Retail Podcast 407: Shlomo Chopp Bridging the e-Commerce to Retail Storefront Gap

Bob: So, tell us, I know you've been around in commercial real estate for a long time, and I'm just not very familiar with your company, so you can tell me a little bit about yourself and what your company does, how's that?

Shlomo: Oh, that's great. I appreciate it. So, a little bit about myself. So, I've been in commercial real estate, I'd say, well, since 2003, even slightly before that. I was selling kitchens and flooring tiles and I got to meet this guy that was buying shopping centers. And it just, it just stuck with me.

I really liked the process. And I liked what owning a property did for you from a convenience perspective. And then, my dad's in computers. He's a computer programmer. And his weekend jobs, he would have me help him out a bit. And then an opportunity came on my plate where there was this commercial real estate company that had a software program they were trying to sell to brokers and I was hired to take care of that.

And then eventually I just got tired of trying to sell a $5,000 piece of software to people who spent more at a night in the clubs. When I came in with the organizational software, the executive assistants, I thought they saw a ghost.

It's like, “Oh, do we really need this?” And then the brokers didn't want to share the data. I'm like, “You know, not for me.” I decided I'm going into investments and hey, you’ve just got to find a property, sell a property, broker a property, you can make a crap load of money. Well, the problem is it doesn't happen that often.

So, I got into the investment side of the game and actually did a few deals, which is, which was good. It kept me going. And then the downturn hit. And no one was buying any deals. No one was buying any properties.

Bob: That's 2008, that's not now.

Shlomo: Yeah. The financial downturn, meltdown, whatever you want to call it. Exactly.

The self-inflicted finance problems, but the thing that I did, just because, you know, I didn't graduate college, I actually dropped out. My father said he’d pay for it if I did a certain you know, x, y, and z, but I'm like, “Nah, I'm not doing that.” So, I just went my own merry way.

So I taught everything to myself for the most part. And one of the things I did when working commercial real estate is really ask, “Why” and really dig in and say like, “Why does this process go this way?” Or, “Why are people getting loans in this amount?” Or, you know, “The lender said they'll fund you 85 percent of your cost, will it really close?”

And I was the guy around the table that said, “Guys, go with the more conservative quote. He understands a property better. You know, let's go with that loan.” So being involved in digging beneath the surface, immediately I was drawn to this whole concept of restructuring CMBS debt. CMBS is, is securitize that.

So, basically what I got into was to help borrowers who took on loans that were way too large for operating their properties. And for several years I was very successful in helping borrowers get out from under foreclosure situations.

And just the same problem-solving approach is what led me to look at retail and say, “There's gotta be a better way. There's gotta be a better way for retailers to be able to succeed. There's gotta be a better way for digital natives to be profitable.” And that's how we came up with this concept called Shop Fulfill and the Anchor Shops retail.

Bob: And what is it in a nutshell? Like, you're telling somebody at Starbucks.

Shlomo: So, Shop Fulfill is essentially a low cost, well, let me back up. Shop Fulfill is an infrastructure that provides everything a retailer or brand needs to operate. The retail facing concept is Anchor Shops, so essentially, it's a low cost, brand centric retail presence with localized performance.

Bob: So, give me an example.

Is this like b8ta, is this like what's, is there anything we would have ever known about this? This is like that Amazon marketplace, in physical form?

Shlomo: Well, it's similar to b8ta. It's similar if you've been to Neighborhood Goods as well but it's slightly different. In addition, it has an infrastructure component.

So when you’re a retailer going into one of these locations or a brand or a digital native, we give you all the tools you need to succeed. Not only in a short term, you know, “Hey, I just show up in the store and everyone sees my brand. They're going to go to my website.” But rather we give you everything you need to succeed long term at that location and grow your business, grow your skews, grow your products, grow your locations, and also at the same time be able to cut your costs for e-commerce fulfillment and get it to the shopper quicker.

Bob: And so, where have you opened these up?

Shlomo: So, our first location is opening up, I'd say late summer, and that is going to be in Philadelphia. Our first region is a South Jersey, Philly region. Within that region, we will be delivering e-commerce orders essentially from store, next day, for the price of ground from New York City, Philadelphia, DC, that whole region and our retail core will be in the Philadelphia area market.

So, the first location is downtown Philadelphia. It's a premier 7,000 square foot shop that will house up to 40 different brands each in different stages of growth. And there'll be merchandise. We're not a purveyor of space. We're a purveyor of product that we merchandise to complement each other. To encourage shoppers to come into the collective group of brands, visit the brands they know and discover brands they don't yet.

