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Leadership|November 29, 2022

Leading Retail in Increasingly Complex Times with Phil Wahba | EP43

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In this episode:

Wendy Liebmann talks with Phil Wahba, senior writer at Fortune magazine, about what it takes to lead successful retail companies in complex times, as operational issues clash with increasingly demanding shopper and workforce expectations.

They discuss:

  • The qualities the next generation of retail leaders must have to succeed
  • How empathy is a critical CEO requirement in post-Covid times when companies are demanding a lot more of employees
  • The need to adapt the structure of the C-suite to the new reality of a company.
  • How a culture of stagnation and lack of experimentation cannot be overcome overnight by even the most innovative leaders
  • How the best leaders – in retail and in general -- get the fundamentals right first and always, and are not distracted by “bright shiny” things
  • How not everything Gen Z entrepreneurs do will revolutionize the (retail) world
  • The characteristics that will define retail winners and losers in the future. Who’s getting it right now. (We name names.)
Don’t miss upcoming episodes, stay up-to-date by visiting the WSL Shopper Insights Library, or our Podcast page.

Podcast Transcript

Wendy  00:07

Hello, I'm Wendy Liebmann, CEO and Chief Shopper at WSL Strategic Retail and this is Future Shop. Here I talk to innovators disruptors, and iconoclasts, who are shaping up the future of retail or in this case, someone who has his eagle Canadian eye on what shaking up retail.  And on top of that, he's keeping his eye on what are the qualities and next generation of retail leaders will need to have to succeed. He, in this case, is Phil Wahba, senior writer at Fortune magazine. He writes about leadership across many industries, including retail. He also knows about a lot of other things. He is the co-chair of Fortune Tech, so he knows a lot about technology. He knows a lot about marathon running Def Leppard, opera, Dolly Parton and Peanuts, and oh, yes, he speaks five languages. Definitely a renaissance man. So hello, Phil, welcome to Future Shop.

Phil:

Thank you, Wendy,

Wendy:

Great to have you here. Phil and I have known each other for a long time. And if you read as you should, all of Phil's writing, he has great insight into what's going on not only in retail, but across lots of industries. And his focus now about leadership. And what it takes to lead companies into the future is really important to read. So pay attention. So Phil, it's just so much going on in the retail landscape these days beyond the roller coaster of retail results. It feels like there's just a lot of change going on in the leadership of retail companies.

Phil  01:46

Well, there's always been a lot of turnover in retail, but this year, it's been particularly noticeable and in many cases, you have leaders who have come and gone and not been held to account sufficiently by their board. We've had Gamestop CEO leave, we had Bed Bath & Beyond and their drama, we’ve had Kohl's that was announced a couple of weeks ago, and in the case of Bed Bath & Beyond and Kohl's you had CEO departures where there was an interim and that suggests that this was unexpected. Otherwise, you know, that's not really great succession. You know, you've also had Dollar Tree and you've had Peloton of course, you've had Adidas, Glossier, you also had the gentleman at Under Armour, Patrick Frisk, Starbucks, also, I ascribed this to a lot of turmoil in the world of consumer and retail and CEOs that use an old playbook and boards that sort of went on along with it for a while, and they just couldn't go down. They can't just keep using the same moves.

Wendy  02:43

Is that something about bringing external people in? Are you seeing a trend here and some

