Retail Podcast 709: Dan Hodges Innovation Comes From Store Tours

Bob: Today, I'm talking with Dan Hodges, the founder of Retail Store Tours based in New York. Hi, Dan.

Dan: Bob, it's great to be with you again.

Bob: Absolutely, my friend. Tell me how Retail Store Tours began. Now, I believe it was in 2010, and had something to do with the Haiti earthquake. Is that right?

Dan: Interesting. Well, there was the Haiti earthquake and I had gotten a call from the State Department and they wanted to understand how they could use mobile technology for disaster relief, and I had 96 hours to teach them everything. So, I developed a very compressed way of doing it through experiences, through meeting people and networking, and it worked out. And it was one of these things that you do it for your country when you're country asks, and that's it. But how it got started was I had gotten calls from senior executives at the very top of McDonald's and also at Citibank, and they said, "Hey, we heard what you did with the State Department, can you do that for us?" So, that's really kind of how the immersive learning process got started.

Bob: Well, but with this, it all revolves around physical retail. So, why do you have a passion for retail?

Dan: Because it's one of these things that when you look at it, it has all the elements of humanity. It's got the human touch. It's got connecting with people. And we are the supercomputers and on our shoulders, we've got the supercomputer that does very well absorbing sight and sound, and taste and touch, and feel. So, retail is one of the places that I look to as an immersive learning opportunity for executives, and it's a really dynamic ecosystem that's been around for thousands of years. So, I think the combinations of retail, whether it's American Dream or a small boutique in SoHo, it's just the manifestation of the human imagination and it's just so interesting.

Bob: Well, I love that. So, you've said that New York has 15 different areas that are great. So, can you compare what makes retailers work like in SoHo, but not in Hudson Yards or in Brooklyn? Because they are very different, right? You can't just say it's all great in New York.

Dan: Well, Brooklyn is interesting because Brooklyn has been the melting pot for the country for 200 years. And it's also the melting pot of ideas. So, when companies want to know what's going on, what are the trends, what are the shopping trends, what are the behaviors, what are the technology trends, go to Brooklyn if you want to see the future. And Brooklyn is broken down into Williamsburg, which is like SoHo 15 years ago. So, you can kind of go back and you can go forward. There's Atlantic Avenue, which was a very scary place to visit not too long ago, but now is completely filled with interior decorating and design stores. You've got Industry City, which is filled with interior decorating and ideas, and then you've got Dumbo, which is sort of an eclectic boutique. So, there are all sorts of activities, and Brooklyn has always been that melting pot where different cultures came and it's no wonder that Brooklyn would also be sort of an incubator for retail.

Bob: And so, compared to Manhattan though, does that mean the newest and cool kids are in Brooklyn and the more established are in the more established neighborhoods of Manhattan?

Dan: So, what's interesting is that, and I just realized this like last week, everything in Brooklyn is scaled down. So, you'll have a Nike flagship on Broadway and SoHo, but you'll have a great, very neighborhood-centric Nike in Williamsburg. And you'll see that with Sephora and others and Alo Yoga. So, what they've kind of done is a trend that I've seen in retail is that people are kind of making smaller footprints, and the Nike store could be more of a showroom. And what's interesting about the Nike store, it's catering to families and to children, and that's different from the Nike flagship on Fifth Avenue and also the one on Broadway in SoHo. So, it's right in front of you, but sometimes difficult to see, what's going on in Williamsburg is really kind of a scaled-down version of those stores.

Google's there, Hermés is going there. So, it's a place the smart money is kind of betting on Brooklyn, and it's one of the places that during the pandemic it had actually a net increase in population. So, it's just interesting. Because I constantly go back and look at these places, and every time I go back, I get another clue as to actually what's really going on. And that's sort of what drives my passion because I feel like a detective out there looking at different things that are going on, and sometimes it just makes no sense. I'd seen cooking and shopping centers in Shanghai, and I said, "This is interesting." And then I say that in the U.S. about three or four years later. So, New York has 85% of the design talent in the world. So when you look at other places, nothing really compares to New York. Vegas has its own unique retail. LA's got its sort of health retail, but when you look at one concentrated place on earth, really New York is the place for such a diversity of concepts.

