Encore - Revitalizing Retail

You. Hi everyone. Welcome to this encore edition of my interview with thought leader and absolute leisure when it comes to retailing. Jim Inglis. Now Jim is the author of Breakthrough Retailing, has significant experience with Home Depot and consulting with companies across the world on how to achieve breakthroughs in retailing, how to revitalize retailing, and this was an excellent episode. It was much loved on my previous show, the 1% difference. And so I'm bringing it to you here today for chats with Jason. Hope you enjoy the episode and as always support the show by giving it a like sharing it and of course by picking up a copy of the author's book. Hey everyone, welcome to the one percent Difference show with me, your, your host, Jason S. Bradshaw. The one percent Difference show is here for you to help you stand out and succeed. A 1% extra focus on customer experience, employee experience, brand experience, product experience, your business, your life, your career is all the difference it takes. Joining us today is Jim Inglis, author of Breakthrough Retailing. Jim is a world renowned expert with 760 years experience in the retail home improvement industry. He's served in executive positions with the Home Depot for 13 years and is currently the president of Inglis Retailing. Jim has helped shape the industry worldwide as a special advisor to the boards of leading home improvement home improvement retailers across the globe and in 2015 was honored with the lifetime achievement award from the Global Home Improvement Network and the European DIY Retail Association. Inglis is also the author of the newly released book Breakthrough Retailing How a Bleeding Orange Culture Can Change Everything. Jim, thank you so much for being part of the one percent Difference show.

Thank you Jason. Glad to be here.

So Jim, Breakthrough Retailing, what led you to write the book?

Well, as you mentioned in the introduction, for the last 20 years I have made a career of traveling the world and working with home centers all around the world, building material retailers and working primarily with their middle management, educating them on what are the principles of a high productivity retailing. And at the end of every one of those classes I had so many of them come up and say you ought to write a book, you ought to write a book. And I thought, well, you know, someday I might do that. And then, you know, I would write a few, a few paragraphs in the first chapter and then kind of put it on the side for a while. But then when Covid came along, it gave me a chance to really stop traveling around the world and really focus on hey, this might be a good idea. So I basically the book has got two sections. One Section. The first section of the book is the history of Home Depot. And of course, as I went around the world, there's incredible interest in why is Home Depot the largest home center in the world? How did Home Depot change the whole industry? You know, what, what is that magic difference that makes them so much bigger and so much more profitable than anyone else in the industry? So that's the first half of the book. And then the second half of the book is really the principles that you can learn from observing what happened at Home Depot. And essentially those are the, the. Each, what I've done is design, is list those into 10 principles and each of those principles is a chapter in the book. So the first half of the book is basically a history book and the second half of the book is basically a textbook. And like I say, I wrote it really because I had so many suggestions that people would like to know more about the Home Depot. And knowing that those principles could help a lot of retailers. And you know, there's a, I heard somewhere that, you know, people die, but words live on. And so to me it was sort of a legacy thing to say, let's take all of these notes, all of this learning that I've done over the 60 years and try to put it into a book. And as a result, it's a very thick book. It's 417 pages, I believe. So it's a heavy book, but it's really two books in one.

Look, it might be 400 plus pages. And I know you referred to as part of the book being a textbook, but for our listeners, I cannot recommend this book enough. It is such a great read and clearly comes from a place of passion and, and experience within the Home Depot world. And of course, the work that you've done through English retailing, working with other organizations around the world. Within the book there's, as you mentioned, the two sections and then that's broken down into four parts and then each of the chapters. One of the chapters that you talk about is Building a Winning Culture at Home Depot. How important is culture in business?

