that that people get used to not spending full price and and the fact is that you don't have to it's changed everything fast fashion has that huge growth and you really can't feel Goods online I mean and and the fast fashion players have been fantastic they weren't around in ten or fifteen years ago and I think it's okay to buy clothes wear em for night someone said to me yesterday that well I'm renting closed by the month and why should I even buy clothes anymore so I think clothes don't play the same role in one's life as they used to okay so your former employer and tailor yes now renting their clothes oh they are that's right they are and I was talking about the runway what do you mean do you talk about the way we did ride-sharing this morning with Ober is there a day where we're all gonna be renting clothes well you know what do I think I I think it's pay attention your core business get you Goods looking great try to figure out how to not to be a discounter and don't start groping for solutions to problems that aren't that easy to solve I mean you have to sometimes face the reality that something is not gonna grow and it might be going like this and maybe that's the state of the retail business okay let me ask you just a sort of I mean this is a life question for you you look at the gap and this remarkable success you had grow grow grow grow grow it's great and then it starts to level off and then it starts to politely I'm gonna say go down a little bit absolutely same with j.crew right you get there it's hot hot hot hot you inject this energy into it is that the life cycle of fashion is that something else is there any way that you think when you go look back at your experiences that you could have kept it going forever I kind of think it's the life cycle of life it's great it's amazing it's exciting and then it kind of wears off a little and then it's a very low entry the copycats come in we started Old Navy because target announced they were copying a cheap version of gap this is in 1994 so I went to target looking at that cheap version of Gap they were called date nuts and then and it was called everyday hero so I looked at their knockoff for the gap store and I got furious and angry because that's what you do when the competitors trying to take you know eat your lunch and then we stopped off in Chicago on the way back to San Francisco and found that that gaps close and I learned this was not the cheapest game in town and I always thought gap coming from Ann Taylor was less cheap anyway long story short we gave a bunch of people 200 bucks each to go shop discounters these are people who worked at Gap and they came back and said as long as the clothes are right the values there and and they didn't say this but treated respectfully with dignity we think we sure would buy cheaper clothes then we found that gaps jeans started $35 80 percent of the genes in America in 1994 were under $30 so we started Old Navy named after a bar Unruh size remain in Paris now that's part of the art and science of retail so we went into the Old Navy business which is still doing well different version of it than we fattened that we founded but I think fashion brands do run their course and then they get reinvented a fancy expensive example is Gucci right now and and I don't I'm not a fashion expert I'm I'm a business person who likes to sell merchandise and I don't think it's about fashion as much as product and what people are wearing and figure out this taste and lifestyle of people but I think you said it I don't think clothes are that important anymore but let me let me go then back to the digital side and talk about what I think in retail is the elephant in the room and read you this this is Lee Petersen he's the VP of brand strategy & Design at WD partners he says that Jeff Bezos is the greatest merchant of this century and he says who is going to be the next successor of brilliance none of these merchant princes have successors who is Ralph Lauren's successor it's not Tom Ford it's no one and that that is what Jeff Bezos has done what do you think about that and what do you think about what Amazon is doing I think it's been nothing short of extraordinary but of course if you look at their earnings and and and I'm not a stock market person I don't understand the earnings thing but they announced earnings with Facebook and Google in the last two weeks and you looked at the hundred and ninety some odd million versus the billions and whatever 133 billion dollars in sales I guess if you go out there you if you're valued at the extraordinary level you value that and and and people say well you don't really have to have any margins look forgetting that everyone's angry with them have time or that they do what they do but they've been nothing short of brilliant they've created a new habit of shopping in the world it's a habit and once people change their habits you know it's really hard to undo that but here's then a brand question would you sell your goods on Amazon that that is the central question that so many companies rappeling with well I don't have to make that decision today because I am NOT the CEO anymore I would not sell my goods on Amazon because because number one they owned the customer number two I'd be afraid that they would take every bestseller and put it into their private label collection which I think they would do now I have enormous respect for for Amazon and their extraordinary competitors but I would not do it and how do you think about the trickle-down effect not just to traditional retail but I'm starting to think of companies even like Nike or Under Armour that have taken such a hit even though those were not considered fashion brands before well I think there first of all their legacy brands I guess I'm not I don't follow Nike that cause I know Under Armour's taking a huge hit but maybe some of that's due to their acquisitions maybe some of its to the shoe business I think it's a great brand and I bet it will come back with Kevin making it come back and Nike is it's an iconic brand it's gonna be around now I'm on the board of a tiny