Bob: Well, we're going to come back to your idea about retail becoming more family-friendly, which I think is quite interesting. But I never quite asked you, what do you do with Retail Store Tours? So, maybe it'd be a chance for you to explain to us, because I met you, I don't know, a long time ago at NRF, which is coming up in January where I was like, "Who is this guy taking me around to these places I've never seen in my life?" And I needed to know and didn't know and was glad I went. So, tell us, actually what'd be interesting for me is how do you actually create one of these and then who should go on these? How's that?

Dan: Great. So, we're super happy with our relationship with the National Retail Federation, and we've been doing the tour since 2017, and we've got four great tours. We have Hudson Yards, American Dream, Brooklyn, and SoHo. So, those are the areas. But our process is really listening. We listen very, very intently to people in terms of what their objectives are. And it actually takes a while on the executive side to actually get what they really, really want. Because let's say we're going out with Corporation A, they have a CFO, a CEO, a board, a CMO, a CTO, a CIO, and they're all from the same company, but they all have different sort of information needs. So, what we do is we basically start every particular engagement we have with clients and the NRF, the NRF, we threw out what we did last year and we start from scratch.

And so, it really is based on what is it that's important to you? And most executives, the really successful ones know that they have blind spots, so what we do is we help them with the blind spots. We say, "Okay, well, what about metaverse? What about unique business models?" So we're listening intently to what they want. We're creating special experiences just for them. And we'll bring in executives that are very, very high up in the food chain to meet with people on our tour. So, it's not just a store, it's the story, it's the people. And it's fascinating, because to be with the world's sort of top thinkers and top executives and working with them to try to figure out for them, how do they process all this information in a short period of time, it's a huge amount of work, but, you know, it's like Thanksgiving dinner. You're knocking yourself out to make this 45-minute feast and at the end you're happy because it just... And so, every time I do one of these, we basically start from scratch. We will hire subject matter experts to be with me on the tour so that we can bring a lot in. And really, every engagement we've had, people come back and we've had people back three or four times now. So, we're not cookie-cutter. We're very tuned into what they're asking and also what they're not asking.

Bob: You're just a light bulb junkie. You just want to see the light bulb go off in their head and go like, "Oh, thanks. That's a great idea. That's a great idea." And hey, I'm a speaker, it's the same, that magic moment is worth everything and you don't know when it's going to happen, you just know it's going to happen, right? That's I think what really makes it, Dan. Now, you and I have connected over a long time over what has to happen in retail and you have some real distinct pillars that you've developed over the years that like, this is what makes great retail. And if you're not hitting these, there's no way you'll be a great retailer. So, can you just take us into that world and what the pillars are and explain them in not too much detail, but I don't want you to gloss over anything you think is important.

Dan: So, the single most important factor is the human touch because Apple hires people who are kind, and they evaluate them based on empathy. And if you look at the earnings reports of Apple or Williams Sonoma or Sephora or Nordstrom, it's no coincidence, Hermés basically had a record year. So, it's hiring those people who are kind and empathetic who will look at you on a hot day and offer you a glass of water. Very, very tuned in, it's very much about you. The second is training. And the question really is, how do you get them to be so good so consistently? And Sephora basically has Sephora University and they train people between 15 minutes and an hour every day. And Nordstrom and Williams Sonoma are constantly training their people and giving them skills.

Bob: Can we unpack that just for a second, did you say Sephora trains how much per day?

Dan: They spend between 15 minutes and an hour on various types of quizzes or product quizzes or policies and procedures. And actually, it was that way at Barneys because Barneys would start out every day with between 45 minutes, an hour and 15 worth of, well, we have the new sweaters in or the new Italian fabric. So when you think about it, if you and I weren't retail and you had the New York Giants and I had the Atlanta Braves, or let's say that we're coaches of both teams...

Bob: I'm the Yankees, except this year.

Dan: There you go. So, what made the Yankees get to where they were or where they were in the past? It's the training, it's the push-ups, the sit-ups. And so, what Sephora, Williams Sonoma, Apple are doing, they're constantly training their people to keep them on the edge of customer engagement and product, so that when you go in, you're immediately disarmed and you're ready to... I love Sephora because you go in, you break the geo-fence, "Oh, Dan, if you spend 10 more dollars, you'll get a facial." And I got to tell you, I've lost people on these tours when they start looking at their phone, they say, "Oh." And then, "Bye Dan, we'll catch you later."

