EPISODE 019 : 07/15/2021

Retail Expert Dana Telsey, CEO of Telsey Advisory Group

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Dana Telsey is the CEO and chief research officer of the Telsey Advisory Group. Her team leads the industry in retail advisory and equity analysis covering all segments of the retail industry. Dana also serves as a trustee for the International Council of Shopping Centers and has been recognized as one of Barron’s 100 Most Influential Women in U.S. Finance. Dana is a regular contributor to CNBC.

Host: Ned Hayes and Ashley Coates
Guest: Dana Telsey

Topics Discussed in this Episode

  • Detailed small business insights from Olympia, Washington
  • Small business resiliency and adaptation during COVID
  • Doubling community outreach during the pandemic
  • Opportunities for small business loyalty programs

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Audio Transcript

Ned Hayes [00:00:01] Welcome to SparkPlug, where we talk to smart people working at the intersection of business and technology. Brought to you by SnowShoe making mobile location smarter. Dana Telsey is the CEO and chief research officer of the Telsey Advisory Group or research team coverage U.S. and international companies across a variety of retail sectors, including apparel, children’s and teen consumer electronics, cosmetics department stores, discounters, home furnishings, luxury goods, grocery stores and many more. And Dana and her team constitute some of the leading analysts and hedge fund investment coverage of the retail sector. So welcome, Dana.

Dana Telsey [00:00:39] Thank you. Thank you so much for having me. I’m thrilled to be here with you today. 

Ashley Coates [00:00:43] We’re glad to have you on Spark Plug, Dana. So Neds already provided a basic introduction of your work. But I’m curious if you could get a bit more personal. What’s the story of your interest in the retail sector? What drives you to this area of the economy? 

Dana Telsey [00:00:59] Oh, I’ve been drawn to it all my life. I grew up in Manhattan and my family had a bookstore on Madison Avenue. My grandfather was cashier register number one. My mother was cash register number two and I was cash register number three. So it’s always been all about serving the customer and getting that feedback. And frankly, it was who could bring them up the fastest in my family. And so going to see stores, seeing how customers reacted and then being able to blend the quantitative with the qualitative became a wow. So for some people, they love and get the adrenaline from exercising whatever. To me, shopping’s my exercise and today wallet spans multi channels. Because I’m walking in stores and I’m combing websites at the same time. There’s nothing like interacting and being able to get the pulse of what’s working and what’s not. And seeing people in the store and whether they’re smiling or not. So post-pandemic now, I can’t wait with this safety. That’s even more assured because of vaccination rollout and also the cleanliness standards that are heightened in a lot of the retail destinations. I’m excited about what Retail 2.0 and 3.0 looks like. 

Ashley Coates [00:02:14] Absolutely. And we’re really looking forward to chatting with you about that. Will you tell us more about the Telsey Advisory Group Tag? What value does your company bring to retailers and retail investors around the world? 

