Episode 25: Episode #25: Increase In-Store Sales vs the Online Competitor with the CEO of Elkjøp ...

Computers now have primary control of critical vehicle functions. Welcome to the IBM Keep It Simple Technology Podcast, where each episode we discuss technology but in a simple way. We keep the explanations simple, but what we spend our time on is emphasizing what this technology means to you and how you can best utilize this technology for you and your business. Welcome to the IBM Keep It Simple Technology Podcast. I am your host, Thomas Anglero, Nordic Director of Innovation for IBM. And you know what? I think I outdid myself because I have one of the best guests ever on the show today. In the pre-talks, we're having such a good time that I violated all my rules. I said, "Frederic, stop. We got to go straight to recording." Ladies and gentlemen, we have the CEO, the managing director, the head honcho, the man himself of Elshop Norway, Fredrik Tønnesen. Fredrik, hello. Welcome.

Thank you, Thomas, and thank you for having me.

I wish people were listening to what we were talking about just moments ago. So let's get right back into it. So listen, the reason why I'm laughing, Fredrik is a great guy, right? This is one of these guys you want to move in, you know, just say, hey, let's jump in front of the pice. The fireplace, let's get a couple of beers, whatever, and just keep on going. Fredrik has got me laughing because of his amazing enthusiasm for what's just happened with Black Friday. So Fredrik, let's just bring them up to speed. So why we're both so wired, right? Why don't you tell them exactly what happened on Black Friday with a certain product?

Go for it. Yeah, of course. As many of you probably have heard, we have the PlayStation 5. Going into the Norwegian market. And of course we had a launch this year. We decided to do it together with Sony online to keep the crowds out of the store for this popular project. And now we had at launch 64,000 Norwegians pushing F5 and wanted to buy the PlayStation 5. And for us that was quite a big issue because we had like 1,000 of the PlayStation 5, and when you then have 64,000 just pushing F5, F5, F5, you're going to, what should I say, disappoint a lot of Norwegian customers. And, but the launch went incredibly well, but I think that it's kind of crazy you have a new product with not many games to that console and then you like I think if we had 100,000 PlayStation 5s, we would probably sell everything on Thursday and Friday.

That's insane. And you said, how many years you've been working at Elshop?

15 years now, and I've never seen anything like that. And the demand was so high, people sent me SMS, said, Fredrik, you're the boss in Norway, can you please give me a PlayStation 5? I said, I'm sitting here pushing F5 at the same time. I also want one of those.

You're my friend. We went to school together. I always loved you. Oh my God. You were the most popular man. And then when they didn't get the order, they hated you.

Probably. Of course. I also got some people were kind of mad saying that. Why do I was in the queue? Yes, that's correct. But this is like if you have a store and you have one toaster you want to sell and you have 100 people outside the store and then you open the door, you're going to have 99 disappointed customers afterwards. So it was an impossible mission, but I think that we solved it really well. And of course, now we have a couple of thousand PlayStation 5s in the Norwegians' home before Christmas, and hopefully we will get a lot more after Christmas.

What— so this, I think, let's, let's talk about the, the mindset of people, because you made a good point in that the PlayStation 5, there were no supporting games. I mean all the regular games worked on it. So there's something clicked in people's minds, and the PlayStation 5 was only sold online, right? People couldn't go to the store to pick it up. Did you have the American rush into your stores on Black Friday?

No, this year we wanted to do it a little bit different. So we spread all the offers over 9 days, meaning that we cut off all the hourly offers and everything so that we can manage to have full control in the store. The week turned out to be fantastic, even better compared to just doing a Black Friday. And I can just say that we see that under the COVID-19 pandemic, people like products that they can use home, new technology, so they can stay— because they are sitting inside their houses and flats and they want to have the new TV, they want to play, they need a new computer, they need a webcam, everything. For us, this period has been really, really good, and we're really happy to see that a lot of our products actually helps people.

Fantastic. I get it. I got so many questions for you. So this change of behavior with people, let me be more specific. Were people, when they're stuck at home, had any resistance to clicking on, okay, let me buy this 10,000 kronor Norwegian kroner TV set, or were they more clicking on something that was a lot cheaper, or people just didn't care? I need to buy something. What do you see?

It's the same split as always. I think somebody likes and needs the more cheaper product and somebody wants the more expensive, but now they just want more. And we saw that in February, March, when the Norwegian society closed down with regulations. People needed webcams and monitors, right? Because they're sitting in home office and we had like, I think we usually sell around 100-120 monitors a day in Norway and suddenly we were peaking at 1,200-1,500. So we sold out and even in some of the stores, store manager called me, said, you know what, today a customer wanted to buy our sales monitor. To just say, I want that one. But so of course then the demand is much higher and the actual stock of that product. But so we see that when it comes to the home office part, but then we also see that people are spending more home time home and then they also want to refurbish their home. So okay, I want a new TV, I want a new iPad, everything. So it's just like surfing on a wave.

