Retail Podcast 405: Dan Hodges on the Design of Experience Retail

Bob: Today my guest is Dan Hodges, CEO and founder of Retail Store Tours. Welcome.

Dan: Bob, it's great to be here.

Bob: Always great. Now you and I go back. I've been on several of your store tours in New York City. So just bring our audience along. I mean, how did you get into this business? I doubt you were five years old and said, “Mom, when I grow up, I'm going to lead retail store tours around the world.”

So just give us a bit about how you got there and what you do and where you do it. How's that?

Dan: Well, a funny thing you mentioned my mother and five years old, because when I was five years old, Bob, my mother had a clothesline on me in the supermarket and the department store to keep me from running out of the store.

So, if she were here today, she'd be finding this very humorous. So, you know, I wasn't sitting under the tree one day and an apple fell on my head, but not, not too dissimilar. I had the great, great fortune of working with the NRF for the past five, five or six years. And, my first time at the NRF, I thought it was a great show, but I ended up getting lost. I didn't have my mother with the clothesline back then. So anyway, I created a program, which is called Expo Tours, which is still in effect and going strong after five years and that program, we basically find out that the key areas that are of interest to retailers then we create tracks.

Knowledge tracks based on artificial intelligence and future tech and customer journey. So about five years ago after we were done with our very first Expo Tour, I asked for feedback. And the feedback was shocking because the feedback you're expecting is, “This wasn't right. This was late,” or whatever was wrong.

The feedback was, “This was perfect. Don't change anything,” which was completely shocking for me. And, but pleasantly shocking. But the feedback, I remember someone from Woolworths, Australia, pointed at me and said, “You know, it got us, get us out to the stores.” And I said, “All right.” So, about three years ago or four years ago, we started Retail Store Tours to answer that question.

Now you know, Bob and probably the listeners know that a store tour means 10 different things to 10 different people, maybe 20 different things. So anyway, so we started around 10 years ago, I started the process of curation 10 years ago with executives and board members at big events.

That same process that I've used for the CEOs and boards, we incorporated to the Retail Store Tour. And so, the store tour basically can be two days, or it can be two hours, generally around two hours long. And this will sound like hype, especially to someone with your background, Bob, but it's transformative, these two hours.

And how can I say that? We've had around 3,000 people take them and they all say that. So, I guess scientifically I'm on good ground.

Bob: Well, I would join in that. I would say they are transformative because what is different, and I don't want you to think that I'm overhyping, but what's different about you is you really are able to isolate out, “This is why this is interesting. This is why this is different.”

 I think because you're in the streets so much, you're able to call out, “Yeah, this was a pilot,” or, “Oh no, that's really been there for two or three years,” or, “Oh, I would've thought they would've.” I mean, you have the context. To be able to make it transformative, it's not just a movie star tour of retailers.

Right? It's not like, “Over here, just look,” I think you're able to ID the significant trends and I applaud you for that.

Dan: Well, thanks. As we go through life, there are certain patterns that we recognize and, you know, the idea of experience retail, it goes back to 1957, with Walt Disney and Disneyland, but it probably goes back a couple thousand years before that.

So, the idea of experience retail, is something that is not particularly new, but, I think it's the context of where we are. So, I think where we are on planet earth, is, we had the smart phone and the smart phone came out basically in 2007 and you know, I plan global sales for Nokia, so that's a market I know well.

 But the big miss, and maybe you've talked about it, but others haven't. The brain has been essentially rewired with this device. And not only just you and me, but 6 billion people. So when a comet hits the earth, like the smartphone, and rewires the entire population, changing behaviors, you know, it's pretty profound.

And, you know, the one thing that we do talk about on the store tours, in addition to the seven habits, is that, we have these really, really powerful senses called the nose, the eyes, the ear, the touch and the taste. And, there's a report out from Erickson which looks at the top 10 consumer trends in 2030.

And they basically summed up that over the next decade, the action will be sort of optimizing the senses. This can be done for software or AR / VR, but it can be done at places like American Dream, which is the big center that's opened.

So, you know, we're living through a really exciting period in history. And also, you know, in addition to retail, we have investment banks, architect, CPGs, travel companies, and automotives on these tours. And I think the role retail plays in the consumer market or the retail is the canary in the coal mine, and as soon as behavior shifts, boom, it manifests itself at retail. Either, you know, an Amazon being wildly successful, or Ali Baba. Or, new stores. I'm not sure if you had seen CAMP when you were on one of the tours at Hudson Yards. And I mean, that's, that's all part of this big experience trend.

Bob: Well, I think we are seeing is the rise of the boutiques is what I've seen. It's like no longer is bigger, better. All the big boys want to be smaller and seem like they're smaller. And some of those legacy brands like Gap, who physically had to have big stores cause only used to when they started, only got jeans twice a month, right? Don't need that much space. So now what are we going to do with it? And I think some retailers have it figured out brilliantly. I think other ones are struggling.