little company I hope everyone will shop there it's called outdoor voices it probably does the whole company does maybe what one quarter of a Nike store does but I'm having fun as the chairman and investor and you know the exciting thing about the business and nothing stops you is that you can take something move it forward if you have the right goods you have the right delivery you have the right passion you have the right leadership and you're doing something that's differentiated from the competitors so so I think I think those two brands are here to stay in a really important way what is going I mean outdoor voice is a fascinating new sort of up-and-comer in the same way that all birds all birds whoo so but speak to that though there there are these sort of micro brands that are becoming much larger brand so it's not to say that everybody is dying it's to say that certain legacy companies I I think the legacy companies first so if you do something saying looking glossier I mean I spent the day two days there last week I mean it was extraordinary I don't know if they make any money and by the way a lot of these brands glossy aside I mean let's see when and how they become profitable because you know I'm now I have this tiny little venture thing meaning I follow around my big brother venture capitalists and they I'll put in five I'll put in ten but they lost fifteen million dollars this year it doesn't matter I'm going to spend all this money it's free and everyone's chasing these deals like it's the hottest thing in the world long term and it's long term we'll see who wins and see you loses I think it's exciting look at supreme didn't didn't Black's rock buy them for was it a billion of five hundred million dollar money I mean it's you line up it's a sneaker store the small sneaker so it's god bless them that they could do that you know but so what but then the question is is there a market in building and creating brands that can effectively be sold to somebody else and I'll give you an example Walmart bought bonobos yeah what I think of that do I have to say it publicly well we're here you can you can realize my a few headlines here what do I think of it I don't understand it but we'll see what happens I don't understand it you don't know at which part that they bought they should have bought j.crew instead that's and that's a serious question would have when you were running the company or even today is the chairman if Jeff Bezos called you up and said look oh I think he should have he should have called you well we still could called well he should have because he would have purchased he would have acquired a machine of style and taste and fashion his what is it 26 billion of apparel sales whatever the number is versus us so we're rounding error on his daily stock trades he buy talent and it's talent we we are we're content in a sense we have this extraordinary design team marketing team and all that and that was not the first it was thought of to me we went to visit some of his team members on that it to me it would have been an extraordinarily smart thing to only you you went to him well sometimes you don't go to Jeff directly but you went to them yeah with the thought of that they should be interested in acquiring us and hasn't happened well there's no breaking news here so it's fascinating to me that you went him well III say we went through he didn't meet with us I met Jeff years ago but but I thought it was the by the way I thought Walmart should have done it - I thought Target should have done it the thing that these big companies need is creativity to see where the puck is going and to drive forward and it's still about the product I I you know I spoke to Eddie Lampert years ago about Sears being one of the great opportunities one of the great potential brand sellers in America jeans and t-shirts the the Sears archives extraordinary so you know this is not the normal kind of business it's an art and a science business and the art and the science come together and then it becomes the business but I think that there are companies that could have you know well warm what was the same thing you know you you kind of throw something out there and say is there any interest but look my if I were doing another business it would still be really cheap cool clothes the American uniform and done with great color style I have a I have a an act that I do it's color its key items its style and good value with great marketing and and an emotional connection to the consumer that's needed in this industry you're gonna make you're gonna go do that at this point my life you know maybe maybe maybe I don't know you mentioned potentially trying to at some point sell the company there were reports years ago that you were very close to a transaction with Uniqlo very close with Uniqlo but we got a little greedy he offered what was a fair price and we turned it down and then there was a leak I think it was in The Wall Street Journal right I think they found that who leaked the news and he was really upset about it and that was the end of the relationship in fact I I never heard from him again do you good friends you know I'm hurt do you regret not selling the company in hindsight look at the end of the day I worked for PE firms and I was I'm a 10% owner of course look do I regret it in life no in in business and measurement yes we could have sold it at a premium price and that was just about at the point where things started to tip and you did mention private equity when you look at the success or failure of some of these companies a lot of private equity money has been rushing in to retail there's always the question of AR you're growing too fast for trying to grow for growing sake and B the debt that goes on these companies does it make sense when you lose it makes absolutely no sense where does this old where does this all go from here well I think I had lunch with some good private equity friends yesterday and they're so afraid of retail today almost to the point where you know they're overreacted where does it go I have no idea where it goes I think there