mitchells/richards€¦ · web viewmitchells/richards. a personal relationship is at the heart of...

N9-603-010J U L Y 1 , 2 0 0 3

A M Y C . E D M O ND S O N

Mitchells/RichardsA personal relationship is at the heart of every transaction.

—Jack Mitchell

Once a customer, always a friend.—Bill Mitchell

IntroductionJack Mitchell, CEO of Mitchells/Richards, popped an M&M into his mouth. It was

close to the end of the year, 2002, and his high-end retail business in Westport and Greenwich, Connecticut was thriving. Jack’s parents opened the first store in 1958. Eventually he and his brother Bill took over. Linda Mitchell, Jack’s wife joined them in 1990 and now they looked on as their two sons, Russell and Bob helped customers, oversaw store operations, and ran the show as co-Presidents. The transition from fathers to sons had gone smoothly as the business had grown from a small men’s and boys’ shop in Westport to a multi-million dollar men’s and women’s clothing destination, with two large flagship stores, catering to customers who included numerous CEOs and celebrities. Mitchells/Richards sought to be a model of excellence and personal service. Jack had recently signed a book deal to describe the Mitchell’s way of “hugging” the customer, a strategy that, although conceptualized as a way of relating to customers personally, one by one, was seen by the Mitchell family as relevant for service organizations of all sizes (Exhibit 1 provides advance praise for book). “For there’s no doubt in my mind,” Jack explained, “that our philosophy can readily be applied to selling just about anything—macaroni, aircraft engines, carpets, stocks and bonds, insurance, or beanbags.”1

While the business had expanded, so had the family. Together, Jack and his younger brother Bill had seven sons. Five had already joined the business and two others seemed headed that way. Not to mention the grandchildren beginning to populate the next generation of Mitchells. Jack wanted to leave a thriving business that would be able to employ his family and prosper, but how could they continue to expand? The

1 Jack Mitchell, Hug Your Customers, (New York: Hyperion Press, 2003) p. 6.________________________________________________________________________________________________________________

Professor Amy Edmondson and Research Associate Corey Hajim prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

603-010 Mitchells/Richards

1995 addition of the Greenwich store had been a huge success and the family had helped to double revenues of the store, but was the model repeatable in other locations? And if so, what location would make sense? How essential were Mitchell family members to the success of the business? If Jack could write a book describing universal customer service themes for success, why couldn’t they be employed at other existing stores?

Jack’s hand hit the bottom of the M&M bowl. His son Bob was making his way over with a long-time customer who wanted to say hello. Jack quickly refilled the bowl before extending his hand in greeting.

History/FamilyIn 1958, Ed Mitchell decided he wanted to leave his big city job as a marketing and

advertising executive and do something different, something he had wanted to do for a long time. Jack recalled the day he got a phone call from his parents.

I was a freshman at Wesleyan at the time when I got a call from my parents. They said they wanted to sell our house in Westport and open a store in Florida. I said, “Whoa, wait a minute, let’s talk about this.” My brother was still in high school. They drove up that weekend to talk about it. My dad went down to Florida afterwards to look for store locations, and my mother was working on selling the house in Westport, but prospective buyers kept asking her where in town could they buy clothes? Where was the local men’s store? They changed their minds and decided to open a store in Westport.

At the time, Westport, CT was a small suburban community located just over an hour north of New York City. Residents were, in Jack’s words, “artists, Yankee farmers, some people who commuted to Manhattan, and actors.” It was also a town filled with friends of the Mitchells who had lived there for decades. The original store was 800 square feet storefront within a plumbing supply building, and the inventory consisted of three suits. Opening night was truly a gathering of friends. As Jack recalled,

We used the telephone book and our Christmas card list as our database that first year. We had lived in Westport a long time. We knew everybody and they came because they were friends, they came back because we were nice and they could shop and have a cup of coffee. The principles then were the same as they are now, getting to know people, what they do and what they like. “Hugging” is a metaphor I use for staying close to the customer on a personal and professional level.

The first year, the Mitchells sold $50,000 worth of merchandise. Bill entered the business first, immediately after graduating Juniata College in 1965. Jack had received a master’s degree at University of California at Berkeley in Chinese history and culture and was working as an administrator at a medical and scientific research institute. In 1969, Bill proposed that Jack join and help start the new women’s department, and Jack decided to give the family business a try. With both Jack and Bill involved, the business grew steadily. At the same time, Westport had been changing, becoming more affluent. More and more people moved to its bucolic location within commuting distance to Manhattan,2 and several large corporate employers moved to Connecticut. For

2 In 2002, the population of Westport was approximately 28,000.

2

Mitchells/Richards 603-010

example, General Electric moved to Fairfield, CT in the early 1970s; former CEOs Reginald Jones and later, Jack Welch and Jeff Immelt became customers, as did many other GE managers. Jack Mitchell commented, “if you want to be CEO, dress like the CEO.”

In 1972, Ed and Norma Mitchell passed along most of the equity in the store to their sons and set a precedent for passing on the wealth of the business. In 1991, Bill and Jack gifted 75% of the business to their seven sons. However, that did not mean they gave away control in the same way. All sons had equal ownership of the business, but not equal control. Control was determined by the number of years of involvement and experience in the business.