Before we go too far, I want to make sure that everybody understands that you're not just in New York City. You do London, you do Paris.

I think you have Los Angeles, pretty much any major, and of course, in the China market, I would imagine as well as, other places, anyone can take a store tour. Is that correct?

Dan: Anyone can take a store tour. Every market has its own. We opened up Shanghai, Hangzhou and Beijing over the summer.

We've done Europe for a number of years, and so, yeah, anyone can take a store tour. And the thing I like about the store tour, whether it's, you know, 15 executives from L'Oreal or 15 people that don't know each other, is the level of engagement and the conversations that are sparked. It initiates the conversation that you wouldn't have with a complete stranger.

And you know, within the first 15 to 20 minutes of this, you're having big discussions about people you just met and I just find it so interesting that this behavior is so prevalent.

Bob: I think that you get to get a window on a very different way, you know, when I go shopping, and I was on your store tours, I'm always looking at the little details.

I'm looking at the fact that on the, I think it was the Neiman Marcus at Hudson Yards on the taxi there, even all the way down to the bumper sticker and to the wording on the side of the taxi cab, someone had really thought about it. And the license plate, and people aren't just throwing things up, we're in a new era, I think, of visual merchandising. Would you agree?

Dan: Oh my God, absolutely, and a good example. I'm not sure if you got a chance to visit Brooks Brothers, which is on the first floor of Hudson Yards, but I thought, “Oh, there's so much there.” Like when you look at the design, the design for Brooks Brothers, which was the first prototype, small scale store, started in Shanghai.

So you know, here usually things go West to East, now things are going East to West. And I had seen the sister store in Shanghai, at one of the shopping centers there, and it's about 90 percent the same. But, when you look at the use of the LEDs, the, what I call it, the mindfulness dressing room.

It's a work, it's a masterpiece of art and design and colors and anthropology. That when you go in there, it's you can't be but sincerely stimulated in a way that is very unique.

Bob: I have to ask you, so you're talking about mindfulness in the dressing room.

Sorry, you have to ID that for me, my friend. What does that mean to you?

Dan: Yeah. So, so mindfulness. It’s the ability for you to be with you in a peaceful setting.

So when you go into the Brooks Brothers dressing room or the Gucci dressing room on Wooster Street, you close the curtain and it’s sound deadened to the extent that it can be, so if you're by yourself, you have different sound level, you're surrounded by a 180 mirror with a beautiful, lush green carpet and beautiful wooden mirror that's 180 degrees and it's just you and you looking at you and deciding whether you want this, in a place that is beautiful, that is sort of, you're detached from the overall experience of the store.

And, you know, and, but that's not it Bob, because when you exit the Brooks Brothers and you go to the Conservatory, which is another store on the first floor of Hudson Yards, there is a wall that is Provence. You can smell the lavender and all that beautiful sense of Provence, and there's a mirror.

If you slide that mirror open and you walk in, you're walking into Provence, because in that room, behind that wall with the products from Provence, is Provence. You can see a video of the lavender fields. You can smell the lavender, you can wash your hands in the sink there, you can take a nap on the comfortable chair there.

So, you know, I'm not pushing mindfulness, I'm just observing it.

Bob: But that's the key though, is you are the one that's observing and you're telling people, “There's something here.” And that's what, I appreciate that a lot of retailers, a lot of people say, “Oh, it's all about magic mirrors.”

And I'm sorry, I don't vote on that side of it, mainly because no sale is complete until you actually try it on. So, until she gets it home, until she sees it fit her curves, her body, anyone can throw a dress on somebody and say, “You look great.”

But ultimately to craft that experience that you are walking us through in that 180 mirror and to be alone and someone has thought about, you know, reducing the sound and elevating the experience is what's going to, I think again, capitalize on what many retailers now realize. That the store is the hub, that everything branches from the store to everywhere else and not, it's an afterthought or something to be afraid of. And the smart retailers understand that. Would you support that?

Dan: A hundred percent Bob, a hundred percent.

You know, it's all about the store design as an experience. And, you know, I think you and I had spoken at the interrupt, but to me, the most important element, just, you know, “One thing? What would it be?” It would be people, because, when you look at the human software part of it and the training, that makes all the difference.

Like, I've been in Sephora around the, pretty much, United States. And every experience, every time I go in there, it's the same experience. So it's very consistent. When you go into the Microsoft store on Fifth Avenue. I was asking the person who was giving us the tour what his background was, and he's a stand up comic.

And he was great. I mean, he delivered all the lines and he had us.

Bob: He’s comfortable in playing that role. I totally get that. I appreciate that.