Phil  02:49

of this, you know, it can be tempting to want to bring somebody from another industry who will shake things up, I just think it's a case of bad decisions and also cultures that were allowed to get sclerotic for a long time. If you look at Bed, Bath & Beyond the CEO that they dismissed in June, Mark Tritton, had had a very successful run at Target. And then he tried to do the same moves at Bed, Bath & Beyond. And that didn't work. And so they put in an interim CEO, she's now a full time CEO, to basically undo a strategy. The problem here is a culture of stagnation, of not experimenting of being satisfied by the status quo for a long time until it becomes almost impossible to shake up. Kohl's is another example. They had a fantastic CEO who arguably did come from another industry if you want to consider Starbucks. Starbucks is I mean, it's a retailer but it's really restaurant more than traditional retail and she did a lot of innovative things. Michelle Gass, I'm speaking of she's still there technically for another week. But bringing an Amazon returns, bringing the Sephora boutiques bring an active wear and yet the company still slid backwards. And that is what happens. So lesson for a lot of these companies, they get into trouble by using the same moves for years and years and years. Kohl's was slow to recognize the importance of ecommerce. Kohl's was slow to have beauty which penalize them. Bed Bath & Beyond let its stores get rundown. It's not so much coming from a different industry, but it's really not challenging yourself to not fall asleep at the wheel. I mean, essentially, that's it.

Wendy  04:24

I recall, you and I wandered through JC Penney, at one point was after Ron Johnson came in and redid the whole JC Penney concept. And that didn't work either. Is it that people to your point about things getting so stuck in cement, that they need longer to make the changes? It takes longer to turn things around? Or do they come in and sort of try to gloss something over and not pay attention to the shopper they have? I mean, I'm trying to figure out what part of the issue is here, but a lot of smart people have gone to a lot of smart places and they've failed.

Phil  04:58

Well, I think sometimes there's is such a pressure to do something dramatic and big that it's not thought through or it's not. Let's take a concrete example, Mark Tritton, who's an outstanding merchandiser. Let's remember that he created several multibillion dollar brands at Target, in short order. Before that he was in charge of Nordstrom’s massively successful private label, and he gets a Bed Bath & Beyond, he launched his brands, and they all flop, why is the same person? Well, that's because Bed Bath & Beyond didn't really have the infrastructure that targeted Nordstrom have for their own brands, the muscle that was there. Let's also look at Ron Johnson. I mean, this is a very old story by now. But Ron Johnson came from Apple. And then he just thought he could redo everything, merchandising, marketing, culture, radically changing things, and then it doesn't work. So you know, there is pressure to do make bold moves, but they often fail if the CEO hasn't really taken inventory of what the company can really do. I think that's a

Wendy  05:57

really interesting point, that whole notion of brilliant ideas, and then the challenge of executing, if you have an organization that's moribund, that's been doing things for so long, in a certain way, no infrastructure, the logic of what they bring, and you're right about Mark and what he tried to do a Bed Bath & Beyond. But if you don't have the structure of private brand, to build that into a new operation, or revive a new an old operation, that becomes hugely difficult. The other thing that seems to me is, is having the right talent, I mean, sometimes a new leader will bring in senior executives. But if the buying staff, and I don't need to blame the buying staff, for the issues on the store floor, or they don't have the commerce set up the way they need it, then it's just the proverbial kind of paper and the structure of the house is not going to hold up.

Phil  06:48

You're right. I mean, sometimes we look at CEOs who have succeeded, and we want to give them all the credit in the world. But sometimes, they're steering a ship that is in good shape. And I don't want to take anything away from Sonia Syngal at Gap Inc. But she was wildly successful with Old Navy. And then they put her in charge of the whole company, and she stumbles. And I mean, ultimately, the buck stops with the CEO and the board. But you know, she's the same person. And so it can be tempting to sort of think, well, if somebody has been successful in one place, you just move them that will fix all the problems. If a company is fundamentally broken or challenged, quick fixes, dramatic fixes, with a lot of flair might mollify Wall Street for a few months, but long term, they don't work.

Wendy  07:31

Yeah. And that's the other interesting point, you just raised this sort of quarterly focus of Wall Street, and how do you think about the stock price, the share price, it's so interesting to me, because there's so much innovation going on in retail around the world, and some of the best innovators are the people who've been doing it for a long time, like the Costcos of the world. And I look at a company like Walmart. And there's this behemoth with, I guess, the long view of Doug McMillon or whomever I mean, we can put it with target to and people who are really supporting the structure of the company and what it needs the infrastructure, the investment, and are willing to sort of elbow out Wall Street for the time being, but you have a better view of that. And I do I'm thinking about the shoppers and their level of satisfaction when they walk into the store.