And okay, so all this, were they going online and they're just clicking on buy, buy, buy, or were these people getting off their butts and going to the actual store?

Both. I think that the thing we see now in Norway and Europe and probably the whole world is that you see that the buyers get more, what you said, digitalized. So people tend to go into the online store more, but we see that the biggest increase we have at click and collect, meaning that you do the service surfing on the website, then you find a product and then you push, put it in the basket and then you say, I want to pick it up in the store.

Does that— so in the old days, being a couple of years ago, or maybe some places today, they go, online is threatening my brick and mortar store. I hate online. You're living in both. You have a leg in both worlds. How do you see that? Do you embrace— because you sound like you love online, right?

Yeah, but I think that if you don't love online now, then you can just close your stores also because you see that they live together. Because a lot of— if you want to buy a new washing machine, what do you do? You go to Google probably, telling washing machine, family, 2 children, and then you find some products. Okay, I want maybe that one and that one. And then you go into maybe Priseaktien.no in Norway to say, okay, who has the cheapest price?

Yep, exactly.

And then if you have done your research, then you have two options. One, buy it directly from the online store, or maybe you need more advice. So I think that if you can increase the competence of all the people all the time in my stores, the people and the customers would like to come there. They will probably start online, some will buy online, but a lot of them will also have recognition of, is that the perfect product for me?

So you're saying that differentiator, the way to potentially steal some of these low-price online websites, is your people in the store. Make them knowledgeable, make them extremely more knowledgeable and extremely friendly so that you actually win the customer's heart.

Yeah, I think so, because I have always said for the last 15 years, to compete on price, that's simple. To get the high volume, that's simple. How? Yeah, you can just lower the price and people will buy. But then again, you need to also earn money. If I don't earn money for my company, then I will probably not be in this company anymore. So you need to find a balance between that. But I think that the biggest advantage we have compared to real pure players is the people in the store and the store network.

So let's talk about this. This is great. This is awesome. The people in the store, you said you have to make them more knowledgeable. How do you do that? How much training do you do? And besides training, what about just, um, I'm going to get right to the heart of this. How do you make somebody be nice to a stranger? How do you teach somebody who's naturally, you know, because Norwegian cultures, a lot of cultures around the world, you know, it's not, it's not about going straight up to a stranger. I'm from New York City. We talk to each other. We don't care who you are.

That's so interesting because when I go, when I, when I go to the United States and you go into a store Oh, they're smiling. They are, they are talking to me. And if you do that to a lot of Norwegians, they're like, just, what is this?

I know. Trust me. I know. I learned the hard way. But so how do you, so this is really, this is priceless information. Yeah.

I can say that first, of course, under a pandemic now we have to think all over because we do trainings for $5 million a year in Norway, using a lot of money on that. That has now become much more digital. So we are doing a lot of digital trainings where we, because the market is changing so fast, it's new products, new technology every day, every week, every month. So we need something that we can push through to the 4,100 people in Norway so they can learn about the new product, the new technology. So that's one part. But again, when it comes to the question how to smile, How to be polite.

Exactly.

I think that if you want to be good, if you want to be good at something, you need to train, right? I think that the best people in business, in sports, everything, they train a lot. And I think that it's easy to forget that. So we have our classical onboarding when we talk about, okay, when you're going to meet the customer, how are you going to meet them? How are you going to find out the needs? Kind of product, what kind of services. That's the easy part, but then again, you need to repeat that, and that you can do in the store. So you need to do trainings in the store with role play, and one can be the customer, one can be the sales staff. So we do a lot of that.

Wow, okay. And then, this is great, your leaders, how do you train a leader to be a leader and train a leader to not be a boss?

Oh, now it's starting to get really interesting questions and a little bit harder. I think that, uh, I'm not trying to put you against the wall, it's just that, but I think it's a very interesting question because, uh, I remember when I was new as a leader, uh, and all the mistakes you've done, right? You think that, oh, I need to monitor everything, I need to look over the shoulder of every person that's hired. Yes, and I did those mistakes also. And Mark, maybe the biggest mistake, it was, okay, it's going to be done, I need to do it, then it's going to be the best. And then suddenly you start to learn, but it's not about having the best player. It's like on the football team, you can have a good player, but it's the team that wins, right? So I talk a lot about— 4 times a year I talk to the store managers, to the leaders about the story about what I believe in. What has worked for me? I think everybody needs to find their approach and their, what should I say, how to become and how to act as a leader. But I think that it all starts with engagement. You need the people that work for you to be engaged, meaning that if somebody does some mistake, you need to get acceptance for that in the organization. So the first thing I did when I went to Elsje in Norway was to say that, you know what, If we don't do mistake, everybody's going to beat us. Because if we don't do mistakes, we are not moving in the right direction. So we started that, right? So when somebody does that, that meaning that you don't need to do the same mistake 10 times, but you need to learn about it.

