For example, when we bought Lane Bryant, we borrowed 50 percent more money than we had in net worth. [We] literally bet the ranch on an acquisition—and we paid back that debt in about three months. I was pretty confident that I knew what I was doing. If not, we would have been terminal. We’ve probably invented 30 businesses with $45 billion to $50 billion in market cap and spun them off. This represents hundreds of thousands of employed associates. This is one of our proudest accomplishments.
In retailing, data is everywhere. In fact, there are mountains of it. Has data analytics changed how the industry deals with the customer to achieve, in your phrase, a “more truthful, bias-free environment?”
Our business is much like the movie business. There are some rascals like Steven Spielberg who know how to make movies, but the real skill is that he knows what movies to make. From E.T. to Schindler’s List, he has more of the high-grossing movies than anybody else. You can’t get that from data mining. Maybe you can project consumption of 12-ounce Coca-Cola, but how you get from Coke to Cherry Coke to Lemon Coke to 10-calorie Coke doesn’t come from data mining. Our skill as fashion merchants is to have a nose for finding latent demand and knowing what’s next. Sometimes market research is like giving radar to a hunting dog. It makes him dumb.
You appear to put a high value on employee engagement. What do you do to make this happen?
Whether it’s walking around, going to other people’s meetings, listening to the tone of things [or] going to stores, it’s all about encouraging people and expressing curiosity about their lives and their careers. People have selfish interests—and that’s perfectly normal. However, they also have involvement in various communities, which is something we encourage. For example, we support the James Comprehensive Cancer Center [at OSU]. People bike-ride and ask friends to sponsor them. They’ll ask friends to buy their cookies or have a bake sale to raise money.
Amazingly, people who work in stores as far away as Texas participate in the 50-mile bike ride event here in Columbus. People who are associated with the business in Hong Kong and in the Mideast not only ride the same day, but they’ll get up in the middle of the night because they want to ride at the same time [that] everybody else in Columbus is riding. This is extraordinary. I put a lot of stock in stuff like this. More stock than I do in the data. We didn’t ask them to do it. It’s a familial thing where children might mirror the behaviors or the standards of the parent.
I feel lucky because I work with the best people in the world. I can measure it not only by their performance in their jobs but how they live their lives, how they participate in their communities.
Conventional wisdom says that the U.S. is over-stored and that any real growth will have to come from international expansion. What’s your view?
I’ve always ignored that. I began hearing these statistics about American retailing 40 years ago. Yeah, America has more square footage per capita than any country in the world and we’re adding more every year. So what? If we’re over-stored with Kmarts or Sears, then we have some obsolete businesses. I go to Easton [Town Center in Columbus] and see people waiting in line. So it’s business-specific and it’s site-specific. There’s always been more retail space than was needed, yet some retailers need more. Costco and Starbucks absorb more retail space all the time. Yeah, some big-box retailers are struggling, and maybe there is an overall glut of square footage by a factor of two, but great retailers can’t get enough. Having said that, we are very enthusiastic about international retailing, in part because we’ve got great brands in the U.S.
It begins with whether one has proven momentum and success in the core business, in the core market. I look at retailers that are successful over time, whether it’s H&M in Sweden or Inditex in Spain. They continue to be successful in their own markets. Still, one must be sensitive to crosscurrents in international business. Just because Americans love chocolate chip cookies doesn’t mean Brits will. Oatsies don’t mean much to Americans, but they mean a lot to people in the UK. People told us to go to Brazil because everything is growing to the sky. Well, it’s a lot more complicated than that. Do people in these markets have a popular perception of your product? Can you perform and execute in that market? And can
you make money? We’ll expand our square-footage internationally.
By 2016 and beyond, we’ll expand North America by a magnitude of 5 or 6 percent. That’s on a very big base. Five years ago, we had virtually no stores outside the U.S., but we’ll expand our international stores about 35 percent next year on a base of 1,000. We’ve got a heavy concentration in Canada, England, the Mideast and Southeast Asia. In the next few months, we’ll be opening a number of stores in China, having tested stores in Hong Kong. We’ll expand our square-footage internationally.
Three biographies Les Wexner Recommends:
- Washington: A Life, by Ron Chernow
- George Washington: 4 Volume Set, by James Thomas Flexner
- George Washington: A Biography, by Washington Irving