the mitchell family and mitchells/richards · 2019. 11. 11. · professor amy edmondson, research...

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________________________________________________________________________________________________________________ Professor Amy Edmondson, Research Associates Corey Hajim and Kelly Mulderry, and Senior Lecturer John Davis 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 © 2003–2005, 2007 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.

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

J O H N A . D A V I S

The Mitchell Family and Mitchells/Richards

A personal relationship is at the heart of every transaction. — Jack Mitchell

Once a customer, always a friend. — Bill Mitchell

As 2004 came to a close, Jack Mitchell, CEO of Mitchells/Richards, reflected on the growth and success of his family’s company. Although the company was owned entirely by the Mitchell family, it was named for the Mitchell store in Westport and for the recently acquired Richards store in Greenwich. The family’s high-end retail business in Westport and Greenwich, Connecticut, was thriving.

Jack and his younger brother Bill had inherited the family business from their parents, who had opened their first store in 1958. Jack and Bill had grown the company from a small men’s and boys’ shop in Westport to a multimillion-dollar men’s and women’s clothing destination with two large flagship stores. Jack and his wife Linda, who joined the business in 1990, now looked on as their two sons, Russell and Bob, helped customers, oversaw store operations, and “ran the show” as co-presidents. The transition from second-generation brothers to third-generation brothers had gone smoothly.

Mitchells/Richards sought to be a model of excellence and personal service. Its customers included numerous CEOs and celebrities. “Hugging” was Jack’s metaphor for staying close to the customer on a personal and professional level. Conceptualized as a way of relating to customers personally, one by one, the hugging strategy was perceived by the Mitchell family to be relevant to service organizations of all sizes. “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 Jack Mitchell’s book, Hug Your Customers, published in June 2003, described the retailing philosophy and practices that drove Mitchells/Richards. The book

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

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had sold over a hundred thousand copies in the U.S. alone and had been translated into 10 languages. (Exhibit 1 quotes advance reviews of the book.)

As the business had expanded, so had the Mitchell family. Six of Jack and Bill’s seven sons had already joined the business and the other son seemed headed in that direction. The family now also included grandchildren. Jack and Bill had concluded that if they wanted to leave a thriving business that would employ the family and prosper for years to come, the company would have to continue to expand. The 1995 addition of the Richards store had been hugely successful. The Mitchell family had helped to double the store’s revenues, demonstrating the power of the Mitchell family’s management and customer service approach. But could the family business continue to grow—and, if so, what was the best way to grow the company? Was the Mitchells/Richards business model repeatable in still other locations? And, perhaps central to all the questions that Jack pondered, how essential were Mitchell family members to the success of the business?

Family Involvement in the Business

The founder of Mitchells, Ed Mitchell, decided in 1958 to leave his big city job as a marketing and advertising executive in order to do something he’d wanted to do for a long time. Jack, 65, recalled how he learned of his parents’ decision:

I was a freshman at Wesleyan at the time, when I got a call from my parents. My brother was still in high school. 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.” 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 they could buy clothes. Where was the local men’s store? They changed their minds and decided to open a store in Westport.

A small suburban community a little more than an hour north of New York City, Westport, Connecticut, at the time was populated by, “artists, Yankee farmers, some people who commuted to Manhattan, and actors,” according to Jack.2 It was also a town filled with the Mitchells’ friends—many of whom had lived there for decades. The store they opened in a former plumbing supply building was 800 square feet. The opening inventory comprised three suits, and opening night was truly a gathering of friends. According to Jack:

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.

The first year, Mitchells sold $50,000 worth of merchandise.

Bill entered the business in 1965 immediately after graduating from Juniata College. In 1969 he invited Jack to help start a new women’s department, at which point Jack decided to give the family business a try. Jack had earned a master’s degree in Chinese history and culture at University of California at Berkeley, and was working as an administrator at a medical and scientific research institute when he decided to return to the family business. With both brothers involved, the store

2 In 2002, Westport’s population was approximately 28,000.

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grew steadily. In 1972, Ed and Norma Mitchell set a precedent by passing along to their sons most of the equity in the store.

Westport, meanwhile, was becoming more affluent. More people were attracted to the bucolic location within commuting distance of Manhattan, and a number of large corporate employers had located in Connecticut. General Electric had moved to Fairfield, Connecticut, in the early 1970s, and former CEOs Reginald Jones and later, Jack Welch and Jeff Immelt had become customers of Mitchells, as had many other GE managers. Jack Mitchell commented, “If you want to be CEO, dress like the CEO.”

Jack Mitchell, CEO of Mitchells/Richards—as well as the author of a best-selling book and an in-demand speaker—still considered working on the floor of his family’s retail store his day job. He was never without his measuring tape. In 2004, Jack, as CEO, was responsible for company strategy, family harmony, and maintaining strong positive relationships with customers, clients, and vendors. Bill, 61, while not formally directing store operations, was the “persona of the spirit of Mitchell/Richards,” greeting customers in the store, representing the family and company in community meetings, and working with associates (employees) to help them understand the family’s core values of customer service. The title on Bill’s business card was Coach.