Russell MitchellRuss Mitchell, a graduate of Dartmouth College, recalled being brought into the

company by “semi-ultimatum:”

I was working at IBM, in sales. Around 1989, business in the store was not great and the company was struggling financially. There wasn’t a person here who really understood finance. The store was doing about $10 million in business, yet was run as a very entrepreneurial company. They felt that they had to hire someone with a finance background. I wasn’t terribly interested at the time, but the ultimatum was, if I didn’t come in at that time, in two or three years I couldn’t just jump in above someone else they would have hired. My wife and I didn’t want to move from Boston, so the compromise was that I worked out of Boston for two days a week and commuted. So, I was here half a week for about a year.

Russell was responsible for store development, the “non-core” pieces of the business as he described them, behind the scenes and technology, “I like to think I am the analytical guy. I like more structure than other people.” He further described his position. “If you look at most retail companies I do bring a unique skill set. I have a degree in computer sciences, did a lot of programming 10 or 15 years ago, I understand systems, I grew up working in a retail store, and I have an analytical finance mind.”

Bob MitchellIn 2001, Bob Mitchell, along with his brother Russell became a co-president of the

business; Bob was responsible for merchandising and sales. He joined the business in 1991 after a successful early career at Sports Illustrated. When he graduated from Dartmouth he was eager to join the business, but Bob knew the family rule that all third-generation Mitchells had to work outside the family business for at least five years after college. Jack and Bill encouraged Bob to explore other things. Their father, Ed Mitchell thought they were making a mistake. Jack explained, “Bob had been working on the selling floor since he was 13 years old, he knew the business. He was very qualified. Dad said we were crazy. ‘You’ll send him out to pasture and he’ll never come back!’ Bob would go off and find another career, get involved in it, and do well. He thought we would lose Bob.”

After working at Sport Illustrated for five years however, Bob got the call that he was needed in the store. Bob recalled:

3


It was not the timing I had been thinking of. I had just gotten married and we were getting ready to settle in the City. I had always wanted to come back to the family business someday, but I wanted to fill a real need, an existing position on the merchandising side. Then a job opened up and my wife and I decided to look at houses in Westport instead of apartments in New York.

Bill described Bob’s decision to leave the magazine world. “They fought to keep him at SI. But his boss knew the bottom line. It didn’t matter how much money he could earn, he would never own Time, Inc.”

Todd MitchellAfter graduating from Boston University, Todd Mitchell joined Apple Computer,

where he thrived. Yet, the lure of the family business ultimately brought him home initially to connect the computer systems between Mitchells and Richards and then moved on to run the client accumulation program with the sales team and in 2002 was managing the Mitchells women’s business. His primarily responsibilities included hiring, training, and managing the day-to-day activities of the store. His main concern was finding the right people for the job, and he focused on long-term commitments.

Andrew MitchellAndrew Mitchell, Hamilton College graduate “backpacked” around the world before

he began his business career. He was ready to work in the family business before there was an opening and had to wait about six months before a job became available to him. His expertise was in marketing and advertising and included a management position in relationship marketing at Godiva chocolates. Prior to Andrew’s arrival, Russ was handling most of the advertising and marketing for the business, but when Mitchell’s began to expand in Greenwich, including building a new store, Andrew was brought in to help. In 2002, he was vice president of marketing.

Scott MitchellScott Mitchell graduated from Dartmouth and was the only Mitchell thus far who has

entered the business with retail clothing experience. He had worked for Abercrombie & Fitch, Eddie Bauer, and Ann Taylor. The last job positioned him well to enter the business as the manager of what many in the family considered the most promising area of growth, the women’s’ department at Richards. Mitchell’s and Richards both began solely as a men’s store, added women’s apparel later, and soon became extremely successful in this area. Running a women’s department was very different then men’s due to a more fashion-forward approach.

More to comeBill and Jack Mitchell had seven sons and grandchildren were already arriving, so

generations of Mitchell managers were expected to report to duty in the future. (See Exhibit 2 for mission and vision).

4


Family Business StructurePamela Miles, Jack Mitchell’s assistant, commented, “The Mitchells treat the family

like a business and the business like a family.” This attitude was not meant to be cold or formal but instead to suggest a systematic approach to continued success as a family business together with a warm personal touch with customers. Aware that 92% of family businesses fail in the third generation,3 Jack and Bill wanted to be very conscious of the steps they took in integrating new family members into managing the business.

Jack and Bill Mitchell engaged a family business consultant who helped them create specific structures and guidelines for the organization. For example, before joining the business, each family member had to work somewhere else for at least five years. Plus there must be a “real job” available that matches their skill set, expertise, and experience. The Mitchells also created a family council that met three to four times a year and included anyone in the family over the age of 18. Jack gave a “state of the store” address and opened the forum up to questions. Everything was discussed except salaries. As Bill explained, “Equal is not always fair and fair is not always equal. If you don’t keep the business healthy, what difference does it make who has a nicer car or bigger house? There can be a lot of jealousy and that will rip a family apart.” Tuesday mornings were weekly family meetings. Bob lamented that sometimes the family element could make usual business relationships more difficult; “Feedback is not something you’re used to getting and giving as a family, but constructive feedback, when you get used to it enhances the business and the family. The two keys are communication and empowering the next generation. We have to continue to do that.”