will be some great value there but it's not like the old days in retail where yes it's selling at a three or four multiple of its EBIT and is it gonna come back and you can look at companies there but then you have to figure out if there's a vision because you're not gonna win on on the lowest prices you're gonna win on differentiating product at great pricing and I looked at a company for my little fun then I say from fund it's little with other people it's a great prestigious brand and it's all made an American and decided that the only way this brand will ever be successful and return money to its shareholders used to go discount go make a deal with t.j.maxx make a deal with Walmart make a deal with someone and take this prestigious tiny brand and discount it and I and that's the only way out now we're looking at it and we'll see where does it go from here I I don't think it's gonna be the way it's been before and if anyone thinks that in my personal opinion they're gonna wait a very long time okay final question Vinny whoa pijn it up real estate what happens to all of these shopping malls well I've asked my real estate friends and there's one or two here who you know and I said to Steve that that I don't think it's a matter of filling stores and shopping space because you're gonna have pickup and delivery first of all the the traffic and cities around I you know out there were voices based in Austin so I go there once a month I sometimes think I'm in New York or LA in Austin I can't believe it this is a small city whatever so I don't think people are running to pick up their stuff it's stores anymore plus one you'll just call 1-800 deliver at this minute and you get the delivery anyway so I don't know what's gonna happen I think if you look at if you connect all the dots and look at the empty stores in this city it's in to get worse and worse the more people he Feuer mahir will have to answer that question everyone's asking for lower rents and they're not getting as easily as they like to we're all closing stores and people aren't lowering their prices yet on real estate it's sad for the cities because the fact is that you have three empty stores on a block with ten stores and it's the three or four blocks running it takes a little away look at Bleecker Street the hottest Street in the world but retailers are emotional they always overreact and right now we're in a period I don't know if they're under reacting right now I don't know what's gonna happen Thank You Mickey let's let's open it up for questions I'm sure there's a lot of people who want to want to ask a question this afternoon of Mickey Trexler it's harder to see at this go ahead sir you are visionary you've done amazing things what is your best guess for the retail future the retail store that could exist in 10 or 20 years well you know I can use all the cliche terms that are out there well I suggest buy if you want to see a phenomenally successful business go to glossy a showroom anyone been there and if anyone's heard of glossier and they open the store in Broadway last Sunday I know if anyone's seen it it's to me the epitome of an experience it's a fragrance store one fragrance I think you've got to have the right product you got to have the great imagination you've got to give someone a feeling about wanting to shop there and be there or else you've got to give them the greatest value in the world I think the technology we're all using the technology it's just a matter of having being loaded down with all this real estate way of paying high rents and every year your your ebody is going this way because in a store buy story but duh but I think it's still gonna be it maybe I'm old-fashioned but I still think it's gonna be the product the offering and being in a business that's just not out there the same way anymore but do you need another fragrance in America no but if you do it the right cool way do you need another sneaker accept all birds did a comfortable sneaker and they kind of made it cool the customers made it cool to wear whatever you think it looks like I don't know how many people here wearing old Birds today but you know it's kind of they say a geek sneak or whatever that means it went from zero to 80 million in about 10 minutes but that's what I think is gonna happen and it just still starts with a great idea and great product ma'am I worked with you who are you I was what's your name and it was one of the most exciting times in my career and you taught me attention to detail and I never forgot it but my question is how important do you think celebrity is in fashion today well again I am NOT an expert but look at Kim Kardashian the Gigi Hadid sisters millions of people I think it's really important great American jeans by which Kardashian sister did it the great American Jane same team yeah they're all do they all agree kkkk one of them did it I think the type of celebrities informed but I think just hiring a celebrity head paying him or her X amount of dollars and doing a normal thing doesn't work social media huge that's why the magazine's are this thin right now huge social media presence and you know even in the little company that I'm involved with Tyler the founder is very involved in social media she's there we did a glossier event and they were all kind of naked ish on the social media thing I called up the next I called her up the next morning Tyler you're the CEO you're the founder why are you naked ish she goes I didn't want to tell you so now you see it now it ran in everyone I looked at it MIT's but the world is changing rapidly so rapidly and but if there it depends on this selection if you can get those two or three to talk about you free or not free I think it's huge yeah well you know better than I do nice to see a Joe wid you work there oh cool right we're gonna let them get coffee Mickey Drexler thank you very very much the conversation thank you sir really appreciate it thank you a cupcake [Applause]

Channel: New York Times Events

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Length: 29min 3sec (1743 seconds)

Published: Thu Nov 09 2017