Steve Schlecht's company made its name with practical work clothes and clever ads. But it needs new analytical skills to thrive amid the retail disruption caused by mobile technology.
Duluth Trading Company CEO Steve Schlecht points to two things at the heart of his retail company's success: creating one-of-a kind work clothes, and being "great storytellers" about those products. That storytelling approach explains the tens of thousands of YouTube views of videos for Duluth's Ballroom jeans to let men "crouch without the ouch," or for its long-tail t-shirts designed to cover up "plumber's butt".
But Schlecht says Duluth, which sells mostly through the Web and catalogs, also needs to get better at data analytics to succeed in a retail world that he describes as "omni-channel"--reaching customers via mobile, Web, print catalogs, email, social media, and stores. (Duluth has one store and is planning several more.) This trend of customers shopping multiple channels at once is as big a disruption as any Schlecht has seen in his 42 years in retail.
"Today my biggest challenge is this area of analytics," Schlecht said, speaking to the Fusion CEO-CIO conference in Madison, Wis., last week. "How can we get in the heads of our customers, understanding how they shop, how they buy, what they're looking for?"
Listening to Schlecht's no-nonsense view on retailing's future is good tonic for any IT leader not moving to steadily improve in-house analytics capability. Schlecht doesn't consider Duluth on the cutting edge: "We were always following Lands' End," Schlecht said of the fellow Wisconsin-based direct merchant. "Whatever they would do, we'd do about a year later."
But Schlecht built and sold his last catalog business, Gempler's, to W.W. Grainger, and he says Duluth Trading is growing at around 20% a year. Given his track record, and four decades of perspective on the industry, when Schlecht says we're in the midst of a "total disruption in the way purchases are made," it's worth noting why, and how he sees analytics playing into this change.
Schlecht painted this thumbnail history of the retail industry's disruptions:
1880s: Department stores, enabled by the railroads.
1930s: Suburban malls, enabled by cars.
1960s: Discounters like Walmart, enabled by volume buying, logistics, and entrepreneurism.
1970s: Big box category killers like Circuit City emerge, as an offshoot of the discounters.
1990s: E-commerce, from Amazon to Webvan, enabled by the Internet.
Today: Omni-channel and omni-directional buying, where a shopper might research online, ask friends via social networks, get an email and a catalog promotion, see a TV ad, and stop in a store. And it's mobile devices that are enabling it.
Duluth's existing analytics are very purpose-driven, said IT director Tim Balliet, such as systems for deciding which customer segments should get a particular catalog mailing or promotion and responding to their performance. What it now needs is more horizontal analysis of customer likes and dislikes, in order to be more proactive. One step Duluth has taken in this direction is using social network sentiment analytics from Radian6 (owned by Salesforce.com). But the company will need new skills as well as software to get where Duluth needs to be.
There's a risk to having the company culture embrace analytics, though. Not everyone's going to like Duluth's sense of humor when it comes to advertising "Buck Naked" underwear or those "Ballroom" brand jeans. "One of the challenges is figuring out what is worth responding to, and what isn't," said Mark DeOrio, CFO and senior VP of operations. "It's very easy to get totally distracted and to frankly lose your way, and turn into a totally reactive organization."
Schlecht is probably like a lot of CEOs these days--his company has too much data, and he wants help making sense of it. Marketing and IT are critical in figuring out how to do that, Schlecht said, and the line between them is "getting really fuzzy."
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