In addition to family meetings, an advisory board was created to serve as a “board of directors,” which met quarterly and consisted of five to six outsiders who were paid but not liable. They were primarily used as a sounding board for strategic business decisions and put a sense of business discipline into the family business

The StoresThe Mitchell family owned two stores, one in Westport, CT and another, acquired in

1995. Richard’s had been an existing men’s store in Greenwich, CT, about 20 minutes south of Westport.4 Both stores catered to a large number of businessmen and their families due to their proximity to Manhattan and therefore supply of commuters. On the list of customers were 450 CEOs, COOs, business owners, and other well-known individuals, including Paul Newman. Jack Mitchell described the value of having prominent customers. “There is a power of number one. If you get the CEO of a company, people say to them, where do you shop? They are your celebrities.”

The average age of customers was mid-40s and over half of customers used a store charge to purchase their clothes. In 2002, Mitchells/Richards sold $65 million of merchandise, with 50% of the volume sold on Saturdays. It employed 165 people, including 52 sellers, 20 of which sold over a million dollars in merchandise each. Tailoring was a free service.

3 Company information.4 In 2002, the population of Greenwich was approximately 60,000.

5


Mitchells/Richards was a unique business in terms of scale. “We have grown very abnormally,” Russ explained. “Most people with our volume would have 10 stores. It is very unusual to have stores our size.” Its main competitors were Barney’s and then other larger department stores. At $65 million in revenue, it shared a competitive space with very few. Jack described Mitchells/Richards competitive relationship with Barney’s.

Barney’s had a location nearby in Westport. They were about 80% women’s, 20% men’s. The history of the store was all men’s, but in Westport, from the get go, it was primarily women’s. Their presence made us even sharper, helped us raise the bar on the women’s apparel when we entered the business. Expansion ruined them. The second generation built a big business. They started as having one location, in downtown Manhattan with about $50 million in business and the second generation then built an alliance with a Japanese conglomerate, around the country and with the flagship in Manhattan. After they opened them all, there was family disharmony and fighting. The company went bankrupt, closed many locations. Now they have stores only in New York, Los Angeles, Chicago, Manhasset, Long Island, and Seattle plus outlet stores.

Often Mitchells/Richards by its dominance kept competition out of their markets. Bob recalled two such examples.

Gene Pressman, part of the third generation of Barney’s, came to visit our store one day after trying to figure out what to do with their struggling store in Westport. He came in and saw all the suits and he said, “no wonder we can’t sell suits.” The same thing happened in Greenwich, Wayne Miechner from Saks Fifth Avenue came in when he was deciding whether to open a men’s department in their Greenwich store. He went into the back of the store and looked at the suits and he said, “no way we’re selling suits.”

Bob viewed competition in general to be broader than just other local stores, “Our big competition is New York or the world, because our customers travel. Our strategy is to dominate in our markets, which helps us leverage our relationship with our vendors. We try to lock in with key resources.”

VendorsGood vendor relationships were essential to the business. Competitors were bigger

and therefore had more leverage with suppliers, so the Mitchells had to find other ways to strengthen connections (Exhibit 3 lists of vendors). Managing those relationships often required traveling the world and spending time, not only business, but also social, with the people from whom they bought clothes. Jack described his strategy.

I often think about basic instinct, territory, and migration. There is something about us, as people; our most powerful instinct is territory. I learned that and started practicing it with our vendors, which meant going to their outings in Italy, eating pasta, and drinking wine with them on their territory. We have to work harder because we are competing against bigger distributors. But for our competition and the vendors, the relationships are more adversarial, because they are beating each other to get a deal. We have friendships with our vendors; a lot of them are also family businesses. When we were talking about buying the Richards store our vendors helped us reassure the owners that we were nice people. The same go for bankers by the way. We use the Bank of New York and

6


when our lender needs a new suit, we go to his home or to his office to fit him—personalizing the relationship.

MarketingMost of Mitchells/Richards’ marketing was the result of word-of-mouth advertising.

Happy customers were free buzz-creators. Otherwise, marketing was considered something to be dealt with very carefully, gracefully, and personally. No outside agency was used. Mitchells/Richards did not want to overwhelm its clients or do anything to jeopardize the high level of service. Only once did Mitchells/Richards buy a list from American Express of people who were buying $5,000 to $10,000 of clothes in other stores. The family used the list to market directly to these people, using gift certificates or discounts on particular items, as a one-time event.

Additionally, Mitchells published a fashion image piece twice a year, a lifestyle magazine called Forum, and literally hundreds of other direct mail pieces, many of them personalized. Every time someone bought a house in the area worth over a million dollars, they received a box with wooden hangers and a $100 gift certificate. The response rate for the package was over 25%. When the post office raised postage from $.34 to $.37 Mitchells/Richards sent out a packet of $.03 stamps to 500 of its best customers. Email marketing was in its early stages of development and will be used carefully with a personal touch. Community involvement was very important to the Mitchell family and considered a key element to company success. Another family marketing tradition was to head to the railroad stations from Westport to Greenwich and hand out free coffee and the New York Times, with a special promotional piece inside.