Phil  08:17

Yeah, well, Wall Street can pressure companies to make the wrong decision, or to do things quickly. I mean, ideally, if a company's really struggling best to go private to fix it, but a small example is the pressure on Nordstrom and Macy's to grow. And then they add all these off-price concepts. And now Nordstrom Rack is struggling, ultimately, that's on the board, and it's on the CEO to make the case to push back on bad ideas.

Wendy  08:44

You have such a broad view of the companies that you follow, consumer products, companies, specialty jewelry companies, and I think about Ulta example of how they have extraordinarily built this business and a time of lots of change and looking at things like Sephora and the challenges and department stores and beauty. I think about companies like PepsiCo and how they changed their whole focus, not entirely, you didn't throw out that proverbial baby with the bathwater. They just said there are healthier options here. So from your view, I mean, if you step back and all the people that you look at, are there two or three leaders that you go it says these people, you know, in good times and bad times get it right?

Phil  09:28

There are a lot of companies out there. I think Doug McMillon Walmart has been very good in modernizing that company. It stores its assortment. I mean, I think the key is to not chase shiny objects and to or do it a little bit, but not so that it overwhelms everything. Walmart has made a little bit of a big deal of its little efforts in the Metaverse but it doesn't overcrowd the overall thing whereas Facebook is now in trouble because everybody's afraid that they're going full on and Metaverse so you know that was in the world. have retail, a company like Costco proves that you don't have to chase all these fads to get people to come. It's just really being excellent at what you do, and offering customers what they want. People go to Costco for fun for the treasure hunt for the samples for the good prices. They do ecommerce, but they're not huge on ecommerce, but they can get away with it because they're giving customers what they want in every other way,

Wendy  10:28

They strike me as a company to that I think about that reflection of how they treat their people, and how that plays out as a member, whatever, as you walk in that kind of general respect for people. I was looking at, you know, all the people who are now striking what's striking to those at Starbucks, again, Starbucks, there, you think about a company that always was recognized for taking care of their people and having healthcare and supporting education and and then what happened?

Phil  10:58

I'm glad you raised the issue with Starbucks, because you need your frontline workers. And I think not just Starbucks in this, but it's worth it for Starbucks, and even Costco and even REI and even Target a lot of these Apple now companies where the workers have decided there's some effort to unionize. And these are all companies that have a reputation of giving a lot of benefit, education support, and they need to ask themselves, why is there discontent after all, because clearly, they're disconnected from their workers, if they didn't see this coming. At this point, you need store workers we just saw during the pandemic, you cannot have quarter after quarter of growth like Target did or Walmart did, but you don't have engaged employees. And so before we were chatting a bit about the qualities that leaders need. So today's leaders in retail and consumer, but any industry really, it's not just operational stuff, it's not just about supply chain and negotiating prices, and manufacturing. And all this, the right brain is important too. It's a cliche, empathy. And you know, companies make me roll my eyes and our assignment, we're purpose driven. And we're empathy, blah, blah, blah, but you need to understand what your workforce needs and wants and the tone you can set. So in the case of Starbucks, they really emphasized all this, and then all of a sudden, their original CEO, and he's been back a couple of times, he will be leaving soon. He's said some very critical things of some of the employees who want to unionize. And so that can really cause the company a lot of problems. And ultimately, I think it hurts the brand a bit. There's emphasis on that. But it's just all this to say the role of a CEO right now, in any industry, but particularly in consumer and retail, it's much more complex. And part of this too, is unfairly I think a lot of retail and restaurant workers were treated like garbage by the public disproportionately during the pandemic and coming out of it. And I think a lot of them are traumatized by it. So it's really important for CEOs in this day and age to they all talk the talk, but it cannot be performative. It has to be real.