What you're talking about is a cultural shift.

Yeah.

Shifting the culture of the organization to allow people to make mistakes because that means they're experimenting. They're exploring, they're moving versus just standing there. Right?

Yeah, correct. And I think that because you have Amazon soon entering, they have entered Sweden, they will probably enter Norway soon. You have a lot of competitors that want to take Elshop. And of course, if we have a culture where nobody tries to be different, try to test new things, then we're going to be eaten within months.

But then, so I'm going to be challenging and again, not disrespectful. I just, I'm driven by this one. People again, Nordic cultures, Nordic, all the Nordic cultures aren't that way. But then, are you seeing a change in the demographics specifically? Are the younger employees, the millennials, are they easier to approach other people and be open versus your older salespeople or older staff, let's say, who are, 'No, no, no, no, I don't do that. We don't do that where I'm from. I'm from a small town. We don't do these types of things.' Do you see anything like that?

I think that of course the millennials, they are more open, but they're also more challenging. Ah, so again, of course they, they have higher demands. They want to be heard more. But I think that if you start as a new leader in an organization to build this culture, to be open, to talk to the employees, to visit the stores, then you will actually grow that culture and people will be more open-minded, even if they're young or older. I don't think that matters. When it comes to if you're going to change some IT systems, then probably the older ones will say this is not going to work.

How important is it to physically visit the stores? You just said it's really important to visit the stores, and you said how many times, how often do you visit the stores?

I usually do. I'm not, uh, I think I'm between 50 to 100 store visits a year.

And so when you're there, are you there and do you spend time looking people in the eye or are you there sort of as, um, CEO is here?

No. And I think that's a way, I think that, uh, when my regional managers and my head of operations, when he visits the store, he can do that part. I'm there to listen, to find out what is working, what's not working, what can we change. Is this something that we at the main office, at the headquarters, should do to give you a better day-to-day work life? Is there something that we should change? So I'm usually there just to have fun, talk to the people. Sometimes I still even sell to some customers, not that much. I don't think that—

I don't believe you. When was the last time you sold? What did you sell? What was the last thing you sold and when was it?

I think it was December last year and I sold a vacuum cleaner.

Did the person know that the CEO of Dell Shop is selling them a vacuum cleaner?

No, I don't think so. I haven't asked the store if they have gotten the vacuum back yet, but I think I did that.

That's great.

This is the bad thing. I think that means how to act and be as a leader. You need to visit the store. I visit the distribution center. I like to go to the shelves and put products up because then you know what the business is all about.

Wow, that's profound what you just said. You like to physically put products on shelves still and you're the CEO.

Yeah, without products you don't sell anything.

Boy, you just raised the bar for all leaders. Think about that. How many CEOs are willing to get their hands dirty and dusty on those shelves, you know, restock?

That's wow. But again, I'm taking decision about, okay, how is the plan going to be? How are we going to fill up the shelves and so on? If I don't try it myself, how should I know if it's working? Because I think that it's something I call the CEO disease. You know what that is?

No, please.

Yeah, you are the last person in the world to actually know something. Probably most of your organization have heard it before you hear it. Meaning that if something's not working, it's not always so nice to go to the top management saying that, you know, the new system or the new shelf automation we just did, it's not working. That's not going to happen. So, if you are out there, you get the information.

But how? Okay, I love what you're saying. And again, I'm not challenging you. I just need to— but I am going to challenge you. Every CEO— so, the majority of our listeners, the subscribers are professionals and a lot of leaders or wannabe leaders and a lot of CEOs listen to this show. And they were learning. And so, here's the challenge they have. They're stuck in meeting hell. Right? They can't get out of meeting hell. They have long days. Everybody's calling them like on the PS5, your 100 instant boyfriend girlfriends you got, then you lost all of them. I won't touch that right now. How do you specifically, how did you create your own environment such that you're not always in meetings from 8 AM to 8 PM? How do you, how do you, how did you create that? Number one, how do you manage that? Number two. And then the third one is work, work, private life balance. How do you balance out being the CEO, so popular, so much in demand, and then have a life? I think people would love to know how you do that.

