Brands that thrived through financial crisis and retail disruption

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The year was 2007. The mood? That depends what month.

At the start, the nation’s economic expansion had slowed somewhat. Inflation was decreasing, and things felt somehow stronger. Businesses were upbeat; consumer confidence was strong.

In a game-changing moment, the iPhone was released in late June. With a “giant” 3.5-inch widescreen display, the revolutionary device was available with 4GB or 8GB of storage. It didn’t take long for touchscreens, apps and virtual qwerty keyboards to open new worlds of possibility.

Everything was going great — until suddenly it wasn’t.

As hedge funds collapsed and the housing market crashed, the “Great Recession” that was to last into 2009 took hold. Despite all this, a number of fledgling retail startups managed to take root amidst the rubble. As it turns out, it was no ordinary crop.

Consider the names Indochino, Smashburger and Journelle. Each launched in 2007, and despite significant changes in the economy, in technology and in customer expectations — or perhaps because of those factors — the companies have thrived.

From the beginning, each has been about satisfying consumer needs and desires in innovative ways — and staying true to the course, no matter the environment.

“We’re all true specialists,” says Lyn Lewis, CEO of Journelle, which focuses on luxury lingerie. Indochino makes made-to-measure suits. Smashburger is known for fast-casual quality burgers.

Perhaps things would have been different if the companies were founded in another era, even today. Regardless, lessons learned about focus, strategic use of technology, evolving with the times and continuing to connect with the customer apply year after year.

Right price, right quality, right time

If ever there was a Goldilocks at the table of the $100 billion-plus burger industry, Smashburger would be it. When the recession hit, the Denver-based chain was already strategically placed. Inspired by fast-food leader Chipotle Mexican Grill, the company originally aimed to take advantage of a growing consumer demand for better quality food at lower prices.

By the time disposable income began disappearing for many Americans, Smashburger had 10 stores on the ground. Burgers were priced a few dollars above fast food — still significantly below sit-down restaurants — and it was a perfect fit for an increasingly difficult market.

“As a lot of people’s businesses contracted, we found ourselves in a position where the talent and the real estate were there,” says co-founder and CEO Tom Ryan. “We grew like crazy during the recession.” Now Smashburger has some 400 stores across the United States and nine other countries, with an expanded menu featuring craft beers and Haagen-Dazs milkshakes and malts.

Ryan — a food industry veteran behind Pizza Hut’s stuffed crust pizza and the McGriddle for McDonald’s — was aware of a “latent demand dissatisfaction” around burgers.

“Once people discovered that there was a great-tasting burger that wasn’t going to cost you an arm and a leg, that you could access with about the same grace and ease with a little bit higher level than fast food, they would gravitate to it,” he says. “And they certainly did.”

The brand continues to evolve without disrupting its roots; the idea is to be “perpetually relevant to the 32-year-old mindset,” or the age group that a young adult might look up to and an older adult might still wish to be.

Smashburger continues to introduce new menu items with trendy ingredients like goat cheese, truffle mayo or Applewood smoked bacon, as well as sides like flash-fried green beans and carrot strips. It’s also morphed stores’ décor and music, and incorporated digital menu boards for flexibility and dynamic pricing.

“We’re a highly differentiated brand,” Ryan says. “I’ve always had an aversion to being formulaic.”

An experience of luxury

For most, the words “indulgent,” “comfortable” and “rewarding” don’t come to mind when thinking about shopping for lingerie and swimwear. Journelle’s experience can leave women surprised.

“We hire fabulous sales associates who are smart, passionate professionals, and the store environment is comfortable,” Lewis says. “Even when we’re at our busiest, it’s not chaotic. We keep it tidy and easy to shop.

Most lingerie mom-and-pop shops have lingerie coming out of every corner, and at Victoria’s Secret, bras are spilling out of drawers. At Journelle, we’re serving Italian chocolates and popping Prosecco at every opportunity. This stuff matters.”

The company, which opened its first store in Manhattan’s Union Square, came at a time when luxury shoppers who still had money to spend often desired to do so more discreetly. Not only that: Past economic downturns have proven that beauty sales rise as incomes fall. Journelle continues to offer world-weary women a rather private, much-needed escape. That’s especially so in New York, where three of Journelle’s shops are located; the fourth is in Chicago.

“New York City is a grind,” Lewis says. “I love her, but she’s a grind.”

Lewis joined Journelle in 2013 as director of operations and became CEO in late 2015 when founder Claire Chambers stepped aside. From the start, it has been a time of questioning what “treating yourself” truly means. The questions that most challenge Lewis today regard ecommerce and the ability to recreate the store experience through other channels.

“We have wonderful people that sit behind our website,” she says. “But lingerie is a tricky thing to put online.” The fun images are often the “super sexy” ones — but they don’t necessarily convey what the store is all about. The store’s mission is to help women feel beautiful and confident from the inside out.

“Most of us don’t look like these 22-year-old, tight six-pack models,” Lewis says, “but can still look beautiful in lingerie.” She says the American shopper still doesn’t know too much about the category, and Journelle has a valuable opportunity to teach her.

“It’s such an exciting time to be a woman,” she says. “There are so many more professional women today living their lives and creating their destinies than at any other point in time. It’s such a powerful time for a company like Journelle … to be able to tap into that wave.”

“There are so many more professional women today living their lives and creating their destinies than at any other point in time. It’s such a powerful time for a company like Journelle … to be able to tap into that wave.”
— Lyn Lewis, Journelle

Singular focus

There have been times that jeans, shoes and other men’s apparel categories have been up for consideration at Indochino.