Wendy  13:10

We've talked about Costco, we've talked about Walmart, Target. I think about companies like Patagonia, I mean, companies that began with a leader and had a history of really caring about their employees, as much as they cared about their consumer then now we've got the power of the employee, because of shortages in so many areas and people walking away from things during the pandemic, when the power shifts like that it does require of management, a very different sensibility. I wonder if somebody like Doug McMillon, who's grown up in the ranks, has a different sensibility than somebody who just sort of plunks in a top and says, Here I am. That's why I think about Starbucks. That's a great example of a company that really did take very good care until they didn't, and then how quickly the culture changes how quickly now people stand at the barricades and say, no, no, we're not going to put up with that anymore. So it feels very different how leaders must think today.

Phil  14:08

No, absolutely. And this companies that we're talking about, they absolutely need their employees on board, because they're all having to transform. Walgreens is making a big push to have a lot more health services in the stores so that we'll be asking employees a lot more because the nature of the job will change. Walmart itself, the job 10 years ago was really people just running around putting things on the shelves. But today, it's a lot more helping customers shopping on their app, its inventory control. Everything is a lot more complex. So it really is important for these leaders to have employees on board. Absolutely.

Wendy  14:43

Yeah. And I think the other thing you talked about Walgreens and thinking about the channels and industry like drugstores, and I think about this, the three major chains three leaders have all come from sort of different places. You start to see the level of differentiation that they're trying to build within those organizations, whether it's the Aetna sort of vertically integrated health care model at CVS, whether it's Rite Aid and kind of a very digital focus or Walgreens coming from, you know, Sam's and Starbucks and thinking about that model. When you look at an industry like that, does it matter that people come from different places to do that? Or do you see similarities required for leadership in an industry?

Phil  15:26

in the case of those, those three companies, the it's actually notable, they'll have women's CEOs, and they do have, you know, they're still plugged in from industries that were connected. It's not as if it was a automotive CEO who came in and started running. The CEO at Rite Aid came from a health startup, not very much retail experience, but Rite Aid they're hobbled financially compared to CVS and Walgreens. And they need to compete on the healthcare side too, because you know, the front of store, the general merchandise, that's just a brutal, brutal part of drugstore, retail, frankly, I think all three of them really need to raise their game. If you just look at them as pure retailers, Walgreens, they brought in somebody who was at Sam's who was at Starbucks before, but you know, she's surrounded herself well with the healthcare team. And then at CVS, you had somebody who came from the insurer, CVS, whoever the CEO would be that would not have had experience in every single thing that CVS does. It's just such a sprawling thing, that all three of them are very capable, you can't really have experience in every single thing that a drugstore chain does in the year 22, because they're a lot more complex than they were 10 years ago.

Wendy  16:33

So that talks about the people around you, right, that talks about that leadership team, or the way you think about the experts in different areas, right that you need to bring in. Yeah, and

Phil  16:44

the structure, for example, Walgreens, last month separated the jobs of the people running the drugstores. So there's somebody who's in charge of retail, and then there's somebody who's in charge of pharmacy. And of course, they have to work hand in hand. That's a decision by Roz Brewer, the CEO, that smart leadership where you adapt the structure of the C-suite to the new reality of a company.

Wendy  17:08

Yeah, I think CVS has done the same thing. So that ability just sort of not get stuck or mired in the way it was always done. But think about where you're headed, and having the right talent. I mean, it sounds so simple, right? How do we get it? And some people don't know, just kidding. The other thing that I think a lot about when you talk about bright, shiny things as they think about technology and digital, there were decades when everybody looked at Walmart as the benchmark of what to be or what not to be. Now at Amazon and said, What do we do to compete with Amazon? Is Amazon still, from your perspective, the benchmark that everybody still says, What are we doing to compete,