Bob: Yeah. I think that's a challenge. Cause I know I've been into some of these, some similar concepts, let's just say, and it's like tables with products on them and you're like, “No retailer would have merchandised this like this.” It's boring. It's a black table with, you know, black signage and the employees aren't very engaged.

I also went to Showfields. I was not very impressed with it. A lot of people think it's the way of the future, but, I think there's a lot to be done Shlomo around, if you're going to do this, you better do it with the idea like the customer who's used to going into a Nordstrom, a Macy's, a Kohl's with professional merchandisers and make it attractive.

Would you agree with that?

Shlomo: You are so spot on. And the one thing that I sort of try to pride myself on when I'm able to is that I mostly know what I don't know. I'm a real estate guy. I’m a problem solver.

Bob: Okay, that's not good. You need to know more than you don't know.

Shlomo: Exactly, well, listen, we could only try. We could only try.

But so, I brought on board my co-founder, Ryan Wolf. He's got 25 plus years of consumer experience. Of course, brand, product, channel, technology and supply chain. He launched Banana Republic Europe. He led retail development of the Honest Company. And he’s got over 10 years at C-level roles at digital native brands.

This is somebody that is going to be executing the retail component of it. It's not some Johnny come lately, real estate guy, like a lot of these other concepts have either a tech guy or real estate guy that says, “Oh, let's figure it out.” Even a guy saying, “You know, we want to put a space in there so that the brands could grow into a long-term lease.”

So, we realize that it's gotta be more like Selfridges and less like a bazaar, less like a marketplace.

Bob: That's a good way to think of it because, because, ultimately how you market this, you know, that's the other thing I know and I've gone into the Amazon four-star store and it's kind of this bizarre feel, right?

Cause it's just all these random things that have no real connection and it starts to feel a lot like work. It doesn't feel like you're really exploring it. So, being able to keep it so that it feels fresh and interesting, I think is the key. So, what steps have you taken to attract a DTC and that's direct to consumer, listeners, retailers into this environment?

Shlomo: So, the steps we've taken, it's the first thing to have a point of view, right? This shop. What do we do? We focus on clean beauty. We focus on health and wellness. We focus on family. We focus on home. So when you, the shopper, come in, you know what to expect. You know what you’ll find.

Secondly, it's organized in departments, not with walls around it. There’s bleed, no doubt, but it's organized where the health and wellness guys are all in one area for the most part, the clean beauty in one area for the most part. So that's organized properly.

And the way we do it is essentially to say, “Hey, you may not be the most popular brand or the most well-known brand. If you wanted to open your own store you couldn't attract the customers just on your own because you don't have enough product. You don't have the breadth of product required. But when we put you side by side with another brand that is exciting and compelling, that brings you through the door.”

 And I can tell you we've turned away more than I personally, you know, would like, but it's about staying true to the brand because I think there's a marketplace issue right. When you have a concept with multiple brands together, you're at the mercy of all these brands, right? If one decides they want to go, what do you do next? Right? And, it's important to give them an environment where they could flourish and actually do sales. Cause that's the only thing that will keep them in store and not some promise of, “Well, you've gotten more notoriety for your brand and therefore you have, some down the road benefit from this store as a media.”

Bob: So, let's stop. Let's stop right there. Cause I think already, that's music to my ears, my friends, cause it does matter if they buy it. I don't believe this whole, idea that, you know, if people just come and expose to it, then you win because they'll go online.

It's like any retailer would tell you, that is not what it takes. I need to sell this and see if there's a real market who will pay my price without a discount. And so, I appreciate that being one of the things that you are focused on.

Shlomo: Yes, and I think, you know, the retail industry is facing a lot of headwinds, but I think the biggest head wind that the retail industry is facing is that guys and gals that have been in retail forever and ever, they got it wrong with Amazon.

They said, “Ah, people don't want to shop online.” Once they got it wrong in some way it's impacted their DNA, where they’ve forgotten everything they've known and learned about retail and now bought into, “Okay, e-commerce is the next wave.” And the funny thing about it is that the guys on the other side who started online, they want to get into retail and they don't have the expertise.

So there's this two ships passing in the night, and then you have, and again, I don't want to cast shadows on a group as a whole, but you have a lot of the consultants coming up with theories as to, “This is why Amazon does well,” and they break it down from convenience maybe to experience, so therefore let's come up with - it has to result in a sale because if it doesn't result in a sale, people can't grow.

Bob: That's going to be the title of your podcast, what was that exactly? I want to make sure I get it right. If it doesn't sell …

Shlomo: If it doesn't sell, you can't grow.

Bob: If it doesn't sell, you can't grow. I think if we heard nothing else today, this is true for big and small retailers, new and upcoming, that unless it sells, you are a hobby.

