Mickey Drexler, America, Merchandiser discussed on The Business of Fashion Podcast
Ahmed founder and CEO of the business of fashion and welcome to be. Oh live. We have a legend with us today for B. O. F. Live I'm pleased to welcome Mickey Drexler. The former CEO of gap and J. Crew and kind of legend in the in the American Retail and fashion world. And I caught up with Mickey briefly on the phone about a week ago and asked whether he would join us today for conversation. Because there's been so much timeouts in turmoil in the American retail landscape over the last couple of weeks I thought it would be really great to have someone like Mickey. Help us all to navigate the changes that are happening and make sense of what's going on and also to paint a picture of what the future might look like as on the other side of this crisis that we find ourselves in so Welcome Mickey to be off lines. Nice to the appreciate it. I wanted to start Mickey Before we dive into the topic at hand if you could just tell us a little bit about how you're doing how your quarantine has been what you doing To keep yourself occupied. I find that everyone is finding new ways to keep their minds and bodies occupant it occupied tile. I'm going crazy I I can't stand still. It's a huge turn for answer. My pants and every day is kind of repeat of yesterday. I have no idea. Tuesday versus Saturday's link. And I get up every morning and not living in a homeless living in a hotel but at such a long story in that makes it less fun. I'M GONNA get up every day. Take a walk with my wife. My kids are one in New York and one's in Sampson and I walked for an hour and a half a long beach here in Miami not on the beach because you're not allowed to and then I come home till the next morning home or whatever wherever I am and life is. I actually like without work. I be dying and this choosing his favorite hobby of mine. My wife is very serious about keeping US isolated Argentine as she should be a so it's it's almost surreal living sway. All of us is just unbelievable. And I don't think anyone really knows what it's going to look like on the other side but it is what it is and I can't wait normal. I do facetime with my grandchild. Some getting to know she's a year and a half and that's my relationship with are in. That's that's like it's not. It's not eas- house. There's a daily routine. I think that we're all developing. I guess it's about injecting moments of connectivity moments of exercise moments of reflection and an moments of work and mixing that all but while being in the same physical space which is kind of challenging. Because it's hard to transition between all of those different but I. I was really excited to talk to you because obviously you know as a as a media publication that covers the global fashion industry of which the the American market still plays an incredibly important part watching from over here in London. What's happening in the retail environment in the United States? It's been harrowing. You know some of the big titans of the American retail landscape are teetering on the edge of bankruptcy some have already filed for bankruptcy some are planning for liquidation including two of the companies that you used to lead an you know. The gap has been withholding rent payments. Furloughing its workers trying to reorganize and restructure its operations and J. Crew has obviously filed for bankruptcy as a way of doing a restructuring of the organizations and they're not alone right this is J. Crew Neiman. Marcus is the gap is his Lord and Taylor as you look across the American retail landscape. It's it's pretty grim out there and so the first question. I just wanted to you to ask you you know. How did we end up here? That so many of these big American retailers find themselves in a position where you know there are teetering because you know the the companies that seemed to be surviving seemed to be seemed to be kind of getting through at least up until now are the ones that were strong going into this crisis. But many American retailers were already Suffering before this all started and this is kind of become the kind of final you know the the proverbial Straw against the camels back so talk to me a bit about how we ended up here in the first first thing I'm GonNa say is Speak to a lot of people every day to work and do whatever most people will say. I have no answer to your question. I mean I have one opinion on how he ended up here with. Most of us don't know what the other sides could look like in my own opinion on and I think statistics There's been for twenty years or so to many retailers too much inventory and I think what's happened because of a corona virus in one short sue. What probably could've happened ten or fifteen years ago. Too much out there to choice to inventory drove down prices drove down margins increase of price. And they're well if you look at Tj. Max I think the biggest most profitable department store in America if not the world and they have a great merchant account rich wanting running at night. I think the great were cheap or is also part of it. I think this just too much square footage for human being in America. It always has. That's one thing. Lack of creativity I think is another thing although with too many stores into choice of what you get is just a deflationary trend in retail nights. We've been going through that. Very simply stated is too much assortment out there too much goods not enough special. Not Enough unique. Lots of commodities Amazon certainly influenced a lot of this and that's life end so could add twenty or ten years ago because I always ask the question