Dan: Right? Yeah. And, and at CAMP, I asked the New York manager, Kyle, I said, “Well, Kyle, tell us, tell me about your criteria.”

“We don't hire retailers, we hire actors.” So, I thought, “Boy, oh boy.” I mean, it's like the mindfulness, the triangulation of the thoughts in three different areas. And now we're looking at another level of a training. When you go into a b8ta. They also have actors there that are highly trained in the product. And, so, you know, it's all about the many things.

But first and foremost, the most important thing is, as Angela Earns had said, we hire people who are kind and evaluate them on empathy. So, if there is a magic … Nordstrom is going into this, we had a wonderful tour at Nordstrom and those people, they were just lovely and phenomenal, from the moment you walk in from the security guards to anyone, you come in contact.

A colleague of mine said that they had a question. There was someone stocking a shelf in the shoe section, and she turned around and said, “I'm going to show you where Women's Jewelry is.” So she stopped stocking the shelf of shoes, physically turned around, got up and took that person to where jewelry was in Nordstrom.

Bob: Okay. So that's great. But we shouldn't be surprised that someone got great customer service, right, Dan? I mean, we are now like, “Wow, wasn't that amazing?” I mean I grew up in department stores. I was lucky to be trained by the old white hairs, in the ’70s.

And they taught you from day one, the customer is most important person. And so, what you're see is the same thing I see, which is retail has always been about being brilliant on the basics and the basics all come down to human interaction. Now, when we were on the tour a couple of weeks ago, you had started a little list to tell me, you know, I have five of them written down, but I think you'd said there were seven of what you see that the best retailers are able to do.

Could you unpack a little bit of that for us? 

Dan: Yep. And we've actually picked stores that are our 2020 winners, but it's the human touch, and again, it's that, you know, higher on kindness and basically rate on empathy. The second is employee training. If you look at Sephora, they have Sephora University, they have quizzes every day.

Brooks Brothers has what's called CARE, an acronym regarding their philosophy toward customers, they've been around for 200 and something years, so they must be doing something right.

The use of technology to enhance the customer journey and Sephora is brilliant at that. Whether you've got, you know, men or women, they can't help but be completely amused by the color IQ.

The next one is store design. And a really good example of that is the Starbucks Roastery in Shanghai. We had a tour with Proctor and Gamble with the architect who designed it. And, every single - the acoustic tile, the 3D printing underneath the stools - every aspect of that was just brilliant.

The next thing is brand story. And, you know, when we look at M. Gemi at Hudson Yards, or we look at a brand like Gentle Monster. That's a place where you're completely, you become one with the brand. CAMP is a very good example of a unique value proposition. I mean, where else can you find this type of an immersive experience that, by the way, the business model is subscription, special events, retail and food. A lot of people on the tour said, “Well, how can they make money?” Well, four different ways.

And then this is the hard one, but it's the ability to change that is critical for anyone, you, me, business, retail. But in retail, it's very acute. I've seen already changes at the Nordstrom store, over the past two months, and it's only been open for a few months.

So, these are the critical things that I think are driving success.

Bob: Excellent. Well, let's take a break and we'll be right back.

So Dan, so you see thousands of retailers a year and you know, like Gentle Monster. I saw them in Los Angeles. I didn't know what they were. I walked in and I was bowled over, ended up getting two pairs of glasses.

A buddy of mine ended up getting two pairs of glasses and I was like, “I'm hooked.” But you know, they all tend to be smaller. If we look at, you know, the challenges particularly that a lot of independent retailers have, there is no store design, training, telling a story. A lot of things are really tough.

And at the big side too, there's a lot of brands that are struggling right now, JC Penney's, the Sears, the Gaps, all of that who to me seemed to have kind of forgotten about their customer. What kind of advice would you have for this disparate group of retail owners who are listening to us right now?

Dan: It's going to sound terribly self-serving, and I don't mean it to be, but get out to the stores to see what's going on. Because when you're with an executive team and you're in a b8ta looking at the beacons, or when you're in the Chanel Atelier on Wooster Street, you can't help but see what you see. And, if you're in the marketplace and seeing what's working, and it kind of gives you the guidelines of how you should change and how things have changed, because these brands are having measurable success.

And, it's right there. We're all people and we all have our basic needs. And when you, when you fulfill these needs, when you abide by the seven habits, you're going to be very, very profitable and very successful. And so, it's really seeing is believing and the journey never ends.

As, you know, Bob, it never ends. I mean, I’ve learned something every day and I do this every day. So,  I think the big surprise, not that you've asked me for a big surprise, is that when I was at American Dream this past weekend, I saw thousands and thousands of families smiling, families holding hands, walking through that shopping center, I said, “Oh my God, this is something that is just working.”