Dana Telsey [00:02:28] So Tag was formed 15 years ago. I came out of Bear Stearns. I started my career on the buy side, working for Baron Capital for seven years and then went to the sell side to see Jay Lawrence and Bear Stearns, where I ran the retail team. Always thought there was a better way to do consumer research as the big world of brokerage firms were changing. So 15 years ago, in 06 before Bear went away in 2008, I started Tag with four of my partners who came with me from Bear Stearns. And today, 15 years later, we’re around 40 people. We cover the consumer landscape and cover a lot of the same categories, but are marrying that with new economy. So we’re covering what’s happening in apparel, what’s happening in homes, supermarkets, discounters, luxury goods, cosmetics, you name it. If it touches the consumer, we’re going to be there. And I always think about what makes a concept successful, what makes us different concepts execution and management is what drives retailers and the drivers behind that are constantly innovating and changing. So today, to have a successful concept, you have to innovate, apply that to Tag and you bet we’re innovating. We’re doing things differently than we’ve done in the past and differently because of how the consumer is getting their goods, learning about brands and basically being able to incorporate how they want to buy and what they want to buy. Second element that drives a retailer is execution and today what makes its first successful execution, its seamless and speed? Who would have ever thought five years ago? I remember being in meetings and people would say, I don’t need something in two hours. I can, or I don’t need something in two days. I don’t even need it in two hours today. What a stores become. Stores has become the ultimate close to the customer. In order to fulfill those wants and needs. So I think overall, when you think about retail so far, it’s about innovation. It’s about speed. And the third thing concepts of human and management, what makes a management have a path? It’s data, and it informs the data, informs and about the vision. So what we attempt to do differently to incorporate that, we’re breaking it down in order to see what concepts can drive and have a path for success and longevity. What don’t and what changes need to be made marrying this with the consumer, marrying this with the concept and the brand and marrying it with our operations in order to be able to have a quantitative and qualitative grasp about who can succeed in the future and what demographics and what profit profile can they have. So that’s the first leg of Tag line research. Second leg is all about consulting and banking. And we’re fortunate that we’re in been involved in many of the IPO transactions lately. Given the abundance of what’s happening in the consumer space. Two reasons, because of our insights into the consumer sector that we can marry what’s worked in the past, what we think we’ll incorporate into the future. And we could tell a story. And also because given the importance of DNI, we’re DNI firm given our WBE designation that we have. And so our bat phone to the investors, combined with our insights into what’s happening with the world of consumer and how we can frame that and dialog about it. And then having that DNI mandate is the point. We consult and consult to all types of companies. And it’s been a lot of real estate companies, but lately it’s been other categories too, whether it’s media or steal. Everyone wants to understand brands. How do you brand yourself to stay on top of people’s minds? So first look of Tag is about research. Second leg of Tag is about consulting and banking. Third leg of Tag is about asset management. We form the Telsey Consumer Fund. Five years ago, the co-founder and portfolio manager with responsibility for all investment decisions and alpha generation is Ben Sullivan, who was a client of ours at Bear Stearns, a client of ours at Tag, and now he’s the co-founder. So we have had very nice returns and we’re up around 23% net last year. We’re up around 26% net so far in 2021. And the headwinds when we first started up oh my Amazon is going to take over. What do you need consumer for? Oh, my stores are going to close or oh my, they’re going to be so many bankruptcies. Those headwinds post the pandemic are now tailwinds as companies are leaner, meaner, their profit potential is greater. And so we are raising assets with the fund and if anyone would like a any documents on it. Email me at details@telseygroup.com. That’s what Tag is. And keep in mind, I had a grandmother who lived to one 103 and worked many, many years still was working, even when she passed away and well in the beginning innings of Tag. So I can’t wait to see what the next decades of what Tag is going to become. And it’s all because of the fantastic team I have. 

Ashley Coates [00:07:43] Thank you so much for that overview. That’s fantastic. And I actually want to grab on to one thing you said, which is Amazon is going to take over wondering if we can grab everything that you just mentioned from that conversation in the work of retail leaders today and e-commerce versus physical retail. And if that’s even the right way to frame it would love to hear your kind of general thoughts on e-commerce versus retail, physical retail. Who’s winning right now and how will it all change post-pandemic? 

Dana Telsey [00:08:18] So a couple of things I don’t think it’s either or I think it’s an and. I think that story of e-commerce versus physical retail is the past. It’s not the future or the present. Every company that has a customer base that’s loyal, that’s growing has both a physical retail presence and an e-commerce presence. If there’s one thing that the pandemic taught us is that physical stores are essential. And the reason why they provide a touchpoint, they can provide an opportunity to be closer to the customer. And you know what they provide. They provide social engagement and everybody needs that. I have a theory and a theme that came out of the pandemic that we call supercharge change. And I think that’s exactly essentially and I’ll tell you a little bit about it of what’s happening today and what I think is certainly going to be happening in the future. So when you think about what is supercharge change and what does it mean overall, when I think of supercharge change change, it’s the accelerated strategic plans for companies to activate engagement beyond just the positive macro backdrop. And what we’re seeing out there in terms of what companies are doing, they’re innovating, leading to the acceleration of these actions that would have taken three to five years to achieve, if not for the focus of companies striving to better serve the consumer. So you almost think of it is it was an accelerator and think of what’s changing. Yeah, the circular economy that’s gaining steam and awareness and business model adoption. You have it, whether it’s in resale that’s happening, whether it’s in second hand, that’s happening, whether it’s the emerging spending power of millennial and Gen Z consumers with that increased focus on sustainability, particularly among younger consumers. And so I think these. Changes are super exciting into what it leads to and is it is e-commerce or is it physical? I think what we’ve seen so far, the data from e-commerce helps inform the physical footprint, what should they stock in the store? How personalized the assortment should be, what the turns on those items should be. And we’re now seeing brands emerge and evolve beyond just being one category category you’re extending into lifestyle. And one of the things I always talked about in terms of what I’ve read, how do you know what a brand is? A brand has to say what it does and do what it says, so that clarity helps. And I think that’s what came out of the pandemic. 

Ned Hayes [00:10:56] Well, I know that you began your work in bookstores and I’ve been amazed to see independent bookstores rebound. You know, there was this big push that Amazon is going to tell the bookstore now, turns out, not so much independent bookstores are blossoming all over the country. So could you speak to particular segments that you think will really benefit from this marriage of getting data from online and understanding how to curate the experience in a physical location? Are there segments that you think will really nail that? 