I think that's what I'm getting from you. Does that make sense? You can continue, but I, I really appreciate the way you say that.

Shlomo: Yeah. I mean, listen, I have a lot of definitive euphemisms, some of them that people can push back on, but I think that's one that's pretty tough to push back on because when you don't sell, then what happens is the guys that put together these concepts, they try saying, well, “Hey, e-commerce is up,” so prove it to me.

Well, there's no way to prove it if you don't have the right technology, which goes to a whole other pet peeve, but they've got all this data tracking in store that you can't do anything with. For example, your touches are up, your sales are down, your sales up, your touches are down. You had women that passed by, men that - okay, dude, what do I do with all this?

Right? You know, how do you connect? And this is the key thing and this is a big way how we differentiate ourselves. How do you connect that shopper in store to the e-commerce order at home? And the way we do that is through a very unique attribution model because we handle localized fulfillment and we have an instore app.

I know a lot of people don't sign up for apps, but the goal is to have location-based promotions to entice them to sign up, meaning they're walking through the store and their profile fits a certain profile that the brand said they want to provide a discount to, they get a buzz, “To the right, 20 percent off.”

All of a sudden you get this, so there's a reason for them to download or even when they check out, you ask for the email because most people want email receipts as opposed to written receipts.

Bob: Right.

Shlomo:  Once you have that information, you could attribute online orders in the market to that person. So even if they don't buy in store, once you have a way to track them in store with permission, then you're able to say, “This store helped you with that order.”

If you don't handle the logistics side of it, then it's a fragmented solution because, “Hey, there’s a digital native brand out there. They want to grow. Great. Let's open a store. Let's give him a store. Oh, there are about 67 other things they got to do otherwise, but let's leave it to them to take care of it. Let's give them a fragmented solution.”

 That doesn't work. So, what we're doing is giving them a complete solution that lets them not only do sales, but grow the business and potentially even micro target customers to bring them back to those stores. So, you're able to now get a full picture.

Bob: So that's your secret sauce is that idea that you're the one delivering it so that we can connect the dots.

Cause we've got your email address. I liked that. I liked that whole idea because ultimately, unless you have, you know, like I say in my speeches, is all that matters is conversion and ad-ons. That's really about it. Lookers to buyers baby. And did they buy more than they initially came in for? And that's - I don't care where you are - that's gotta be what it comes down to.

Cause to your point, they have more media exposure. Well, you know, it's not hard to get buzz. Some Instagrammer who, you know, I was at a big high profile event for a major brand, and they had these influencers who had absolutely no idea what this brand really was doing, but they're taking pictures of them with a cupcake that they were serving at the event and you know, “Oh, we got already got 3,000 likes.”

And I'm like, “Do you think that translates to something? Do you think that that's it?” And maybe I'm old school, I will give you that. But at the end, it's never been about buzz. It's only been about conversions.

Shlomo: Yeah, I agree with you 100 percent. And here's the thing. A lot of the people that just liked those 3,000 likes, they've liked another 3,000 things in the interim and moved on.

And I think there’s really two really interesting things that, well let's first down to the one on social media. That's really interesting to me. So, everybody has been pounding on how the U.S. is over retail per capita. Right? So, in the U.S. per square, I don't know what the stat is, you probably know it off hand or have it written down somewhere.

Bob: There's a hundred stores for every person in America. It's something outrageous. You're just like, “Wow, thanks.” Yeah.

Shlomo: Got it. Now, the interesting thing about that, okay, is that if you take those a hundred stores, the people in the market who those stores are supposed to target, have each been to those stores.

Okay, now let's take e-commerce, how e-commerced are we in America, and here's why it's even worse, because if you just take a look at how many brands seep through on Instagram, on Facebook, because Instagram and Facebook, that's the equivalent of our walking through the mall.

Bob: Products are finding us now, we’re not even looking for them, right?

Shlomo: Exactly. But all these brands don't even break through to even come to our face on Instagram or Facebook. And if they want to, they’ve got to bid for spaces. So, imagine you’re on Southwest and you're bidding for a better seat, and you constantly were bidding the whole flight, that’s essentially what's going on over here.

So, we're not over retailed. Yes, compared to other countries we're a much larger consumer economy, there’s no question. We’re over e-commerced and the way to get out of it, as crazy as it seems, is to go into retail. And if you go into retail, you're physically around the individual. You don't have to bother with all Instagram and Facebook thing, and all of a sudden you're getting organic growth, organic impressions by people walking by.

And that's something that brands are learning and want to get in, but yet, unfortunately, there’s these barriers to entry, credit, build out, expertise, infrastructure, and that's what will break them down.

