The last of the Mohicans. The oldest CEO in the Fortune 500 puts everything on the fall of smartphones
The man of the old school, the head of Victoria's Secret, believes in one rather radical idea. Shopping from smartphones will fall. And he is so sure that it is inevitable that he puts his entire business at the cost of $ 10 billion on it.
Leslie Wexner - the legend of the retail of the XX century. He began his journey at Ohio's little parental shop, helping mom and dad sell clothes. He opened his first shop, The Limited, in 1963, borrowing $ 5,000 from his aunt. At its thirty square meters, he conducted a real sales revolution. Instead of gaining popularity throughout the US shopping centers, where you could buy any clothes you wish, he made his shop extremely specialized. The Limited sold a very narrow set of styles of women's clothing, and only its own brand. In the 70s, Wexner turned it into a successful and very profitable national chain of stores. And he began to recruit other specialized brands under the wing of his large corporation, which he called L Brands.
In 1982, a businessman bought Victoria's Secret, an unknown brand of lingerie, with six stores and a catalog. The entire company cost $ 1 million. By the beginning of the 90s, it began to cost under $ 1 billion, and by 2000, it accounted for 30% of all lingerie sales in the United States.
In many ways, the success and fame of the brand brought the "angels" who invented Wexner. The best supermodels in the world, presenting his underwear at the shows. Such shows are still gathering millions of people, not only women, but especially men (with the expectation that they will then buy gifts to their other half). "Angels", by the standards of supermodels, pay very little. But each of the girls selected there quickly becomes a multimillionaire, because many other brands want to enter into contracts with her.
Leslie Wexner has been at the helm of a huge corporation for 55 years, and is not even close to going to retire. He is the last working leader of a large retail business in America who started back in the 1960s. And now, when most people in the industry are confident that the future is in online sales, Wexner believes that it will be exactly the opposite. While all large chains close offline stores and carry the main business online, Victoria's Secret only expands the number of boutiques, even if they do not generate income. “Sales on smartphones and via the Internet will not kill shops,” he says to employees. - "This is the trend that will pass."
The logic of the billionaire? Here is what he tells in a CNBC interview in 2017:
People are herd animals. The fact that now we are doing everything from the screens of computers or smartphones is not normal. Soon we will begin to bounce back. We already see it. People want contact, social interaction. Yes, there are times when we forget about it. But our 5,000 years of history is not so easy to cross out.
Speaking of a long history, Leslie Wexner mentions Ancient Rome, Egypt and Mesopotamia, where the foundations of trade were formed, which we use now. Large bazaars and squares on which merchants and artisans displayed their goods ... But the old, time-tested model seems to be failing now.
Sheren Tourney (third from left, yep)
More recently, Victoria's Secret has grown at an impressive pace - under the management of a woman, Sheren Tourney. From 2006 to 2016, over the ten years of her work, the brand value increased from $ 4 to $ 7.8 billion. Then she left the company, Wexner took everything into his own hands. And now, in just two years, the situation has changed radically. Shares of L Brands (which owns Victoria's Secret), which had previously grown steadily, fell almost three times.
In 2016, the brand was forced to stop selling swimsuits, shoes and accessories. And not because these areas were unprofitable. Just selling these things went only online, on the official website of the company, and in boutiques they were not presented, to save space. This is not consistent with the strategy of the new leadership. All "online only" offers went under the knife.
Instead, the store focused on exotic lingerie, perfumes and pajamas. Mostly - erotic. From 2017, the company also began to pay more attention to bralet , lace bras without stones and inserts, which are designed to toe in sight. This is the main attempt of Victoria's Secret to regain the youth audience. Aim at what they will do in them selfies for Instagram and in the evenings to please their boyfriends. Under the same audience, the Victoria Sport line was later launched . So far, the strategy has not been justified. In 2018, L Brands lost another $ 4 billion, almost a third of its value. Most investors run away from the company like the plague.
William McCob, the owner of one of the large hedge funds, tells why he withdrew money from L Brands and invested in the online retailer of women's underwear ThirdLove:
This is a struggle of two cultures. Shopping trips and convenient shopping from the comfort of your own home. Obviously, what kind of culture is winning. But they have everything built on the physical store, and they can not change. They do not want to change.