Customer ServiceYou never know who the next big customer will be, as Bob recalled,

One day this young guy comes in, baseball cap, ripped t-shirt, jeans and he is holding the catalog we send out. He wanted the Ferragamo shoes in the catalog so I asked him, “Where are you buying clothes?” He said, “New York,” so I asked if he’d like to try something different. He agreed and invited me to come to his house the next Saturday. When I arrived at his house on North Street, I found myself at what looked like a French chateau. He answered the door in gym shorts and a t-shirt. After he tried on a couple of suits and found one he liked, I showed him the fabrics—all 12 of them—and he said yes. And so I asked, “which color?” “All of them,” he said. He bought all 12 in one shot, for $3,000 each. That was six years ago. He recently went down a size, and I went back to his house with a tailor.

“The philosophy is to keep a tight rein on the cost of everything except service. The sales people are not only paid well, but allowed considerable leeway to go the extra mile for a customer, even if it means jumping on an airplane and flying to Mexico City to give his closet a once-over.”5 Jack Mitchell’s strategy on customer service was simple: “we listen, we learn, and we hug,” he said. “We are passionate and we love

5 Holman W. Jenkins, “Your CEO Shops Here,” The Wall Street Journal, October 6, 1999, p. A23.

7


what we do.” In addition, everyone was required to work on the floor at some point or another, from the accountant to the CEO, to shipping and receiving. Jack expounded:

We don’t have a warehouse where there’s shipping and receiving. It’s inside both of the stores. The shipping people take the time and the care to wrap and package clothing that is being sent out because they see the customers upstairs and they get to know them. If you know someone by name, then that motivates you to makes sure that when the customers opens his garment it’s pressed properly and so he feels hugged. That’s [also] why the tailor shops are on the premises.6

The Mitchells were always accessible, even when the store was closed after hours and on Sundays, in case of emergencies. When there was no one at the store, the voice mail message gave customers an emergency option that would route the connection to Bill’s home, then Todd’s, then Andrew’s. The Mitchells also tended to be responsive to late comers tapping on the closed door of the store past regular hours or phone calls that came in when they were wrapping up the day. Jack recalled one such story that happened one Sunday when Jack just happened to be in the store for a meeting:

Just as I was leaving, the phone rang. I thought it might be one of my sons seeing how the meeting went, so I picked it up. It was an elderly woman who said, “I’m desperate. Do you know where I could buy some underwear?” She sounded really frantic. I told her she could find some over at the mall. She said she really didn’t like the mall, was there any other place? So I couldn’t help but ask her why she was in such a rush to find underwear on a Sunday. She said they had sold their Greenwich estate and were moving to a smaller place. The moving van had just been there and she had packed all of her husband’s underwear and he was really annoyed at her. Of course, I told her, “Come on over.”

Twenty minutes later she tottered in and bought a few packages of underwear. Hey, every pair of briefs counts. More important, maybe I even saved a marriage.7

To the salespeople at Mitchells/Richards the key was to turn a customer into a client. A client was someone who spent over $5,000 over 12 months in the last three years. “You have to believe in relationships,” Jack explained, “not transactions.” Jack continued. “Selling has moved from a ‘May I help you?’ transaction to ‘Is the new outfit for business or a special occasion?’ You’re researching need.”8 Part of what turns customers in clients, was the hands-on approach of Jack both internally and externally. Often when a seller sold $1,000 to a new customer, he picked up the phone and complimented their work. Every new customer, no matter what they bought received a personal note from Jack signed with a real ink pen. “Even if someone came in and bought nothing other than a handbag on sale, she gets a letter from me. I’ll bet she comes back and buys a lot more on her next visit.” 9 Anytime a customer, new or old, bought $2,000 or more, he sent them a note. (Exhibit 4 is an example of customer correspondence)

The first thing Jack did every morning was to check a print out that arrived at his home that listed the transactions of the day before. He also tended to scroll through

6 Mitchell (2003) p. 25.7 Mitchell (2003) p. 44.8 Mitchell (2003) p. 16.9 Mitchell (2003) p. 31.

8


the computer to check on activity whenever he was bored. “Like I once knew all the stats on Joe DiMaggio and Mickey Mantle, I now know all the stats on my top thousand customers . . . but it’s not just me: our tailors and our fitters know our customers; even our delivery people know our customers,”10 Jack explained. Customers were not bombarded with notes because “sometimes good service is knowing when to leave a customer alone,” Bob Mitchell explained. “Marketing is built on the sales relationship. We should only be calling if there is a real purpose and we have their permission. People are time-starved and the reason we offer them to come in should be specific. The one-to-one marketing should enhance the level of service, not dilute it.”

Another program, called New Arrivals, was geared toward brand preference. When a new line came in of a particular brand, digital photographs were taken and cards sent out to the top 50 customers preferring that particular line, only if permission had been given. Other one-to-one marketing activities happened on a more casual basis. A sales associate might notice a woman looking at a piece of jewelry and might also notice her birthday or anniversary is approaching. The associate could contact her husband and give him a little hint of what his wife might enjoy.11

Jack and his family worked hard to enable their sales associates to provide extraordinary high levels of service. Part of the strategy for encouraging good service was to create a principle-based system, instead of a rules-based system. Jack explained, “We do not think to have a high level of service organization that you can have a rules based company. Strict rules don’t work, you need to have principles. We can’t have our associates constantly worried about seeking approval, we’d rather they do the action based on principles.” With every principle was a story. Bob told another.