In 2000, Linda Mitchell, Jack’s wife, 65, joined the company as vice president of women’s merchandising. From 1965 to 1992, Linda owned Tallmadge’s department store in Wilton, Connecticut, with her mother and Jack. Very involved in the community, Linda served on the Wilton Board of Education from 1977 to 1985 and was chair of the Board from 1983–1985. At Mitchells/Richards she reported to her son Bob.

In 1991, Bill and Jack gifted 75% of the non-voting shares of the business to their seven sons (neither of them had any daughters). In 2006, they would pass the remainder of their ownership (voting and non-voting shares) to their sons. Jack’s four sons would then each own 12.5% (up from the 9.4% they owned previously) of the business and Bill’s three sons will each own 16.7% (up from the 12.5% they owned previously). Although all seven sons were owners, their years of involvement and experience in the business determined the management authority that each exercised. Six of the seven sons worked in the family business. Two of Jack’s sons, Bob and Russell, became co-presidents of the business in 2001. Bob was responsible for merchandising and sales. Russell was responsible for store development—what he called the “non-core,” behind-the-scenes and technology pieces of the business.

Russell, 41, was Jack’s oldest son and a graduate of Dartmouth College, with a degree in computer science. In addition to growing up working in their retail store, Russ had significant programming experience and an analytical finance mind. He 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 who 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.

Jack’s second son Bob, 39, joined the business in 1991 after a successful career at Sports Illustrated. Although he had been eager to join the family business after graduating from Dartmouth, he had


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respected the family rule that all third-generation Mitchells work on the outside for at least five years after college. But Ed Mitchell thought his sons were making a mistake in encouraging Bob to explore other things. “Bob,” Jack explained, “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!’ [He thought] Bob would go off and find another career, get involved in it, and do well. He thought we would lose Bob.”

In 1991 Bob got the call that he was needed in the store, and thus joined the family business. He recalled:

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.

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

Todd Mitchell, 35, one of Jack’s younger sons, joined Apple Computer after graduating from Boston University. Although he thrived at the computer maker, the lure of the family business ultimately prevailed. He returned home in 1996, initially to connect the computer systems between Mitchells and Richards; he then moved on to run the client accumulation program with the sales team. In 2002 he was managing the Mitchells’ women’s business. His primary responsibilities included hiring the right people, training, and managing the store’s day-to-day activities.

Hamilton College graduate and Jack’s son Andrew, 35, “backpacked” around the world before starting his business career. His required outside-employment experience included work in marketing and advertising, in relationship marketing, at Godiva Chocolatier. Russ was handling most of the advertising and marketing when Andrew first expressed an interest in joining the family business. Six months later in 1999, when Mitchells began to expand, including building a new store in Greenwich, Andrew was brought in to help. In 2002, Andrew was named vice president of marketing.

Bill’s son Scott Mitchell, 33, a graduate of Dartmouth College, was the first family member to enter the business with retail clothing experience at another company, having worked for Abercrombie & Fitch, Eddie Bauer, and Ann Taylor. The last position had prepared Scott to manage what many in the family considered the company’s most promising area of growth—the women’s department at Richards. Although begun as a men’s store, Richards added women’s apparel in 2000, which quickly became successful. Running a women’s department involved a more fashion-forward approach than was called for by a men’s department.

Bill’s son Chris Mitchell, 31, also a graduate of Dartmouth College, made his name on the sports field playing soccer professionally in Belgium and Connecticut. He worked for NBC Sports in the Olympic Division and earned an Emmy for producing the documentary “From Man.” Before becoming a manager of the men’s department at Mitchells in 2003, Chris managed the Ermenegildo Shop at Neiman-Marcus in Los Angeles.

Jack and Bill Mitchell hoped that generations of Mitchell managers would report for duty in the future. (See Exhibit 2 for the Mitchell family genogram.)

Nine non-family managers worked with the eight family managers. Each store had a store manager, sales team manager, shipping department manager, and tailoring manager who were non-


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family managers. The comptroller for Mitchell/Richards was also a non-family manager. These non-family members were considered key to the successful operation of the company.

Family and Business Relationships

Jack Mitchell’s assistant, Pamela Miles, observed, “the Mitchells treat the family like a business and the business like a family.” Her remark reflected the Mitchells’ discipline as a business family and their systematic approach of warm personal relationships with customers.

The Mitchells clearly emphasized the importance of doing what is right for their business. As Jack stated, “The family business comes first and we believe what is good for business is good for the family.” Bill added, “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.”