Bob: "Be right back."

Dan: "Be right back."

Bob: Well, I want to add in here before you go too far on the pillar. So, what I take from that is a learning brain is a working brain. If the synapses are firing, you've got people connecting this to that. They might be doing a mock session, they might be comparing and contrasting, the brain's alive. Why so many retailers are struggling right now is we allow the brain to go down into sleep mode, like your computer. And then we wonder when people walk in the door, they aren't greeted, they aren't made to feel anything because the brain is going to sleep. You haven't kept it moving, which is really what you're talking about with ball players and professional athletes and musicians. They've got to keep those synapses firing so that they can be on their game and it's preventable. That's the whole point. That training keeps that brain learning, which keeps it happy, which also cuts down on your turnover and it also raises your average check. There's like no bad things except a lot of people say, "Our people are already trained," and then you walk in and you see something different. So, not to interrupt your frame of thought...

Dan: To add to what you're saying, the sports analogy is absolutely 100% because when you go to, let's say a butcher and you ask for a cut of meat and they'll discuss, "Well, how many people are you having over, and what are you serving with it?" And so, that type of an engagement it's... I go to your house and you're happy to see me, and would you like a glass of water, maybe I'm hungry, or maybe you want to go in the backyard and have a nice talk. So, it's no different. We've been this way for 200,000 years, chances are we'll probably be this way for another 200,000 years. So, we've got this great big computer on our shoulders as I mentioned earlier, and it responds very well to the human smile. It's very hard to resist a human smile. And once you connect with someone, sort of the bonds of trust are trying to establish themselves. And as Dale Carnegie said better than anyone else, if you want people interested in you, you must be interested in them, and the course of really good training is that genuine interest.

Bob: Absolutely. Yes, absolutely. Now, you've said you can't kill New York, that other areas could have tough times. Now, you already said 85% of creatives, but when you say that, is it easier to be creative in New York? For other reasons, just the fact 85% of the people are there, why is it such a litmus test for a lot of retailers?

Dan: It's interesting because the SoHo ecosystem consists of corporate brands that have done something different. The CHANEL Atelier on Wooster Street, I think it's 120.5 Wooster Street is a complete rethinking of the beauty experience. The store that you and I love a lot, the Reddy store is a boutique for dogs. And by the way, if you have a dog, they're have a Halloween party. So, there's a dog, his name is Chester. And Chester shows up every day at 3:00 at Reddy and they have Chester's biscuits that he likes. There's a door guard. When you go into these places, you think, "Oh, my goodness, how many other business ideas are right in front of us that we can't see?"

Bob: That's a great point because Reddy, if you don't know, who's the owner?

Dan: Petco.

Bob: Petco. So, you look at it and every piece is designed so well and it all plays well with each other. And the food's all the way in the back, which makes brilliant, taking the idea of what grocery stores have learned and the little mannequins or little dogs maybe with their leg up and everything. And the pride of all of those employees who also, I don't know if it's required, but they seem to be able to speak two or three languages quite fluently because of the international area they're in as well. So, these are high-performing people and they get to work in a beautiful store and everybody wants to go there.

Dan: They do. And if you've ever been on a line for a bank, the dogs line up around 2:00 and they're all waiting in line to get their biscuits because they know every dog by name and every dog gets its own little biscuit. It's crazy, it's crazy great because it works and it ignites. That sort of experience ignites an executive's mind because they think, "Oh, my goodness, this is the only dog boutique in the world and how many dogs are there?" So, anyway, so it just...

Bob: I'm going to unpack that too. So, let's say you decided, usually it's like, "Oh, I want to do that." There's an awful lot that went into that experience, right? You can't just copy it, it's got to be organic, doesn't it? You really have to know what success looks like and why we're doing it, instead of just throw some label on and say, "Yes, we'll do something like that."

Dan: I mean, that's the brilliance of the CHANEL Atelier, which I think you may have been to, Bob, as well, yes. You look at that and they have what's called the lip bar that they'd created during the pandemic and they have 130 different shades of lipstick. And depending on your coloring and your hair and things like that, their geniuses are picking out the right lipstick for you. And when you go into the CHANEL Atelier, you look at the design and you almost get a headache from just thinking about all the meetings they must have had to create this unique experience. And generally when you go in there, it's about two and a half hours when you leave and you're looking at your clock and saying, "Oh my God, I've been here for two and a half hours." So, it's just genius and it's working. One of the things that I thought was amazing is that plus 20% of the people at that store are men. So, they've cracked the male cosmetic marketplace by a certain type of approach they've got.