We had an important customer, a woman who was going to a ball in New York. She was scheduled to pick up the package herself, but instead it was shipped out UPS. The sales associate ran out after the truck and flagged it down. If we had rules, she may have had to call the “traffic” department and filled out a form and it wouldn’t have worked. The woman would have had to find something else to wear to the ball.

The Mitchell family placed a lot of trust with the sales associates, because ultimately they represented the key element of the customer relationship. They saw associates as their first priority, followed by customers and products. “The relationship is not between the store and the customer, but the sales associate and the customer,” Jack said. They were hired and coached to run their client relationships as their own business and associates recognized the value in that. “They let me run my business like it’s my own. There’s nothing I can’t do. I have complete freedom within the confines of the organization. That includes opening the store for Robert Redford in the middle of the night,”12 commented Robert Harcarik, Armani rep and sales associate for eight years. Because of that essential connection, Mitchells/Richards had a specific hiring strategy, which was to hire experienced people with passion.

Mitchells looked for people who were the best at what they do. “We always look down the resume and if we see the person graduated magna cum laude—we don’t care if it was Harvard or Norwalk Community College—that tells us he knows what it takes

10 “Retailer of the Year”, MR Magazine, November 2001, p. 45.11 Mitchell (2003) p. 154.12 “Retailer of the Year”, MR Magazine, November 2001, p. 62.

9


and loves to excel, to be the best.”13 The Mitchells looked for people interested in careers, not jobs. There was also an integrity test, but a lot of what mattered in the hiring decision was emotional. Cultural fit was also very important. Jack described his philosophy.

Sales associates stay a long time. The vast majority of people are 10+ years with us.14 Our model is to hire people with experience because we can take people who are good, productive people and we can enhance their productivity. We can make someone who is good and make him or her great. We don’t have experience with taking people new to the industry. People want to come here. We look for competence, a very positive attitude, and a passion to listen, learn and grow. We enable them. Enabling implies that there is support. This is where the smaller guy has advantages. The easiest person to hire is from a big company, they always feel trapped. We hired a woman from Saks in Greenwich. When she would get a good customer she would call the New York store and ask them to send her more stuff, because it is a small store, but it was a hassle and she would get beat up, and she lost interest, it was too frustrating. There was too much bureaucracy. At Richard’s she has flourished.

Mitchells/Richards sent out customer satisfaction surveys two to four times a year and offered a small gift certificate to anyone who completed the survey. The most recent survey resulted in a 94% extremely or very satisfied response.

Information Technology In 1989, the Mitchells began building a computer system to support the business.

“The idea was to look at what sales associates were already doing and automate it,” Russ Mitchell explained. “With the help of IBM and their AS400 system, we set out to build a computer system that put the customer, not the inventory, in the center.” 15 He continued:

What this system allows us to do is literally turn our clients into SKUs (stock keeping units). We know where they live and work. We know their spouses’ names and their employers. We know if they like to be called Mrs. or Ms. We know how their buying habits trend, how long they wait to pick up finished alterations, and we can also tell, with this system, if they buy anything when they do come in to pick up.16

The development of the system was done in-house. Russ’ technology background proved valuable not only in the development of the system, but also the deployment philosophy. “If we didn’t do our own development, whether it would be as successful or not, I’m not sure, maybe,” Russ explained, “but the key to the technology is come up to business plan then match the technology to the plan. What everyone else does is buy the technology and figure out how to change the business plan to support to technology. It sounds so simple but it is not.”

13 Mitchell (2003) p. 92.14 Store managers averaged 17 years. Head tailors averaged 30 years.15 “Retailer of the Year”, MR Magazine, November 2001, p. 57.16 “Retailer of the Year”, MR Magazine, November 2001, p. 57.

10


The Mitchell family knew first hand the complications that arise with using someone else’s software. Their first computer system was developed after a company wide recognition of a need for discipline. Mitchells/Richards hired a consulting company to come in and evaluate their sales process from a systems approach. Inventory management was a problem and the transformation was from “the more you buy the more you sell to buying the right inventory at the right price at the right time,” Jack Mitchell explained. But the software installed to manage inventory did not adjust to the particulars of the Mitchells’ business. At the end of each selling season, Mitchells/Richards sold the remaining stock to Filene’s Basement, because, as Jack explained, “we feel that a critical part of our success is to be fresh every season.” Even with prior knowledge of the Filene’s markdown, the software could not keep up. “We were constantly making corrections,” Bob recalled, “We got very frustrated, so Russell and a few programmers created our own CRM program.” Russ added, “We were doing it before people came up with the acronym.”

Customization was important to the Mitchells. Russ commented, “We have a business where we have husbands and wives that buy things for each other, there is a household level versus individual level of purchase and each is very detailed. It would fall apart if you just bought some software. We have to track by individual and by household because wives sometime come in and picks up stuff for husbands.”

In 2002, the database contained about 200,000 people, 80,000 households.17

Households were defined as two people, usually a husband and wife, while children were separated out into individual profiles.18 One sales associate would be assigned to one profile. There were 80 computer terminals in the two Mitchells/Richards stores. Included in the systems’ functionality was a list of the top 1% of customers, as well as overall sales rankings, all at the push of a button. Spending changes and habits were noted along with every purchase ever made and when. Anniversaries, birthdays, and even divorces and second marriages were tracked as well as style, brand, size and color preferences, hobbies, and sometimes pet’s names and golf handicaps. Customers were profiled if and when a sales associate attained a phone number and some personal information. The data in the system were not sold or shared with anyone outside the firm. The profiles were built not by survey or questionnaire but instead by the associate’s interactions with the customer. The goal was to know more and more about customers as they purchased more and more and to allow sales associates to add knowledge to their intuition. “Our system allows us to think small and act big. The big stores don’t even know how bad they are doing,” Russ summarized.