Well, as you know, the book is called Breakthrough Retailing, but the subtitle is, you know, How a Bleeding Orange Culture Can Change Everything. And so the real point of the book is that culture can change everything. You know, there's a saying by Peter Drucker that said, you know, culture drives performance. And that is really the essence of the book. In fact, it's the last chapter in my book is that culture does drive performance at Home Depot. We had a Unique culture. It's interesting that as Home Depot grew and started going across the country, there were, at the time of the first year, which is 1980, as the first full year of Home depot, there were 32 home center chains in the United States. And as we went into each of those markets, all 32 of those companies went out of business, except about six of them said, well, we'll invest more money and we'll compete against Home Depot. And so they too opened big box stores. They opened big box stores, they copied our merchandise, they even copied our pricing. But they failed. And the reason they failed is they didn't have the secret sauce, they didn't have the magic elixir, which of course was the Home Depot people. And those Home Depot people had that unique bleeding orange culture.

So culture obviously plays a part in, in the business. It is relatively easy, some would say relatively easy, to create a culture when you are only one or two stores. How do you keep that bleeding orange culture as Home Depot expands to the largest home retailing business in the world?

Well, the way it worked at Depot is, first of all, every company is a shadow of the people at the top, the person at the top. And the, the culture at Home Depot was a servant leadership. And that servant leadership created a bleeding orange culture, which was a culture of decentralization and delegation, in other words, pushing decisions down and out into the, into the organization. And this requires that you, that you empower these people. And in turn, they have to take ownership. They have to take an ownership in that, in that, in that empowerment. And that ownership is taking ownership of the mission. And once they grasp hold of that mission and they see that that mission is something bigger than themselves, it's something that they buy into, then you really can delegate, you really can push those decisions out. Of course, you have to educate your people and you have to educate them not just in how to do the job, but why. Why do we have these principles? Why do we behave this way? Because if they understand the why, they're going to make good decisions and, you know, they may not be perfect, but they'll make enough good decisions and they will be. You know, when you, when you've got 2,000 stores, there's a lot of stuff going on out there. There's a lot of issues that have to be addressed in order to be customer focused, in order to stay focused on your customer and to respond to that customer. And you need people who have taken that ownership, who understand the mission, who understand the why of the mission and know that they're empowered to solve that customer's problem or to create the new opportunity for that customer. And so the key to growing to 2,000 stores is in fact, that whole idea of pushing decisions down and out and creating an ownership culture in the company.

So there is a lot of conversation around the Home Depot customer experience. You talk about the ladies and gentlemen that work at Home Depot being absolutely fanatical about serving the customer. Yet, you know, like any business, I'm sure you had staff turnover, you had location challenges from time to time. How did you keep people focused on caring about the customer despite what might be happening behind the scenes?

Well, as people interact with the customers, they're going to have success stories. And it's so important to recognize those success stories and to reward those success stories. People, people need to work for money because they need an income. But that's not the only reason people work, and that's not the only reason people stay where they work. Because money alone will not create loyalty with the customer. What will create loyalty is buying into the vision, buying into the mission. And people want to be part of something successful. They want to be part of something good. They want to be part of something bigger than themselves. And so it's very important that management recognize not only that the employees and the associates need to have a good wage and not a minimum wage. Heavens forbid that we would pay a minimum wage, but pay above minimum wage, above the market wage, but also make sure that there's that emotional reward. And this happens by recognizing and celebrating and creating these stories and then as management repeating those stories and telling those stories over and over so that they become part of the fabric of the company. And that's how people become part of this, like you say, fanatical group. It was very much like you could go to a Home Depot store meeting and you would think you might be in a religious meeting. And because it's pretty emotional and it's because people believe and they bought into the stories.

I love that. Reminding us that employees work for us for more than just the paycheck. It's obviously a starting point, but they don't stick around for that. They can always find a paycheck. Paycheck somewhere else. So, you know, what strikes me about the Home Depot story is that this growth over the last 40 odd years has had to endure some significant changes in retail. You know, as. As Home Depot rolled out store after store, you know, e commerce became a thing. And there was, you know, we've all heard the story stories of many major brands struggling with the competition that E Commerce has bought and the likes of Amazon and I'm not, not by any stretch of the imagination trying to beat up on those disruptions and Amazon's done some amazing things for people. But how did Home Depot continue to stay relevant and customer obsessed despite all these new, new challenges in the marketplace?