Dana Telsey [00:11:24] So I think we’ve been seeing segments to do well, and I think frankly, it’s less segments and even it’s more companies. What is the management team doing? And I put that word in in brackets, team. The team has to believe look, what happened with curbside pick up companies like Ulta got into curbside pickup within six weeks. Look what Lululemon did by buying mirror and integrating the buying of activewear with the doing of activities and then having a funnel basically of their core brand adopters exercise and workout with them. Look at what Peloton did where they have their average customers are doing nearly twenty seven classes on a Peloton every month. Pretty impressive in terms of the adoption. You take a look at other businesses and now that we have the reopening and recovery, that’s beginning to happen where children who go back to school and once you have children going back to school, parents in some form may go back to a hybrid work environment. We don’t know what that all means or looks like yet. And all of a sudden, what are you seeing? Gatherings acquire new clothing. So you’re seeing companies like an Urban Outfitters really deliver on that free people movement. And that’s been a real uptick in terms of how they’re how they’re improving their business models. And I think take a look at what we’ve seen from supermarkets. Prepared foods, prepared foods matter. And there’s an engagement there that that doesn’t go away. One of the things that we’re seeing out there is we’re seeing a lot of business models try to adapt to next rather than being stuck in what than what was? 

Ned Hayes [00:13:04] It sounds like the the key is having a team that can be nimble, that can execute within their segment. It’s not like one segment will triumph over another. It’s a particular team that sees the opportunity and strives to embrace that possibility. 

Dana Telsey [00:13:18] Exactly. Look what you had yesterday announced when Nordstrom announced the partnership minority interest in it’s in ASOS, why they want to capture younger customers. Look what VF Corp did when they bought Supreme, why they want to expand that, expand their reach, and they can expand Supreme’s network globally. While the drops and the product drops that Supreme has can help inform them about their existing brands of Vans and others. So it’s exciting the changes. All brands are getting life again and take a look at what Old Navy be going to be this fall with the launch of more inclusive sizing. Look at what happened with Gap and Walmart home. So every business I want to know, what are they doing? That’s changed from what they had been doing? And look at Levi’s. I mean, the excitement around Levi’s with the new silhouette of denim and what their denim and how they market it and get an iconic brand excited by all different generations. That’s a wow. And that’s why it’s not a category. It’s the team and need the continued desire and thirst for next that makes that makes you win. 

Ashley Coates [00:14:27] What you just said Dana really ties into some recent conversations we’ve been having with our SparkPlug guests. We recently interviewed Steve Dennis, author of Remarkable Retail, saying that the key to especially for physical retailers and independent retailers is to be remarkable by exceeding customer expectations, by creating an unparalleled experience. What are ways that you are seeing retailers be remarkable and how has this really made a difference in their success? 

Dana Telsey [00:14:58] So I think one of the things here’s an example of remarkable I think it used to be before the pandemic. Luxury goods companies would scoff at online that their customers would need to come in the stores in order to get the experience because of. The expensive nature of those items. Fast forward to today. You have LVMH, who is not only doing online, accepting it and innovating and became an adopter of it, and now you’re seeing some of the brands that they acquired like Tiffany’s move forward at a faster clip. So I think the past was, oh my, it would never be able to buy luxury goods online and take a look at today in terms of how that world has changed and how it’s going to continue to change that way, especially given the fact that none of us have really traveled overseas. And it’ll be, you know, it’s a year and a half or more, and we really haven’t had the influx of foreign tourism. Yet, the viral nature of how you can capture demand and interest and innovate the product assortment. We’re not losing anything. If anything, it’s only becoming more innovative and more personalized. The luxury goods industry is the biggest wow to me and taking the meaning of service and extending it. 

Ned Hayes [00:16:16] So how did the absence of tourism affect things in international retail? And do you think that will change moving forward? 

Dana Telsey [00:16:22] I think when you go back to international travel, I think people want to see history. They want to create memories. What we lost during the pandemic is memories come from experiences and we missed family gatherings. We missed weddings, we missed vacations. So I think people gonna want to make up so pictures, given that the world speaks in pictures right now. And I think we do go back to traveling and perhaps in a bigger way in the near term than we would have had in the past when it’s safe and whether that comes from a booster, whatever it is. But safety is at the top of people’s minds and I think one of the things that doesn’t go away. I think the Purell and hand sanitizer, we’re in it for life, that’s not going away. 

Ashley Coates [00:17:07] So I’ll I’ll have to get used to it. 

Dana Telsey [00:17:09] Yeah, hopefully the masks go away, but the Purell hand sanitizer. 