But each time, the answer has been no.

“We resisted because we want to be absolutely the best at what we do for our customers,” says CEO Drew Green. “We felt that if we did try to do too much too soon, we would sacrifice customer experience [in the] short term.”

Indochino brought made-to-measure to the global masses and was at the forefront of “clicks-to-bricks.” The goal from day one was to sell custom apparel through a unique multichannel approach focused on customer experience.

“I think what often happens with companies is that they lose their focus on what’s best for the customer and balancing that with sustainability,” Green says. “They may be constantly looking for growth, or it may be for many different reasons.

“A constant ingredient in successful companies is customer focus, not having too many priorities, not trying to do too many things or become too many things to too many people.”

The recession — and the introduction of Groupon — helped show consumers that price savings are attainable daily.

“We’ve carried on what we learned in that recessionary period, which is, ‘Let’s provide a great product, great quality, at the same or better price than our competition,’” Green says. “That’s part of the reason why we’ve had so much growth and improved our profitability like we have.”

Looking forward, Green fully expects the same.

“In 10 years, I’d like us to be one of, if not the, largest men’s apparel brands in the world, and specifically, the largest suit retailer in the world,” he says.

“We have every opportunity to do that. There are certainly going to be lots of twists and turns, and we need to continually innovate. But success for us would truly be providing the made-to-measure experience to the tens of millions of customers that buy ready-to-wear, and transitioning them away from that sort of ordinary experience to an extraordinary one.”

Indochino has expanded to include showrooms where the emphasis is on finding the perfect fit rather than selling off a rack.

“We’re seeing dozens and dozens of retailers really struggle and have to retrench or even close down, and a lot of that has to do with them coming forward with massive inventory that they don’t know whether the consumer
is going to buy or not, or at what price,” Green says.

“My belief is that as we go through the next decade and decades, more and more models will be like ours, where something is produced after it’s ordered, and businesses won’t have the cash flow challenges that inventory creates.”

Meeting a marketplace need

In 2007, consultant Bill Mirabito was in a strikingly similar position to where he is now: at the helm of a brand-new startup. Then, he left a position as a senior retail analyst with Forrester Research to found ecommerce consulting firm B2C Partners. Now, his new company is Floorwatch, a smartphone app that allows in-store shoppers to get the attention and assistance of associates in more than 57,000 stores with a single download.

In both cases, Mirabito met a marketplace need. He chose the consultant path after spending half of his days on the phone with clients wanting more detailed advice, and founded Floorwatch after a 2015 survey of more than 1,100 shoppers showed their primary in-store problem was the inability to find help when they needed it.

The concept for the app came after customer feedback, not before — which is an important point. Over the years, Mirabito has seen numerous retailers touting technology in the name of innovation, regardless of consumer wants.

In leaner times, when this crop of companies began, new technology was explored first as the answer to a business need. Otherwise, costs would have been too high for flights of fancy.

Indochino’s Green echoes the sentiment. “I’ve heard of retail tech teams developing robot associates in stores with an iPad for a chest,” he says. “I’ve seen stories about piloting drones in stores, and using augmented reality. But I don’t know any consumer that’s asking for this stuff. What they want is to connect to a human being — a store associate — who is knowledgeable and attentive.”

“I find it over and over again,” he says. “There’s too much technology without really relating to the customer experience and business return on investment.”

In Indochino’s made-to-measure category, there are always new options for how a customer can be fitted, and it would be “easy to gravitate to that new technology. But our belief is entirely in the experience that we can drive, and not just the product … . We don’t introduce things lightly.”

Over time, that plan has paid off. If Green, who joined Indochino in 2015, was going to start the company today, he’d enter a crowded field without much opportunity to differentiate. But starting lean — and holding on — helped place the company out front.

So, too, with one other standout 2007 startup: Fitbit. Over the last decade, Fitbit has grown from two 30-year-old employees trying to inspire people to lead healthier, more active lives to more than 60 million devices sold. In 2016, the company posted annual revenue of $2.17 billion. Along the way, it racked up numerous awards — and countless competitors.

Think different

Consultant Bob Phibbs, CEO of The Retail Doctor, looks back on 2007 as a time when some had an inkling of what was coming, but no one had the full picture. That stands for both the economy and the way technology — particularly mobile — would influence retail overall.

Then, he says, traditional retailers still held all the cards; there was no thought of picking up a phone and scanning something, being able to purchase items online 24 hours a day or finding product knowledge somewhere other than the store.

Consider Rue La La, a member of the online flash sale category of disruptors that appeared near the start of the recession. “Rue La La was designed to revolutionize the shopping experience,” says Jeff Steeves, senior vice president of marketing for the company, founded in 2008.

“The objective was to develop a curated experience of the best brands from around the world and an exclusive members-only environment, and bring customers to the brands they love — and provide a bit of theater while doing it.”

Today, the company continues to innovate, and now sees more than 70 percent of traffic and 60 percent of sales come through mobile shopping environments.

To be sure, dissatisfaction, new possibilities and the idea of “why can’t things be done differently?” have led to great changes. But some things have remained the same.

“It still comes down to this,” Phibbs says. “Who is your customer, and how are you going to reach them?”
If today’s crop of disruptors hopes to succeed like those now in business a decade, they’d do wise to explore the lessons of years ago: branded experience, authentic connection with the customer, well-trained associates and innovation for more than simply innovation’s sake.

“Today, there are too many places to buy too much of the same thing,” Phibbs says. “It really does have to feel different.”

Fiona Soltes, a freelancer based near Nashville, Tenn., loves a good bargain almost as much as she loves a good story.

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