Yeah, well, you know, speaking of, of Amazon, you know, Home Depot today is a brick and mortar store, but in the United States they also the fifth largest E commerce retailer. And Forbes magazine just did a survey and mentioned in their survey not only it's number five in sales, but it's number one in trust. So Depot clearly has made that transition from a brick and mortar company to an inter, interconnected Omni channel retailer. But there's other changes that are equally big. You know, if you think, if you look at back when Home depot started in 1980, it was the, the target customer was, was the DIY customer. It was pure DIY. Today Home Depot says that 4% of their customers provide 45% of their business. And that's the pro customer. That's the customer who's doing repair and remodel. Well, what has happened over this period of time, the people who were the do it yourselfers 40 years ago when they were 20 are 60 today. And what you have is you have an aging population. You also in most cases have a more affluent population. Well, age and affluency create a decrease in DIY and an increase in do it for me. And so Depot has made a huge transition in terms of who they're targeting Target customer is and where that, how they serve that customer. Also, we didn't really have, it was pure diy, so we didn't have an installed sales program. But if you look at today, there's many different ways that you can have your, your project not only designed and procured and delivered, but actually installed as well, working with the Home Depot group. So, so you're right, it has made a lot of changes and it's because it's a learning organization and that goes back to culture. You know, you can have culture that puts you in a box and you can't change. That's a very dysfunctional culture. Or you can have a learning culture. You know, if, if you look at the history of retailing, you know, look at when I was, when I was going into the retail business many years ago, there was no question the number one largest retailer in the world was Sears. And today Sears is a bankrupt company. The first nationwide discount store in the United States was Kmart. I know you have a Kmart, but that's different. Kmart down there. The Kmart up here was the biggest and it's gone. The first big box sporting goods store. Sports Authority created the industry. They're gone. Toys R Us created the toy industry. They're gone. All these people invented their store, defined what that market was, grew like crazy, and then died because they had a culture that said, you know what, we've got the right formula right now and we don't want change. In fact, we want to keep things the same. We don't want those crazy merchants to start screwing up their business. We don't want any surprises in this quarter. And so we're not going to risk any new idea. We're not going to allow any chaos in the company that might actually create some good outcomes. And the result is they kept opening the same stores for year after year after year. Those stores were stale, they were unexciting. And eventually the customers lost interest in them and they found other places that would be more exciting. So change is, there's only one constant and that's change. And you have to have a company that, like I say, is a learning culture that will accept change. And in order to do that, you have to be willing to experiment and you have to have some successes. And guess what? As you experiment, you're going to have some failures. And you have to be willing to have that kind of environment where you're, where you allow experiments, where you allow new ideas and you accept a certain amount of failures. You know, Home Depot went through a very difficult period and you'll read about it in the book. At the end of the first 20 years, the original founders, Bernie Marcus and Arthur Blank, left the company and a new CEO came in from General Electric. His name was Bob Nardelli. And the GE culture was one of command from above. And the whole idea of decentralization was an anathema to, to anybody from General Electric. And so, so the, under this, for a period of seven years, the culture was pretty much turned upside down because it wasn't okay to try, try something new and fail. In fact, if you failed, you were gone. And as a result, during that seven year period, Home Depot lost market share. During that seven year period, even though their sales were increasing as they opened more and more stores, they were in that same downward spiral that Sears and Kmart and, and Toys R Us, all those were in. And that, yeah, they were opening more stores and that created more sales. But if you looked at what was happening in the company, it was disintegrating, and the stock market showed that. And so at the end of seven years, the board finally took action and Nardelli left and a new CEO took over also from General Electric, strangely enough, but with a completely different attitude, A different attitude of stopping where they were and listening to the employees, listening to the associates, and listening to them talk about how did it used to be, how is it now and what is our problem and how can we change it. And he re embraced many of those principles that the company used during those first 20 years to establish that right culture, to establish. An organization that was willing to change and could change. And so since that period, Depot has regained its strength in the market and has consistently, consistently grown and, and, and outperformed essentially all the other retailers in this industry. So, you know, change is critical. Change requires experimentation, and that has some failures. And you, you embrace the change, you accept those failures, and you move forward and you can stay current, not only current in the industry, but you can become the leader in the industry.