Mike Drexler, Chairman of the Board of Directors of J. Crew, who retired last summer, says that he understands Mr. Wexner’s position, and until recently thought the same:
I used to compare shopping centers with small villages. People gather, communicate, meet, have the opportunity to start a relationship. They see how other people are dressed and have the opportunity to show themselves. But now, with the development of social networks, this function disappears. People are much more important to show themselves on Instagram. They see other people on their smartphones, and this is how relationships are now established and developed.
I think they will have to start closing stores. Victoria's Secret has a perfectly organized business, they know what to do when someone came to their boutique, but people simply stop coming. Whoever you are, you will not be able to swim for a long time against the current.
American retailers are experiencing the worst years in their history. The development of online commerce has put many on the edge. More than 6,000 stores were forced to close over the past year - more than during the financial crisis of 2008. Fifty major companies filed for bankruptcy, including Gymboree and Toys R Us.
But Victoria's Secret continues to expand. It is now, suddenly, the largest network of stores in the United States, selling things of its own brand. The company has more than 3,000 points in North America. Half - in the centers of the second and third echelon, with great difficulty attracting buyers. It has more stores than GAP, twice as many as H & M (which develops AI , trying to save itself from falling sales), and almost 10 times more than Lululemon, a lively Canadian online competitor who already stands $ 8 billion more expensive.
Leslie Wexner with his wife and son
In general, the prospects look very doubtful. But Wexner tells his staff that other “evidence” turned out to be wrong. Frozen foods didn't kill restaurants. Corded phones did not kill the desire of people to communicate face-to-face. Smartphones and online shopping won't kill anything either, they will eventually occupy their own specific niche. A businessman is asked - what about a sharp drop in visits to the centers? What about global online sales growth? Why don't you invest in digital technology? “I understand everything,” he replies. “But you explain to me, for example, Apple. They expand their physical presence. They understand that only online will not satisfy everyone. ”
Leslie Wexner says that, like fifty years ago, when he was just starting out, women come to Victoria's Secret stores to chat. To be in a comfortable atmosphere for yourself to try all the products. Underwear, lotions and perfumes are more personal, personal items than gadgets or outerwear. Now, about 20% of Victoria's Secret sales fall to online, and Wexner expects that this percentage will remain unchanged, even after ten years. "If everything is nice in the store, I'm sure people will want to go there."
In order to achieve "maximum pleasantness", the company invests 70% of its investments in the opening and reconstruction of its boutiques. Wexner personally controls all designs, down to the smallest detail. For example, he added TVs to the toilets so that they could watch fashion shows there. And changed the texture of the wallpaper in the locker rooms to make the walls more pleasant to touch.
He is so alone. All others focus on online sales. Last year, Amazon launched its line of bras for as low as $ 10 (Victoria's Secret doesn’t sell anything from them). Over the past five years, according to Dow Jones, 38 online lingerie startups have received funding - instead of 7 startups five years earlier. Some of these firms were founded by former employees of Victoria's Secret.
Michelle Grant, one of these former employees, who launched its online lingerie brand Lively in 2016 , says:
With social networks, we quickly gained a good, active community of women. Ten years ago, it would have been impossible, nobody would have known about us, we would have been nobody. Now, in less than two years, we have already made a profit.
Mr. Wexner believes that times will change, and new online startups will never be able to offer their customers the atmosphere that he created in his stores. He is confident that clothing brands are closing down and losing profits not because of Amazon, but because of their mistakes, and not enough good offers.
In 2016, Victoria's Secret warned investors that stocks would fall while the company was reforming its business. Her angels, supermodels, are also slightly worried. Now, instead of advertising the swimsuits on the beaches every year, they are forced to train, pump their ass and demonstrate the advantages of the new sports line - so that the company can catch up with Nike and Under Armor in this direction.
Now Leslie Wexner and top managers of his company regularly fly planes, visiting their boutiques in different countries and cities. They often drop by the stores of other retailers, like Lululemon and Apple, to see how everything is organized there. The oldest CEO in the company from the list of S & P and Fortune 500 does not rest a day. At the age of 81, he checks the catalog of his goods daily and monitors the products of competitors. His office in Columbus is furnished with hundreds of bottles of perfumes and lotions, mostly from competing brands. And every week on the weekend, he personally goes to his shops to once again check the placement of goods and the general atmosphere.
At a meeting in September, Wexner told investors that, despite falling sales, he is more optimistic about the company's future than ever before. And repeated:
People, fundamentally, are herd animals. Human nature is not so easy to change. If we bet on it, we will win.
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