Bob: So, I love that idea. And that is the mark of a great store. You lose all sense of time, not because it's like Vegas and there's no clocks in there, but because you're having such a good time. You feel like you matter and whatever your phone is tweeting or clucking or whatever can wait, and I think that's really important. During the pandemic, you and I were kind of thrust in this role of providing hope for a lot of people. And I know I enjoyed your reports from the frontline, particularly in China. How did that go about? How did that even happen? Because you were first one like, here... this is what's really going on.

Dan: Well, thank you so much. We operate in Shanghai and my colleague was telling me that things weren't good in China and we weren't quite getting that information yet. And it was one of these things where I said, "Well, someone should do something." And I thought, "Well, that's probably me." So, I decided, I spoke with the Chinese retail association, Kevin Pang, and I said, "Kevin, would you mind sharing what you've got with the world?" Because at that point, no one really kind of knew what to do, it was pretty chaotic. So, Kevin got his people from the largest supermarkets, the grocery stores and shopping malls. We also had New Zealand in, and we created a whole hour and a half working session where we had Chinese speakers and English translations. And it really helped. I think it helped in a way that the world sort of came together and everyone was just really very, very empathetic with each other and trying to figure out what they could do. Rodney McMullen was brilliant. I love his blueprint for success. And he came out with that in April and I thought, "Boy, there's a leader right there." And I kept that going for about a year because there was still need to connect with each other and there really wasn't a clearinghouse. We're neutral, we're sort of like Switzerland. So, we're not trying to advocate one point of view other than there's a value in connection.

Bob: Which is different than me, which was, I did a Facebook Live, I don't know, for six months every day. And I was saying, "You better be ready, you better be ready when it's coming back because this is what's going to happen." And that ability to provide hope is really very much like what our retailers and those listening are providing on an everyday basis as well. So, three stores, anyone with a retail leadership position must visit when they go to New York City.

Dan: They have to go to CHANEL for the reasons I explained. They probably should go to Reddy. And then the next one they should probably go to is Salvatore Ferragamo because they have a new, it's on Greene Street and basically they have really great demo of NFT. You can create your own NFT, you can design your sneakers in augmented reality with a hologram. So, that's very simple and very easy to access and very easy to understand. So, those would be my top three.

Bob: Excellent. So, you've said our mission is to get retail executives to the future faster. So, what does that mean?

Dan: What that means is being able to expose them to innovation that's happening, maybe two or three years from now. So, a good example of that is we've taken many of the executives to a very special metaverse experience. When you talk about the metaverse, it's one of these things like the internet in '95. What's the internet? What does it do? How do you work it? And so, metaverse is one of these words that everyone thinks they know what it means, but until you actually experience it, you really don't. So, that's how we help retailers sort of get to the next level is by either exposing them to experiences like that or connecting them with executives during these executive tours that we do so they can actually meet the thought leaders behind, why did they build the sustainable brand? How did these 10 companies reinvent themselves? So, these are questions that some of the top executives are asking.

And then there's some other less obvious things that we're doing. So, I mentioned too, we had an Australian CEO, one of the top companies there, and we did 17 tours in one day. And at the end of it I said, "Well, what do you think?" He said, "We have to improve our employee training and compensation." Now, we didn't talk about that at all, except when I asked him the question about how was his day? So, I think the key to success is it's not about how smart I am, it's about understanding what their objectives are and giving them the ability to connect with people and experience things that they themselves can internalize. When you have a group of 12 to 20 executives running these huge companies, they're all together and they're looking at CHANEL or Reddy or Salvatore Ferragamo and they react and they respond and they adjust on the fly, they're thinking. So, it's fantastic.