And a great reminder that to anyone that's listening, the power of just an individual. I know that we're talking about the CEO of the organization there or two CEOs, but really at any level in the organization, you've done a lot of work with middle managers across the globe in retail. And you know, I would argue that they have just as great as ability to impact the culture of a team of an organization, as does the CEO. Would you agree?

Yeah, they definitely do. And you know, one of my pet peeves when it comes to a lot the way most businesses are run today is every department or every section of a company has a set of KPIs key performance indicators. And to me, it's sort of a lazy way of, of doing job reviews because what it does is it, it, it takes away the subjective part and turns everything into a number. And that makes it easy for you to give your, your review. The problem is that when you try to set up what are the numbers for logistics and what are the numbers for human resources and what are the numbers for store management and what are the numbers for, for merchandising? If you only look at the numbers for that section, what you'll find is by creating that number as the goal, you put every department in the company against each other. The enemy is no longer outside the company, the enemy's now inside the company. To give you an example, the store knows that it needs to have good turnover, but the logistics people know that if they can take a shipment from China and it's coming to the United States, but they can route it through Canada. They're going to save money, but it's going to take an extra three weeks. So the logistics department says, look how much money we saved on the container. Meanwhile, the store is saying, I don't have any merchandise. My customers are going without product. And so now you have conflict inside the company. And so I think that, you know, to me, one of the biggest problems in the companies today is that the KPIs are not focused on the customer. They're focused on that selfish goal for that one independent piece of the company, and it's not focused together on the customers. And so what happens is you do have individual managers in these different areas that could make a huge difference if they would focus on the same goals, but instead they end up with an internal conflict. So, yeah, the middle management has an incredible impact on the ability to satisfy the customer, the ability to like the customer. But too often they've got goals that are counterproductive to taking care of the customer.

And that's why mission, as you call it, is so important, right? Because that becomes the guiding star, if I understand correctly, the guiding star for how a decision is made. So in your example, if logistics could save a couple of dollars by routing it through Canada, but their mission, first and foremost is to delight customers, then perhaps they don't make that decision to save a couple of dollars if it means customer delight's not going to happen. That's the whole point you're making with Mission, right?

That is exactly the point. You know, the mantra has to be, you know, we will give the customer no reason to ever shop anywhere else. And everybody has to have that goal in mind. Well, being out of stock is a pretty good reason for someone to shop somewhere else.

Certainly a way to encourage them to look elsewhere, that's for sure. So in the book, Jim, you've got, as you've mentioned, you've got 10 core principles of retail. Principle number one, merchandising is an art of embracing change. Now, you've talked a lot about the need for a learning culture, a learning organization, the importance of being able to try things, and sometimes those not being the most successful endeavors, learning through failure at times. But what do you mean by merchandising as an art of embracing change? Because I'm sure when people hear the term merchandising, they're not necessarily thinking about change.