Ashley Coates [00:17:16] So you mentioned that, you know, experience really matters. And one of the things we work on a lot at SnowShoe is loyalty. Can you share your perspective on loyalty? Does loyalty still matter and how does it play into a customer’s decision making process? 

Dana Telsey [00:17:32] Loyalty matters more than ever, and loyalty matters because it’s how you service the customer. The more you can delight them, the more loyal they will be, and the more they’ll want to sign up for your loyalty program. You think about the amount of money loyal customers spend on your brand and non loyal customers. I’ve always heard averages that its three times plus. So you create a customer that is loyal and it doesn’t take much in order to create that memory of saying, Wow, you went above and beyond, yet you disappoint them and you have a greater loss because they’re not coming back, once you disappoint them. So servicing them, whether it’s being in stock, whether it’s a reach out with a greeting, whether it’s a reminder that, oh, you bought this last time, do what do you need a refill? And there’s a lot to do in service that you can do it digitally or you can do it in person that creates that loyalty. I think that more loyalty programs are being adapted. And I think that companies and brand leaders see the importance of loyalty more than ever. You know why? Because it also allows them to personalize merchandise and therefore leading to lower markdowns. So it’s a whole flywheel. It informs them of what goods consumers like, what goods they need to make, helps to make inventory that sells a full price and helps to delight a customer that creates a telephone line that can share that experience with others, thereby bringing new consumers into your ecosystem or brand. 

Ned Hayes [00:19:03] This very much aligns with our experience of providing loyalty programs to a broad market. I’m curious as we look at technologies that are emerging, including SnowShoes on capacitive touchscreen technologies and NFC and Bluetooth and and cameras. If you see new technologies emerging that maybe are not in broad use that you think will really take the world by storm. 

Dana Telsey [00:19:24] So I think there’s a couple of things that are going to change. I don’t know what driverless does. All of a sudden. I mean, are we going to be chauffeured to shopping centers and going somewhere else? Autonomous driving, I think, is a wave of the future that’s coming sooner than we expected. Contactless, I mean, in this new realm of safety, contactless, where you just show your card or you blink an eye or whatever it may be. I think there’s going to be new ways that we all pay for things. And the ease of checkout is going to eliminate a friction pain point that had wasted people’s time before and created frustration. And I think the technology that eliminates these frustrations is going to be in demand, and I think it’s still here. But what it’s doing is it’s going back to where we started. With concept execution management technology that innovates, technology that’s seamless and drive speed and technology that informs through data. 

Ashley Coates [00:20:22] That’s really fascinating. I’d love to get your perspective on sustainable L. Another guest we had on recently was Dr Joanne Brash, and she was talking about retail sustainability and the responsibility of retailers to steward their resources and create a complete end to end cycle for their products. It’s responsible. Do you see retailers listening to that appeal? 

Dana Telsey [00:20:47] Yes, I think it’s been ahead of the game in Europe. We’ve been behind the game in the United States. It’s becoming front and center here because of what it means for the environment, what it means for future generations. I think it’s being adopted not only by Millennials and Gen Z. I think Baby Boomers also, I think to how and why of heritage and authenticity of appealing to customers. It’s about brand messaging and brand marketing. You’re seeing more companies put in place, whether it’s resale, whether it’s secondhand, and you’re seeing these business models become more prominent as singular business for business models. I think it’s going to be something sustainability isn’t going to be an aha in five years. It’s just a part of the conversation and part of what not is a nice to have, but it’s part of what must have. 

Ashley Coates [00:21:40] Thank you so much, Dana. We have one last question for you, and that is what is your personal mission and what do you want to be remembered for? 

Dana Telsey [00:21:49] That’s a very good one. So one of the things that I’m most proud of is I’ve worked for many years and I’ve had great people on my teams. They’ve gone on to let some of them to great success. And so I always want to be thought of as being able to create an inspiring memory that drives people to succeed. I want them to be excited and to enjoy coming to work and being part of the team so that we all went together. And I like being able to inspire, being able to teach and being able to have people who enjoy what they do. Because when you are passionate about what you do, you’ll be great at it. And so I love being able to teach the excitement and the energy of loving what you do, you’re a happier person. 

Ned Hayes [00:22:32] That’s fantastic. Really appreciate your time today. 

Dana Telsey [00:22:36] Thank you. Thank you so much for having me. 

Ned Hayes [00:22:49] Thanks for listening today to the SparkPlug podcast hosted by me, Ned Hayes, and brought to you by SnowShoes Snow.sh for smarter mobile location, Smart Plug is a wholly owned property of SnowShoe all content. Copyright 2021 SparkPlug Media.