The system was designed to enhance the skills of the sales associates even further than the already supportive culture the Mitchell family created. Jack gave an example.

Phyllis is our top seller. In a year she sells $3 million of clothing. She has a natural ability to sell, loves people and relationships. She ran her client business on one sheet of paper. It was a list of her clients and their phone numbers. When business in the store was slow, she would look down the list and start making calls, without even knowing what she was going to say. We now have a report that we call the Phyllis report, client base, and phone number, last sale. But the point is, the system does what Phyllis did, but formalizes it. Everyone can’t remember sizes and preferences of 200 clients.

17 80% of customers lived within a 15-mile radius of the store.18 Primarily adult children.

11


The IT system was also a precise measuring tool allowing management to keep track of how the sales team was doing and for sales associates to monitor their own business. Each week sales associates received a “book” that included consolidated as well as individual sales figures and the status of special orders, schedules, events, client profiles, and alterations. This valuable information enabled the associates to follow up and manage their clients effectively, but there were shortcomings. It wasn’t always easy to absorb. “We need to work on the education thing,” Jack noted. “People like to work off of paper in this industry. We are trying to put together the book, once a week, that every sales associate gets which includes a letter from me and the sales manager of each store, how the store is doing, store schedule, calendar, core set of reports, how the associate is doing, tracked by week, month, year, what is selling, client activity and all alterations due to be finished.” Russ added, “Phyllis doesn’t want the whole book. Some sales associates are very time starved.”

The stores held many events such as fashion shows or designer truck shows. The system helped Mitchells/Richards maximize the value of these events. When an event was approaching the computer system would generate a list of target customers for the show. Russ described the process. “For an Armani show, for example, the system will pull the target list, or call list, based on who they are and what they bought.” The computer also could be used to stimulate customers who had been inactive, or hadn’t visited the store in a while. “If there are customers on the list who have been inactive,” Russ explained, “we might send a $100 certificate on something they have not bought in a while, like shoes or shirts. The computer can generate a suggested list, but sales associates always have the ability to override it. Books are customized for each person, some things are generalized, but a lot are specific.”

Mitchells/Richards held technology in great esteem, but also kept itself in check when it came to the Internet. Jack described the balance of energy. “We are a learning organization. And I always say let’s think inside the box as well as outside the box. Thank God Russell did not hear the call of the Internet, because I probably would have gotten involved. We try to maintain our own strategy. We are a bricks-and-mortar business. We were building this big beautiful store in Greenwich while everyone was saying people were going to buy online.” Russ simply stated, “I knew online was not the way to go, I knew our customers were not going to shop that way.”

In 2002, Mitchells/Richards was beginning to experiment with e-mail messaging based on their one-to-one marketing philosophy. It recognized a small, growing group of customers that wanted to receive electronic information about what was going on in the store. Once again, Russ took a careful and customized view and was having trouble getting to the level that Mitchells/Richards required. He explained the e-mail program’s double customization process.

Once the merge would happen, it looks like a letter, routed through a sales associates outbox. The first level of customization is the mail merge, but the second level is the sales associate typing something in, something that is personal and that is what everyone is missing. We were willing to pay someone pretty decent money to make something custom and they couldn’t do it, but there is no other way for us to do it. We have to build it ourselves.

12


Growth

Women’sIn 1969, the Mitchells store in Westport added women’s fashion; in 2000 Richards

added a women’s department. It was seen as the main driver of future growth. Jack described the difference between men’s and women’s fashion: “Women’s fashion is revolutionary, men’s fashion is evolutionary.”19 In 2002 the business was 50% men’s and 50% women’s. The atmosphere was still skewed towards men’s, but women’s fashion was getting more and more attention. Bob explained that while the structure of the business was the same, the women’s business differed in many ways.

There is more volatility in women’s clothing and more consumer need, due to high fashion element. Women are more motivated by clothing than men. A woman is spending two to three times what a man is spending in a household. Look at other people and you’ll find your answers, Saks and Neiman are 75% women’s. There isn’t much radical movement for men. Women can take a whole new direction in their look day to day. Men will come back and buy the same thing over and over again. There is more risk, but more upside and more action. Every day women want to come in and buy clothes, for most men, there has to be a need. Men want the same thing time and time again. Women want something different time and time again.

What the Mitchell family didn’t know about women’s fashion they made up for in relationship knowledge. They realized that while the men were shopping the women could be shopping and if they used the same high touch relationship building that worked for the men, they could be successful with women’s. “I think we have proven that the relationship is getting even more important,” Bob continued. “Women want someone honest, who will offer an opinion, do alterations, and follow through. Women like to be in an environment where someone knows them and knows what looks good on them. Most of our customers are in traditional gender roles with the majority of women not working.”