And it's brilliant. And again, you know, it's a matter of going there and seeing it.

Bob: You know, it's interesting. When I was in Bogota a couple of years ago and working with several of the malls there and the new director, he had talked about how his predecessor always had guns and dogs at the mall entrances because it's a high security area.

And he said it's really a big deal. And he said, “I don't want to see any of that anymore. We better become the family place.” And so, I don't know if you've ever, I don't know the name of the mall, but underneath is this whole like kid city. Which basically they have their own banks and their own little versions of stores and they have, you know, the little fire engine that goes out and they role play all of it and all in a safe environment.

And it just seems like the smart malls are realizing that the concept of town square means much more than, “Oh, we'll just put a couple of restaurants and we'll put a movie theaters and some retailers in, and that's a town square.” It seems like they're going for something different. Correct?

Dan: I agree. I see that most developed in Mexico City, where the shopping centers truly are places for children. It's beginning in China. I could see it happening in China. That's where I was so excited to see CAMP because that's a trend that is emerging in China as well.

And, you know, basically with 55 percent experience and 45 percent retail American Dream already sort of gets it big time. So, I agree. Keeping consumers happy and satisfied and having happy families shopping together, it's a good thing.

Bob: So quickly, I want you to give me your top three retailers that any retailer worth their weight should go in and take a look at, in big names. All right. One thing I noticed recently on this when I was in New York is it seems like footwear retailers are leagues ahead of apparel retailers. They seem to have the training down, the store design. Who they are, who they aren't.

Customization. Personalization. So for me, you know, Nike, Adidas, Converse, I think they really were - all three of those are certainly worth a look. What other three would you add to that?

Dan: Yeah, I would add Sephora because again, I think I've already talked about them, but they have embraced technology since iOS in 2007, and its won mightily for them.

I would also include Nordstrom because, of the seven habits, when we actually rate the seven habits based on the financial model, it's predictive of revenue results or revenue calming so that Nordstrom would be one. And the last one, I wouldn't call it a retailer, but Starbucks, I mean, what they've done with the roasteries, I mean, every one is an anthropological footprint of that area.

The Tokyo roastery is different from Shanghai. The meatpacking or the Chelsea Market Starbucks is different from the one in Seattle. So, I would say those would be my top three for very, very different reasons, but they all rank high in engagement.

Bob: I would agree.

The meatpacking district, if you want to see what's new in retail, the meat packing district in New York City is really coming alive. Some really interesting things down there with the Vans store, Samsung. You've got the High Line right down there. I know when I saw the Starbucks roastery, I just raved about it because again, the attention to detail is so overwhelming and so different than what you expect.

And at the same time right down the block from them is the RH, which redefined the whole idea of if you want to shop from us, you should buy a membership and we're going to get rid of sales. And that was Uber brilliant. What, five years ago? And people said, it's probably not going to work and look what it's done.

They have done a magnificent job.

Dan: And try extracting yourself quickly from Restoration Hardware or any of the Starbucks. I mean, try it. I mean, I think both of us would fail. So, if you get in and out of there and a half hour, you've run through those experiences.

Bob: That's a great point.

So we've come to the end of our time. We could go on forever here. Dan, you've been really gracious with your time. So Tell Me Something Good About Retail or what do you like the most about retail?

Dan: You know, I just, I love meeting and I love seeing the why and the how behind how things work.

Retail is magic. And when you go into each of these stores, whether it's b8ta or M. Gemi or Nordstrom, you can see the magic. You can see all the thought, all the hours. When you go into Neiman Marcus and you go all the way in the back of the store by beauty, and you look at that staircase and the staircase looks out over the Statue of Liberty and World Trade Center and Penn station and the High Line. It's just brilliant. It's brilliant at work. And so it's very, very exciting to see the manifestation of all these hours of hard work and people trying to maximize your experience in the store.

Bob: So I love that idea of manifesting magic. I know, I just thought, as you're describing it, I'm thinking of that beautiful Saks escalator in the middle of their Manhattan address across from Rockefeller Center. Just that feeling you get from what an awful lot of people had to look at paper and go, “Yup, I think this will work.”

And until it's actually there and they're doing that for our benefit. So how great is that? Well, how would we find out more about your store tours or, how would we get on one or find out more.

Dan: Sure. Thank you so much. So, we have retailstoretours.com. We have many, many store tours. We’re doing our first world tour, which is in London, Paris, and New York, and it's June 4th to the 9th and that's going to be exciting and very small. Only 15 people, we’re doing it for the first time. The retailstoretours.com is the place. And thank you Bob. Pleasure to talk to you.

Bob: Absolutely. Well, keep up your enthusiasm for us and we're looking forward to the future of taking those tours so that we can see that magic too, my friend, thanks so much for joining us.