Bob: Nice. Well, I like that.

So, what do you think the best advice you've ever gotten in retail? This could even go back to when you were selling tile or some of those things.

What do you think’s the best advice you've gotten Shlomo?

Shlomo: The best advice I've ever gotten. And I got it from someone who was a hands on, roll up your sleeves. And I'd sit there with the spreadsheets and come up with all these numbers and how they work. And he'd say when you finished with the spreadsheet and something doesn't sit right, the numbers tell, but in your gut it just doesn’t go with what you got, you know?

Like the end of the day, like if you think you can make a deal happen, it's a classic Wall Street thing. “Yes. We ran the numbers, we put all the variables, we beat up the numbers.” And it works. But deep down, you know, something doesn't add up. Just have a good day. And, I apply this, for example, to e-commerce, right?

Immediacy in retail is so important. So why is it that people are ready to wait two to three days to get the orders online? And it just doesn't make sense to me. I don't believe that people are ready to sacrifice it. I think the reason is, me personally, and it could be proven out. Maybe it could be, who knows?

At least on e-commerce, I see on the website what they have and I know for a fact I'm going to get it. There’s actually better certainty going online of finding that product, and I'll wait a day or two, than there is to go to the store and not knowing whether it's on the shelf because so many stores don't track the inventory, which then explains why exchanges and returns are so popular in store.

Well not returns, but exchanges, because I know if I go to the store, I can actually exchange it for something I could touch and feel and I like, because now I don't know what I'm looking for anymore. I'm looking at something else as opposed to going online and saying, “Well, that one looks good online too.” Well, the first one looked good online too, as well.

So, the point is, I think personally that retail is the crux of shopping. I think e-commerce is maybe even 70 percent of shopping, but it's a ladder 70 percent. Once you're comfortable enough with the retailer or brand you're buying from, then you use it as a convenience, but not as a way to sort of fall in love with the product or decide that you like it.

Bob: Well, I agree that people go online to buy, they go into a store to shop, and that's kind of where you fit in place by being able to bring the direct to consumer brands there, because ultimately they're going to be able to choose from three different departments essentially.

And discover within that there's something they like versus going online. You know, like the example I always use is my printer. I'm not going to go down to a Staples or something and try to find the HP number 54 color, and then have some guy with a little scrunchie around his wrist go and unlock it, and you know, let me buy it.

I'm going to just get that online. But I'm not going to Amazon and just trying to browse printers all day. It's like, “Yeah, no, I'm not gonna do this.” So that whole idea of what our intent is when we're shopping to discover or fulfillment, I think what's killing so many brick and mortar retailers is they are approaching it like, you know, people come in and ask and we answer. It's like a big warehouse.

“Do you have a size 16 in a red shirt with black buttons, yes or no?” Well, if that's what you think your story exists for, online can do that better. Cause I can search it. It's a 16 large shirt with black cuffs.

But if you can see it as more this, if you're just curious about it and then can pique their curiosity by the merchandising and the brands you choose, that it's not what I see everywhere else. Then it sounds like you've got something.

Shlomo: Yeah, I agree with you 100 percent.

Bob: So, tell me something good about retail.

We are coming to the close of our episode and, tell me something good about retail.

Shlomo: I think the real good news about retail is that everyone's finally figuring out all the fluff and wacky ideas around new age stores and media. Like, e-commerce is the only way of the future. And retail stores don't work or people don't want to carry products and take it out. All these, all these misconceptions. Even Walmart. That couldn't figure out that they should be using their stores to compete with Amazon and putting them out of business way back in the day.

They're all finally coming around. It's literally, yeah. It's like now it's everything's setting in, which is good and bad. The bad is a lot of the public companies are getting clobbered. Aside from the recent issues in the past couple of months, but just getting clobbered because we're realizing that they don't have the proper tenants in those malls.

And on the flip side, you also have a lot of the new digital native brands that have filled some of the void online. For some of the incumbent retailers that are going out of business and they no longer can survive online because the venture capital guys are not going to fund unsustainable business no more with content marketing or digital marketing.

So, but that's the bad. But the good is, I mean, the Phoenix is burning, but it's about to come out from its ashes, in my opinion. And I, you know, I hope, and I believe that we're part of that turn around.

Bob: I might have to quote you on that. The Phoenix is rising up from the ashes and we get to be a part of it.

I like that. Well, how can we find out more about your company and the expected opening date of your first location there in Philadelphia?

Shlomo: So we are at www.anchorshops.com. Excellent.

Bob: Well, it's been a pleasure talking to you, my friend, we look forward to hearing about your great success with this.

Shlomo: Thank you so much. I really appreciate the time.