RichardsIn 1995, after three and a half years of negotiations, the Mitchell family bought

another family business called Richards in nearby Greenwich, CT. “We like to be dominate in our market,” Russ explained. Richards was established as a men’s store in downtown Greenwich in 1954, selling about $10 million a year from an 8,000 square foot store that was considered by the Mitchells to be a little crowded and dark. But Richards was considered a mainstay of the Greenwich community, so when the Mitchell family came in, people were skeptical. “Greenwich people didn’t want outsiders taking over their neighborhood store,” Jack explained, “so in Westport we said we acquired Richards. In Greenwich we said we merged.”

The Mitchells IT system was installed in the Greenwich store as well as inventory management, but not every system was transferred. While Mitchells sales people were paid on commission, Greenwich were paid salary plus bonus based on client sales. They received a higher base pay and then a percentage of sales from clients they managed relationships with. Bob described the difficulty with a non-commission philosophy. “In a

19 Jenkins (1999) p. A23.

13


non-commission environment how do you set goals that do not undermine team spirit? How do you make it individual without destroying culture? We struggle with that, but we feel that it was more important to preserve the culture of Richards. They were doing well and we were buying happy customers.”

Jack explained the way the different system worked.

In Westport, it’s very simple and out there: The sales associates earn 6 percent commission, so you know if someone sells $2 million a year, he makes $120,000. I think commission is a good carrot for sellers; it encourages them to form relationships and learn more about their customers. Of course when the economy downturns, associates are more directly affected. In Greenwich, it’s a combination of salary, incentives, and personal goals, which perhaps creates a greater camaraderie, a stronger climate of teamwork. But bottom line, we pay as well or better than our competition in both scenarios, and of course, strong customer relationships are the key in both stores.”20

Bob added, “We are very sensitive to culture. We also go back and forth whether commission is better or not. Obvious advantage of commission is clear motivation, negative is that people can run over each other. Every personality is different. Both are working, so why change one?”

The family considered creating a new compensation system that combined the benefits of both, but came up short. “If it is too complicated, no one gets it,” Russ explained. The computer system was adjusted to accommodate the different operating systems. Russ explained, “We have two totally different compensation systems, and therefore different sets of rules in the computer to track activity. At Richards, added bonus structure is based on relationship with client. At Richards, associates manage a relationship, in a commission environment, get credit for sale, at Richards it is relationship.”

From 1995 to 2000, the Mitchell family doubled the Richards business, but they wanted to do more. They looked around for a new location for the store and found something they considered perfect. The old Woolworth’s store in the center of Greenwich Avenue, the town’s main shopping drag, was for sale. The family had their sights set on the building, but while negotiations continued for the purchase of Richards, Saks Fifth Avenue came in and bought the property. So the Mitchell family decided to build. The land across the street from the old Richards store was for sale and after $20 million plus, the Mitchells had an architecturally award-winning location with, what the Mitchells thought was a key ingredient, parking (Exhibit 5 displays store images). Sales were still booming in 2002, after a small slowdown in 2001. As Bob explained, “We walked into Richards, already doing well, enhanced the culture using the same people and doubled the sales, even with a new store our sales per square foot increased.” Russ, always the pragmatist, added, “We also walked in at the best time to be selling in the history of the world.”

What next?Jack couldn’t be more pleased with the way things were going, but discussions from

the earlier family meeting lingered in his mind. Should they grow? Should

20 “Retailer of the Year”, MR Magazine, November 2001, p. 45.

14


Mitchells/Richards expand to other stores or to other products and services? Could they squeeze more out of what they had today? As Russ mused, “We probably do a better job of managing than most, but as good as we are, I know we could run things even more efficiently. In general, in retailing, the operations part of the business becomes less important the higher prices go (look at how well Wal-Mart and Target are run). But why can’t an upscale retailer also be an efficient operator?”21 Jack considered Russ’s comments. In the past they had used capital to invest in jewelry at Mitchells, would money be more wisely re-invested back into their existing businesses or put into a new store? “Like all businesses,” he said, “we want more customers, which means more market share, but the main thing we strive for is more business from our existing customers, which means more market scope. That translates to me as greater percentage of closet.22

The store sizes, locations, and presence of family members seemed essential to the success of the business, but were the key elements those or other operational components? “We are an odd size, where could we go to have stores of a similar size, where would the formula work?” Bob asked. “Our name doesn’t mean anything outside these communities. Should we buy an existing store, in what community, expand our own brand, offer our management skills or IT systems to other operations?” Russ added, “We can go on and on about our systems and technology, but there is no substitute for being here.”

Jack realized there were many questions to be considered. He was concerned about the possibility of family disharmony while deploying a growth strategy, but he couldn’t help but feel like Mitchells/Richards was more than just a small retail operation. They had real retail knowledge and experience that could be leveraged to other locations and other businesses, but how?

21 “Retailer of the Year”, MR Magazine, November 2001, p. 52.22 Mitchell (2003) p. 82.

15


Exhibit 1 Advance Praise for Hug Your Customer, Hyperion June 2003

This is a terrific read—a mixture of wonderful, insightful anecdotes, along with brilliantly simple and useful advice. You want your customers to love you? Read this book, then BE this book.

—Don Peppers, co-author (with Martha Rogers) of The One to One Future: Building Relationships One Customer at a Time

The Mitchell method is simple, straightforward and incredibly effective. Business people as well as consumers will benefit from lessons in building customer loyalty through service, caring, and quality merchandise demonstrated by this third generation family business.