Phil  17:49

you know, they're outstanding on pure ecommerce of more commodity like products, they're enormous. They're very good at it. They're building an infrastructure for delivery. They're formidable, but they've also had flops, they're not good at devices. They're not very good at stores just yet. I'm not sure Whole Foods is better today than it was in 2017. The Amazon Go stores are fine, but there is a little chain of convenience stores. So of course, they've shaken things up. And to some degree, they've woken up a lot of their traditional brick and mortar retailers who seem to be clawing back some of that market share. And ultimately, you need stores that are well run and well coordinated with ecommerce to make the whole thing economic and make it work. So Walmart is outstanding, and more than half their revenue is groceries. So the whole thing of grocery delivery, call me when somebody's figured out a way to make it profitable, because I just don't see it happening. And you know, the fast delivery, all these little companies that VCs prop up with incredible amounts of money, and then they Go Puff, sorry, couldn't resist the pump. So ultimately, why did companies like Costco, Walmart and Target and Ulta really do well, and Petco, really do well, in those last few years? Well, they rose to the occasion for ecommerce, which is table stakes now but they also just raise their game in pure old fashioned retail with well run stores. Good merchandise fun, well, fun. I don't know if Walmart is fun to go to. But in person shopping is much better than I was in many of these chains and you know, look at well Target’s done, they renovated their stores, they made them more fun than than before the transformation. So, so to come back to your point about bells and whistles, bells and whistles are fun if they're an add on, but they're not a replacement for fundamentals and I'm getting a flashback to something that made me really laughs a few years ago because of sudden Neiman Marcus and Macy's sending me these breathless press releases about smart mirrors that they were setting up. You can come to Neiman Marcus, and you can sit in front of a smart mirror and it can show you how different items will look on you and I remember once I went into the store in Palo Alto, I asked a saleswoman if she could show me and hadn't even been plugged in. So nobody uses it. And so you know, ultimately, these things can be fun and amusing, assuming they're plugged in, you have to have the fundamentals down first before you can really throw bells and whistles. And you know, that's a good segue to a lot of this Metaverse and NTF discussion and blah, blah, blah, you know, the fundamentals have to be nailed down well, before you go into all these things.

Wendy  20:24

And I think that's the piece that you were talking about. And even in the example of Bed Bath & Beyond, you can have this great vision. But the fundamentals are if I don't know how to handle own brand merchandise, and I don't have the merchants or the operating structure, then it's just what I was called a New York secret, something we filled in our wonderful marketing worlds, and then the X the ability to sort of send it out on wings of doves to somebody and hope somebody somewhere is able to execute it. So I think it is the reality, certainly of retail and good leadership and retailers or in consumer packaged goods is understanding the fundamentals of getting the basics right. I mean, I was thinking about fortune does 40 under 40, emerging new generations of leaders, what are you seeing in that next generation of leaders who was sort of bouncing up at you? I'm always amazed, I read that, I look at it, and I go like, well, do I know any of those people? You know, who are they? What industries are they coming from?

Phil  21:22

Well, you know, they run the gamut. And, you know, there's always a bit of hype, and things come and go. But the President of Shopify is under 40, Harley Finkelstein, the CEO of PF Changs is 33 and shaking things up. And they just happen to be under 40. But they're also just really bright business people who see a lot of change. And so a lot of fads come from people under 40. But also a lot of fundamentally new ways of looking at things come from there yet Glossier. Not everything lasts, I don't want to pick on people. But I mean, business is hard. But companies like Rent the Runway and Warby Parker were extremely innovative, Allbirds. But it's tough to make a go of it after all these years still. So I think young people innovate. But it's also important that not everything that a Gen Z entrepreneur does, we should think is necessarily going to be the thing that revolutionizes a world. But by the same token, nobody can sit on their derriere. And just think that things will stay as they were,

Wendy  22:24

I think that's actually a call to action, right? That ability to sort of listen to anticipate I was thinking out team, when I get this thing in my stomach and think, oh, do I really have to think about that. Because you know, somebody who's 25 told me I wasn't doing the right thing, or I needed to do a podcast, I say to I really have to do that really?

Phil  22:40

Well. You're very good at this.