Oh yeah. Let's start with the first one. I think that I have a lot of leaders coming to me saying that, Fredrik, it's too much meetings. I have so much to do and now I feel like I cannot do anything. And I've been there also. But as I said, okay, let's do one task. Put up all the things that you've done the last week. Put it on the board. Give me everything. And then like people fill out like 50 different meetings and tasks. And then I say, okay, remove 20. It's impossible. No, remove 20. And then they start to think, and then suddenly they are, have maybe reduced it with 50% saying that, oh, it's only 25% left. And you know what the biggest thing that people do that I believe they do wrong? They say yes to everything. And for me, I think that you need to prioritize all the time, meaning that it's okay to say no, I cannot do that. Or this meeting in one, that's going to last for 1 hour. Can we do it in 30 minutes? Can you send a pre-read with the executives summary so we just can discuss what we're going to discuss. So it's all about prioritization and saying no. You need to find out what's the most important for you and your organization so that you can deliver for the next 3, 6, 12, 18 months. Was that an okay answer?

That was a phenomenal answer. You remind me of Elon Musk, who, you know, you probably know, he, He hates meetings. As a matter of fact, last night he was interviewed on some show and he says he hopes PowerPoint dies, right? He doesn't believe in PowerPoint. And his rule is that one, there should never be a meeting. And if there is a meeting and you're in that meeting and you don't talk, what the hell were you doing in that meeting? Right?

And then you have a meeting for having a meeting, meeting the same stakeholders in the same meeting. And again, what kind of productivity is that?

But I think so many— I think I know so many people listening to this are like, that's my life. I have meetings upon meetings because a lot of people define their workday. Oh, I have meetings all day. That's a good workday. What do you think of that?

That's a bad workday. And I do some tricks also. I used to go into my calendar and block off time. I block off physical time every week, just putting nothing there. 1 hour, 2 hours, and then I can do whatever I would like to do. Visit a store, talk to a colleague, go out. But when it comes to like, you ask me how do you balance the private family life or the work family life, and I think that if I ask my wife, she will probably say that he's not good at that.

I thought that was great. You're human. Welcome to the club.

So I'm not the guy to ask for advice there. I'm terrible at that. I think I'm always at work. And then you ask, okay, but why do you do it? Why do you always need to be at work? You know what? I love it.

So then it's not work.

No, I think that if I just like say, oh, the clock is 5 o'clock in the afternoon, just stop, put down your computer, turn off your cell phone, I will be bored.

So, so, go ahead, I'm listening, please.

So I think that of course I like to spend time with my family and I do that also, but I think that I have so much passion and so I want to compete and I want to win the customer. I want to be the best. I want that my organization is going to be the best. And then it's really difficult to actually just turn off everything.

You know, everybody listening out there, Do you hear what Fredrik is saying? Do you not even know what he's saying? Do you hear where he's coming from? Here's a CEO who's blocking out time for his own, whatever he wants to do, and his company is excelling. How well is Elshop doing? Let's back it up with some numbers. How are you growing?

Are you doing well during this time of COVID Yeah, yeah, we were growing really well. Some, some of the information is not public yet, but I can say that I've been in Elshop in Norway for now 4 years. We had $1 billion in revenue in 2017, and now we probably are at around $1.3 billion.

Dollars?

Yeah. Wow. So little Norway. In little Norway. So of course we are like the number, the 60th, maybe 65 biggest company in all of Norway. And we are selling computers and toasters and Mouses. Yeah, everything. So, but again, we have been there since 1962, so we have, we know the Norwegian market. But again, I think that it's always that hunt for being a little bit better, a little, give a little bit extra to sell a little bit more.

And so there's the credibility. So let me just wrap this up and let me, like, with the name of the podcast, keep it simple. Let me keep this very simple. How do you become a successful CEO? Fredrik has given every one of us specific lessons. Block out time in your day for you, for you going in to visit the store. What I fell in love with, Fredrik, I will always remember that you are the CEO of a $1.3 billion revenue company and you're stocking the shelves. That's not beneath you. Matter of fact, you said it's fundamental to knowing how things are going out there. And you even sell products and you sell vacuum cleaner, which is hysterical, right? And then, and you don't like meetings. You tell your leaders to eliminate meetings. Look at their tasks, eliminate these tasks, right? That's another wonderful step that you said, right?

Yeah. Nobody gets paid to go in a meeting. That's not productivity.

Exactly. And then the last thing was the result of all those things and a whole bunch of other things is that you love your job. It's not even a job. You just love what you're doing. How many leaders, how many people love their job? Not many, especially during the time of COVID Most people are like, oh my God, right? This, you know, Frederic, this is— you nailed it, man. You nailed it. This is the best advice. This is what people need to hear. They're going, how do I succeed in a time of COVID How do I take my company? How do I grow it? Is about great leadership, correct?