—Arthur Levitt, Jr. former chairman SEC, author of Take on the Street

Jack Mitchell writes with wisdom, experience, and passion about the benefits of superior customer satisfaction. His insights apply to the Fortune 500 as much as they do the neighborhood stores. Mitchells “hugging” embraces a very large world of commerce and relationship.

—James M. Kilts, The Gillette Company, Chairman of the Board and CEO

The Mitchells belong in the Hall of Fame of “Customer Friendly Families.” Jack, Bill, and their relatives have done for many years a spectacular job of making their customers feel at home in their store, on the street and in the community. Their goods and services are great—but their focus on customer enjoyment and satisfaction are beyond the realm of most establishments.

—Bob Wright, Chairman & CEO-NBC & Vice Chairman & Executive Officer-GE Co.

Lots of merchants profess a devotion to customers, but Mitchells practices that devotion in every conceivable way and more than any other merchant I have ever known. Hug Your Customers can change your attitude and outlook while helping you become more successful. A must read!

—Larry Bossidy, former CEO of Honeywell International Inc.

The Mitchell Family has created one of America’s unique retail experiences, executed by few. Their passion for the intimate relationship with the customer, and the loyalty that is created has rarely been duplicated. Jack Mitchell captures the essence of this passion, and delivers it to the reader in his book Hug your Customers.

—Ralph Lauren, Chairman and CEO, Polo Ralph Lauren Corporation

Solid business advice and solid advice for life abound in this book. But then, that is the way I have come to know Jack and Bill and all the Mitchells . . . solid in business and solid in life!

—Nicholas M. Donofrio, Senior Vice President, Technology and Manufacturing, IBM Corporation

Jack Mitchell’s Hug Your Customers summarizes his winning process of delivering a client comes first philosophy applicable to any service organization large or small. I found it to be true added value piece for anyone in the service industry.

16


—John Costas, Chairman and CEO,UBS Warburg LLC

Source: Jack Mitchell, Hug Your Customers, (New York: Hyperion Press, 2003).

17


Exhibit 2 Mitchells/Richards Vision, Mission, Principles, and Strategy

Vision

To be the best men’s and women’s specialty store in the world.

Mission Statement

Mitchells/Richards is a family-owned high-end men’s and women’s specialty clothing store committed to providing exceptional customer service and high quality merchandise in an exciting, friendly, visually dynamic atmosphere.

Principles

Committed to professional and positive relationships based on mutual respect, confidentiality, and the highest level of integrity;

Committed to extraordinary service and high quality products;

Committed to a financially healthy business;

Committed to the learning process in all areas of the business;

Committed to keeping our family together;

Committed to our communities.

Strategy

Committed to professional and positive relationships based on respect and the highest level of integrity;

We will respect and promote diversity;

We will promote and expect the highest level of integrity;

We will maintain appropriate confidentiality of all customer and vendor information;

Strive towards a mutually supportive environment;

Commitment to high quality products and extraordinary service;

Personal, friendly, warm environment that creates excitement;

Service beyond expectation;

Profile our customers;

Aim to be the leading fashion specialty store;

Continue to have our tailoring as a competitive edge;

Define and measure quality in every department;

Commitment to a financially healthy business;

Maintain or grow our market share and scope;

18


Exhibit 2 Mitchells/Richards Vision, Mission, Principles, and Strategy (continued)

Commitment to cash as king

Maintain or increase our profitability;

Monitor and evaluate our financial state;

Commitment to the learning process in all areas of the business;

Technology as an enabling tool;

Open thinking, forward ideas, and an eye towards the future;

Open to change;

Provide continuing education at all levels;

Request guidance from our outside advisory board;

Commitment to keeping our family together;

Open lines of communication;

Clear expectations;

Commitment to our communities;

Stores will be focal point for the community;

Management will be involved in the communities;

Continued support of charities, local events, and town organization.

Source: Company documents.

19


Exhibit 3 Sample list of Vendors

Zegna

Armani

Polo Ralph Lauren

Hermes

Hickey Freeman

Prada

Tod’s

Dolce Gabbana

Canali

Missoni

Source: Company information.

20


Exhibit 4 Sample Customer correspondence

Returning Customer

Dear Sonny,

Thank you so very much.

I am delighted to have seen that were in Richards on Saturday and bought beautiful items from Richard Laidlaw. I especially hope you will enjoy your Hickey-Freeman tuxedo and Canali sport coat.

Thank you very much for these purchases and, more importantly, thank you for your loyalty.

We treasure our relationship with you.

Warmest personal regards,

Jack

New Customer

Dear Judy,

Thank you very much for shopping with us on Thursday.

I sincerely trust you were very pleased with all aspects of your shopping experience – especially our selection of Robin Rotenier jewelry.

I hope Michele Romano exceeded your expectations in regard to her professional service. I know Michele looks forward to working with you in the future.

Never hesitate to call me personally – nothing is more important to me than you and your family feel extremely satisfied when you visit either of our stores – it’s the Mitchells mission.

Warmest regards,

Jack

Source: Jack Mitchell, Hug Your Customers, (New York: Hyperion Press, 2003), pp. 152-153.

21


Exhibit 5 Images of new Richards store, Greenwich, CT

Source: Company documents.

22

mitchells/richards€¦ · web viewmitchells/richards. a personal relationship is at the heart of...

Documents