Wendy  22:43

Well, thank you do the thing you raised there about new ideas, new talent. I mean, that's not new news to anybody. You cannot be moribund, in this world, particularly to my view something as dynamic as retail. I mean, we think about the impact and the extraordinary effect that regular everyday retail had during the pandemic. And you talked about frontline workers. And as we all can sit preciously in our homes and do all of these sorts of things while people were at the frontline through all of that pandemic. It just is extraordinary to me, when I think about all of that, and what people were able to achieve and the power of retail to deliver through all of that. The whole supply chain, that I never thought I would talk about supply chain over time. But clearly that had an impact on shoppers. So here we are 2023. What do you see looked at your crystal ball of Phil-ness? What do you think about there as you are ready to go to NRF and interview people? Are there some things that you're thinking about for the future in terms of leadership or other things,

Phil  23:44

not to get too big picture and philosophical, I think we're at a point where we have to consume less or figure out how to consume in a way that is less harmful. So I do think the circular economy is reality, and there will be pressure, more pressure on companies to prove to get more useful life out of what they produce. When we talk about young people, it's easy to think well, what's next, and we're going to come up with like a TikTok or back in the day, whatever was hot Pinterest, and let's take it a go. I mean, I think people need to be in tune with what younger consumers want or what they're going to push for when they work at companies. And sustainability is something that's trotted around a lot, but we will see a lot more of that. And how will companies adjust to perhaps consuming fewer new items as a whole or where is production and sourcing gonna go? Our economy is based on consumer spending, and it's extremely wasteful. And that is absolutely going to change not just because we need it, but because that's what consumers wants. And it's actually doable. And I really think that when we talk about young people, they're the ones that are going to be pushing this it's not just going to be the the cool new bells and whistles for how to shop. I think we're seeing it now. they're much more willing than their parents and grandparents to push back on employers that are arguably abusive, and they want society to change. And I think even us old people, we want society to change and shopping will be a lot more fun if we're not simultaneously think like, oh, is this destroying the planet at the same time, I really, really think that this is going to be the big thing that's going to reshape consumer and retail in the future.

Wendy  25:23

I think that's a great way to close this is if you think about what you just said, in the context of we particularly in this country, said from two immigrants, you and I, but in this country where the power of consumption and more and more choice, have driven retail, whether it's fashion, or beauty, or food or beverage, whatever it is. And I think about what you just said, for companies, whether they're manufacturers or retailers to think about not only producing more effectively and efficiently for the world. And for this emerging group of consumers and shoppers, but also potentially producing or selling less, that's a very different model that companies have to think about whether it's Pepsi's or the Procter and Gamble's or fill in the blanks, I'm not picking on them, just raising them as hugely successful companies. And then the retailers where you walk in, and there's so much choice, which also gets a little exhausting to people we see in all our research. It's not that we don't want all the choice we want, but we don't need it to make it more stressful to find what I want on the shelf when I want it kind of thing and get on with my life. So that's that's a really provocative thought that you had, and so many ways that we as companies have to think about how they do business on so many levels. So I appreciate that as a last bon mot.

Phil  26:41

My pleasure. And let's go shopping together soon.

Wendy  26:43

Anytime you want sustainably, sustainably very good with a cocktail, of course. Yes. Thank you, Phil. Cheers. We'll see you soon. So here's the thing, as we envision the future of retail and leadership, what Phil says should be a clarion call for all. Leadership today requires different thinking, yes, it's still about getting the fundamentals right. In fact, that's more important than ever to deliver as a smart Walmart executive once said to me, the right product, the right price, right now. And of course, you have to look at what's coming next around the corner and technology and product innovation and lifestyle preferences and more. But you can't be led by the bright, shiny things that take your eye off what shoppers and workers want from you now. Empathy is more fundamental to successful leadership than ever before. The last thing Phil said, which was prescient and requires lots of consideration is that younger shoppers will put much more pressure on us all to create a more circular economy no longer more for the sake of more, which has been the underlying principle of American business from day one. So consider that as you plan for the future. See you there

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