Right. What we know in the retail industry is that there are thousands of variables that are changing on a daily basis. The in the legal change, there's legal changes, there's competitive changes, there's environmental changes, there's pricing changes, there's vendors changing products. There's vendors going out of business, vendors coming back in. There's. There's. It's a very dynamic business, what you don't want to do. And, and you know what happened to Sears, what happened to Toys R Us? They set a formula and then they kept that formula. What you have to realize is that change has to become the mother's milk of your merchandising activities. And what happens, you have to know the customer so that by knowing the customer, by really knowing the customer, not knowing about the customer, but knowing the customer and having empathy with that customer, you can see the changes in the market and you can initiate changes to respond to that. But what you don't have time to do in many cases is to bring in consultants and professors and let's do a study, let's do a research, and let's figure out what that, what that one formula is, and we'll just, we'll just make this into a scientific endeavor. Of course, if you have good data, you should use it. Of course, if you have good data, it's very helpful in making a good decision. But it's unlikely in a retail business that you're going to have all the data you need to make that perfect decision. And as a result, you've got to have merchants who are empowered to make decisions. Make decisions on what? Whatever data they have. But combined with their innate merchandising talent, combined with their empathy for the customer that they've learned by interacting with the customer, that they've learned by working on this floor of this, of the store, by, by, by listening to the frontline employees on the store. You have to, you have to. Not just if all you're going to do is say, well, you know, I really, we really don't know what we should do. There's so many changes. Let's do some more studies on this before we make a decision. Well, that's called analysis paralysis. And most often, the people in the middle management, they're not looking for more data. They're looking for a decision. Give me a decision. Tell me, what is the mission? What are we trying to accomplish here? Where are we going to go? How are we going to respond to this new change? So they're not looking for new data. They're looking for a decision. Well, that decision many times needs to come from a merchandising talent, merchandising group that can say, you know, we've got enough data that we can combine that with our innate knowledge of the customer, that we can combine that with our natural feel for merchandising. And we can, we can now get in front of the curve because what's going to happen in this world is you need speed to market. Think about this. I was talking to my custom, my client in Germany just this last week said, think about this. How long were you a physical store, a brick and mortar store? Decades. How long have you been an e commerce store? Years. How long have you been involved with COVID Months. And how, how long have you been involved in the inflation and the shortage of supplies that's now hit us as a result of COVID weeks? So what do you see is you go from, from change after change after change, but the change is speeding up faster and faster. And so, and so that's why I say you have to be an artist because you have to take what data you have and you have to combine it with your innate ability, with your feeling for the customer and make decisions to move forward to implement that change. And the companies that are the senior management that just says, you know, I'm going to get more data before I make a decision, frankly, is going to get left, left behind because the companies that have aggressive merchants who will take that initiative are going to be the ones that take speed to market. They're the ones that are going to win the customer's heart.

What fantastic insight. And of course, we're just touching the surface of all the insights in the book. Jim, if people want to stay in touch with you, follow your work, get a copy of the book. What's the, the best place for them to visit?

To do that, the best way would just go to the website. It's breakthrough retailing.com.

Fantastic. We'll be making sure that there are links to Breakthrough Retailing and how to get a copy of the book on all available formats in the show notes. But Jim, before we move on to the bonus session, I have two questions to wrap up this part of the show. The first question is, if I'm not in retail, what can I learn from retail? What's one thing I should learn from retail and apply it no matter what industry I'm in?

Well, I would say that whatever business you're in, that leadership is going to set the values and demonstrate the behavior that is going to create a culture that will install a mission that people can grasp onto. And the end result of creating that mission is going to be extraordinary performance. By ordinary people. And that was how we always looked at our staffing at Home Depot, was to say, you know what, we don't have to hire the people with the highest education. We don't have to set big thresholds for people to be part of our staff. We just need people who are ordinary people, who have a strong work ethic, and we will provide them with a mission. We'll provide them with that mission. They'll buy into that mission. And, and you know what? They will exceed. They will. They will perform at exceptional levels. And I think that is the message I would give to any business, is that culture drives customer experience. That defines your brand. And if you can get those. If you can get your ordinary people to embrace that mission, they're going to take care of the customers and you're going to be successful.

Fantastic. Fantastic. Now, the last question before our bonus round is, I'm in retail. If someone listening today is in retail, what piece of advice would you give them to help them grow their career.

If they're an employee in retail?

Yeah.

Well, you know, my attitude in retail was that I always appreciated that I had a job and I didn't come into my job with a sense of entitlement. And I think that people come into a job with a sense of entitlement are going to always be disappointed. And in the retail business, what, what is good about retail is that your performance can immediately show results. And that's what I love about retail, is that you see the results very quickly. And so you need to be results focused and earn your position. Don't feel you're entitled to it, but feel like, you know what? I can earn this position and earn it by making the numbers right, and I'll do that by taking care of the customers.