an I didn't know none of us knew about this while some people that Bill Gates I guess sold coming is what you do. Then you've named companies if solemn so didn't exist would you miss them and there was so many no. I will miss them if they weren't here anymore. Now what's happening is a lot of going away either. Unfortunately because they have no cash they're running out of cash in. They might be good at what they do and the rest. You just won't miss them and the balance sheet was week when you say their balance sheet was weak you mean they were heavily indebted right overly indebted or plus an I. Don't you know right now? Sitting with all these empty stores with huge Will push people over the edge if they might have survived longer than they probably would discount. It cleans up the landscape of Aqua Lung. Markdown companies and others who sadly will go away because you know maybe they just undercapitalized. And they might be run. Creatively have nice goods. The the report cards not in yet. I don't think it's close to being so if that's the question if if there are too many stores and I think you know there's one statistic that's you know frequently cited that there there's more store space in America. Her customer or per person than there is anywhere in the world by a long shot. So there's too many stores is too many malls. There's too much product There's too many brands. How did how did they all last this long? My first place you know. We'll explain that to me because I don't understand how that can happen. What the the answer. I always get free money out there for everyone. I'm not an economist. A merchandiser in what free money means as maybe lower interest rates are money plus a venture capital like. Oh here ten million years fifteen million. Let's think shot I kind of Bedding in dark half the time I. I sat in Venture Capital Office for my first year at J. crew and I visit with companies and it wasn't very hard to get money who's actually quite easy just to fancy. Dan Presentation Sound. Like you know what you're talking about a with great confidence have no experience. Oh we're going to invest in. You know what I've learned is if they hit one or two or three ten. They're very happy and don't says that they'll talk about it. But I'm not blaming venture capital maybe blaming too much cash around America to take a shot and when I look at the companies are known to be critical. I am like very few things impress. And I'm saying you kidding. You're going to invest in this when his so many of that but I think free money betting taking a shot. I guess in the two Twenty that the deal is makes it very attractive to buy company sell companies and it got us to place where we are in a to a degree. And you know you weren't looking at these with a sharp. I may be in my world in Tarot. It's amazing how people might evaluate opportunity without Kinda doing the surgery you know doing whatever before and money people are different than operate. There were very much different. They probably make more money in a sense because playing money in the not Clinton with and I don't think the playing vision and I don't think they're playing with a down. The road shot now. Drafting said is more start ups and I don't know what's GonNa Happen is my own personal opinion. All this is how many of them are actually going to survive. How many will make money? I'm used to and I started made. Well started old navy. A while I was running. It was a matter profit not a matter out big. Could you get how much volume two right? So basically what you're saying is there's been a lot of capital floating around cheap capital either in the form of debt. That's you know coming from. The capital markets are very low interest rates that enables big investors to take bets on an industry that they don't really understand and so they're artificially in a way propping up some of these retailers that without that kind of you know we talk about. Smart MONEY. Maybe we'll call it not smart money with that. Not Smart Money. It kind of it extends the life of these retailers. Maybe beyond what they would have had if they didn't have that money. And then the people taking ownership of these companies don't really know how to operate them a you. Just you just called yourself a merchandiser right. And I think that's a really important a role for everyone to understand because the role of the merchant as also kind of faded in the in the last few years. There's been a lot more merchandising by numbers and algorithms and data and less instinct and taste and differentiation. So when you walk into stores many of the department stores everything kind of looks the same not just within the store from brand to brand to brand but also between stores so talk to us more about the fundamental importance of the merchandiser and operator in making a fashion retailer successful. Well I do call myself a merchant and that's what I do for living in fact someone said to me the other day we have beautiful stornoway really love Alex meal and they said this ten of us and to people said what we need to work at. What you do is they said. Because you're working like you're you're looking at everything you're working at such a detailed level and don't want someone to help you. I said I'm doing the same thing and looking at every style for forty years. Why should it change now will older now than I was when I started running companies? But that's what I do for a living. I said I look at every style and actually like doing that and I look at every email and I look at every this. I am a huge micromanage. And if you're not a micro manager I don't think you're doing your.