Yeah, thank you. But again, I agree. I think that COVID has been, of course, it's one of the most tragic things that happened to mankind for many, many, many, many years. But again, all changes gives you a potential to get more energy, to get change, innovation.

Exactly, innovation. And this goes back to that thing you said before. You want your employees to make mistakes. Yeah. And that is so important, isn't it?

Yeah. Most important thing of all.

There you go. There you go. And how many people are scrutinizing their employees, are going, why did you make that mistake? And then you're scaring your people to not do anything new when that's the exact opposite, right, of what you've done, of what is necessary is to do new things. And it's okay to make that mistake. Because that's how you progress, that's how you mature, that's how you refine. Am I correct?

Yeah, of course. And as a CEO, I do mistakes every day, every day. And I think that's also fine. I'm trying not to do big mistakes, but of course, if you are going to push your organization, if you're going to be better, you need to test, you need to pilot, you need to do things, and then you are sometimes going to fail.

Do you have, how often you said do you talk to all your employees?

Out, I have once, I have every month, I have a podcast where I go live on Workplace inviting every 4,100 people in Norway to send me questions live. I don't know the questions, I just answer them. So we try to just raise the bar there so that everybody can ask the CEO, And it's a lot of difficult questions. I cannot answer everything, but I think that that's good for me also, because now they're starting to say, what is this? Why are we doing like that? Fredrik, what do you think about this? Again, then you get the pulse of your organization, right?

Awesome. So you put yourself out there. You're right on the front line to your internal colleagues. Fantastic. You know, Fredrik, Um, damn, I— if you should start a side job of mentoring other CEOs and leaders around the world, you would do really well. Ah, listen, as we look into the future and look into the future retail, what do you see? What trends do you see? Where do you see us going?

Oh yeah, that, that's really interesting. I can probably talk I could talk for days about that. But again, I think that you need, I think you're going to see, of course, the online part growing bigger. People will use the websites even more, but when it comes to the physical store, because this is a question I always get, what do you think about the brick and mortar? Is everything going to die? No, the bad store is going to die. The stores with bad location are going to die. If you are lazy and not following the trends, your store is going to die. But if you have the right store with the right, what should I say, cooperation with your online store, it will be okay. Because people, we see it now, they are surfing more online, but still we have a 330% growth of click and collect in-store. We saw, we have seen in November that the physical store is growing at the same pace as the online store.

Really?

Yeah. And I just like, oh, this is really, that was unexpected because we always for the last 5 years, the online store has way grown the physical store. But again, we're gonna have to ask, okay, why? I don't have the answer for that yet, but I think it's about also that if you're going to do an investment, like let's say you're going to buy a TV, it costs $1,000. That's a big investment. Are you really sure that you're going to find enough information online? Or can you come into a store and talk to a person who really knows about the TVs? He can ask a question, okay, what kind of living room do you have? Is there a lot of light? How far away are you going to sit? What are you going to connect to that? That part, if we— that works in both online and physical store business— if we can solve that problem for our customers, it will be no problem for us. But again, I see that if you have a bad location or not a good logistics setup, then it's going to be hard.

You know, Frederic, thank you. I think I want to keep on going. We should be keeping going. But what you said now is so profound. I think this is the perfect place to end the podcast. It's— I am blown away by all the information you shared. And I think that's a testament to you in that even many CEOs wouldn't even dare to even talk about the things you did. And you talk about it so openly. And you've answered so many questions about where are we going and also how, how to get there and how to lead. So, wow. Fredrik Tønnesen, CEO, Elshop Norway. I bow to you and I thank you so much from all of our subscribers around the world. Thank you very much for sharing and being so open. Thank you.

Thank you for having me. I'm kind of like sweat now, warm, like engaged. It's been a really good hour, hello, half hour.

Wonderful. I hope your wife doesn't come in the room now, then I'm in trouble. Listen, everybody out there, this is the IBM Keep It Simple Technology Podcast. We're available on YouTube, Spotify, iTunes. We are on everywhere. Please listen to all the episodes we have. And most importantly, during the time of COVID you may be listening to this after COVID or whatever, but irregardless, everybody take care of yourselves, take care of your loved ones. At the time of this recording, is soon the holidays, is soon Christmas. So to everybody out there, Merry Christmas. I love you to death. And Frederick, thank you so much. All you other people out there. Thank you so much, and until the very next episode, take care everybody. Bye-bye for now.

Bye-bye.