Bob: And they may not even know what they don't know until they actually see it, I think that's the whole point to you. And by the way, if you are a retail exec, let's get past the meeting with the senior store people when you go to a store visit. Walk the aisles, go out and see what an actual customer is. Go and check out a fitting room, not because you have to, but because you're curious. What is it like when one of our customers comes in here? And then actually talk on the front and you don't have to be, "Everything's great, right?" And you don't have to look for the bad, just be there because that's the spirit your customers are meeting is that person. And I think it's certainly a place to start, and then obviously doing a store tour with you all. Now, you had a big announcement the other day. What was this, and tell me about it? You're moving into a whole new, not a metaverse, but you're moving into a whole new area.

Dan: So, we're expanding to 25 markets and we're super excited about that. So, the markets, we're in the United States, I won't go through the markets. We're extensively in Asia and many, many countries from Korea to Kuala Lumpur, in Israel, in Dubai, and all over Europe. So, we're super excited. And I'm very fortunate to work with part of the creative people in the world, his name is Byung Choi and he's with a company called New 24. And the reason why I mention him is because when you look at our site, you'll see that it's visually stunning. And so, we practice what we preach. In other words, we're not going to talk about the world of imagination and experience without giving you probably the best site in the world for what we do. And he has very high standards and we built this together. And so, the manifestation of what we do is in cyberspace, but it's pretty stunning.

Bob: Excellent, Well, congratulations. And I know one of your favorite retailers is in Etnia in Barcelona, and they've received an awful lot of buzz about store design. Can you just tell us, we're coming to the end of our time, but just a few things about what makes them special and different and why they're one of your favorites?

Dan: Well, the human touch, they connect with you right away. And what's interesting is the store is set up for above 3 feet and below 3 feet. So, below 3 feet, it's for kids who come with their parents, and there are all sorts of toys and things they can play with. Above 3 feet, when you go into a store, Bob, I go into a store to buy glasses for reading or seeing or sunglasses. When you go Etnia, you buy glasses for your good mood, your serious mood, your pensive mood, your vacation mood, all the different Bobs out there. And so, when you walk out... I normally go into a store to buy a pair of glasses, but when you walk out of Etnia, maybe you bought six because you didn't realize that you had all these different styles and colors and vacation mode and serious mode. And so, that was the amazing thing. I thought that I knew what I was doing, except when I went there I realized, "No, I should be buying six pair of glasses." So, the store has, on top of the store, the sixth floor is a garden where you can have a glass of wine and look at how your glasses look in real sunlight. So, it's one of my favorites and probably the favorite store I have in Barcelona. They're just great.

Bob: And it comes down to training, because that didn't happen by accident, right? And all those design queues didn't happen by somebody going, "We're just going to open a store, we'll compete against LensCrafters or somebody else. We'll just knock it off." Nope, somebody thought of all those touchpoints and then said, "That's part of it, but we're going to have to execute at a different level than anything anyone else made or else we're never going to get." Let's be honest here, folks who are listening, it still comes down to converting lookers to buyers. It still comes down to average sale and more importantly, being profitable. Yes, you can have a retail store and you can lose a lot of money and there's a lot of VC people that are having a heyday with it. But at its most basic, whether you go back to Sotheby's or Harrods or Macy's, at the end of the day, you got to make more money than it costs you in sales and to be able to grow. And a lot of retailers are suddenly realizing, "Oh, I guess we got to up our game." And that's what I see when I go on the Retail Store Tours is to understand that holy crap, they may not be a player in my market, but the experience has been elevated for people who have disposable income, right?

Dan: To iterate what you're saying, Bob, I was the most important person in the world for an hour and 15 minutes. That's how it felt. And oh boy, that focus is revenue generating, that's for sure, and it's also loyalty. I've probably told 300 people about Etnia, I've done reports on them. You can't help it because they touched you in many, many ways and always.

Bob: I love it. Well, the name of the podcast is, Tell Me Something Great About Retail. So, what's one thing you could tell me great about retail to close us out here, Dan?

Dan: I guess going back to the realization we had about three or four years ago is the human touch and the training part. Give me a blank building and just put a good salesperson in there or good person who's empathetic and kind and let them do their magic because that's the case. The human touch is the main driver. And training these people, as you talked about with Etnia, that's it. That's the magic bullet.

Bob: And as a retail doc, I would not argue with that, in fact, we are on the same page. Thanks for joining me today, Dan. I really appreciate it.

Dan: Thanks, Bob. Great to be here.

Key Links


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Retail Store Tours