The Mitchells encouraged family members to be comfortable with inequality among those in the business. According to Bill, a fundamental principle that helped the family manage its business was “Equal is not always fair and fair is not always equal.” This principle was put to the test early on in Bill and Jack’s relationship running the business. The brothers took on different roles in the company and were not paid equally but based on their responsibilities, contribution to the business, and what their peers in the industry were paid. Agreeing to the “equal is not always fair” principle early on laid the groundwork for much easier compensation and bonus discussions with the six cousins now in the business, all taking different roles and all paid differently. Family owners had access to all compensation information, but non-family associates did not know family members’ compensation. No family or non-family associate had ever inquired about compensation for anyone but himself/herself. Jack believed that family and non-family associates and owners trusted that associate compensation was fair.

Bill, Jack, and the other members of the family worked well together. “Our family gets along very well but we work at it. If we did not work at it, it would not work,” Jack maintained.

During the mid- to late-nineties, the brothers engaged a family business consultant to help them create forums for family discussions and maintain effective communication among family members. Bob reflected on the complications of family communication in business: “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 [to healthy family companies] are communication and empowering the next generation. We have to continue to do that.”

Aware that many family businesses fail in the third generation, Jack and Bill were careful how they integrated new family members into the business’s management. The Mitchell family developed guidelines for the behavior of family associates and owners to safeguard the professional management standards of the business. They stipulated that each family member had to work somewhere else for at least five years before joining the business, and that a “real job” be available that matched the family member’s skill set, expertise, and experience. Family members’ pay and bonuses were based on their position in and contribution to the business, and not on their family role.

Weekly meetings of family associates were held on Tuesday mornings. The Mitchells also created a family council that included everyone in the family over the age of 14, which met three to four times per year. At these meetings, Jack or Russ would deliver a “state of the store” address before opening the meeting to questions. Everything was open to discussion, save salaries.


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The legally required board of directors for Mitchells/Richards consisted of Bill, Jack, Russ, and Bob. The board met infrequently. An advisory board (one not held legally liable) met quarterly. Its six outside members served primarily to sound out strategic business decisions and to impart a sense of business discipline to the organization.

In this serious, business-minded family, Mitchell family members also knew they needed to balance work and play. Jack felt that one of the keys to the Mitchell family’s success in business was the fact that “We really know each other, and we work and play together.” The Mitchells tried to create situations where business could not intrude on family life and playtime. During workweeks, talking about business at the dinner table was common, but there were “fun and playful penalties” for talking about or conducting business during family vacations. For example, family members were fined five dollars for talking business at the dinner table during a vacation. The fourth generation—Jack and Bill’s grandchildren—even made a rule that they could throw their parents’ cell phones and blackberries into the pool if they were caught using them during a vacation.

Stores and Strategy

The Mitchell family owned two stores, the original store in Westport, Connecticut, and Richard’s, a men’s store about 20 minutes to the south of Westport in Greenwich, Connecticut, which it had acquired in 1995.3 Mitchells/Richards was unique 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.” Because of their proximity to Manhattan, both stores served large numbers of commuting business people and their families. Their customers included 450 CEOs, COOs, business owners, and such well-known individuals as Paul Newman. “There is a power of number one,” observed Jack Mitchell, referring to the value of having prominent customers. “If you get the CEO of a company, people ask them, ‘where do you shop?’ They are your celebrities.”

Mitchells/Richards customers were, on average, in their mid-40s and more than half used a store charge card for their clothes purchases. Fifty-two of the stores’ 165 associates were sales associates, 20 of whom sold more than one million dollars each in merchandise in 2002. Half of the $65 million worth of merchandise moved by the two stores that year was sold on Saturdays. Tailoring was a free service.

Familyness

The Mitchell family felt that the “familyness” of their stores was key to the company’s success. Despite the fact that Mitchells/Richards sold high-end luxury goods, children of all ages were welcomed at the stores—and given chocolate! There was a TV room with games and cushions in both stores. On many Saturdays, Mitchell grandchildren could be found playing in the stores, possibly with their future clients, as their parents and grandparents helped customers. On Russ’s first day of work, when asked how he would address Jack Mitchell, his boss and father, he said without hesitation, “I am going to call him Dad.” Instead of downplaying family relationships to create a “professional” atmosphere by addressing relatives by their first names, third-generation associates call Jack and Bill “Dad” and “Uncle.”

Pamela Miles thought the approachable, family atmosphere of the stores helped business. “Customers appreciate it when a sales associate can point to a Mitchell on the floor on a busy Saturday and say, ‘There is an owner, would you like to meet him or her?’” The Mitchells

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


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knew almost everyone in the store, and customers were generally friends and often, good friends. Mitchell sales associates grew to feel the same way about their customers and were known to throw birthday parties for them.

Competitors

With $65 million in revenues in 2004, Mitchells/Richards shared a competitive space with very few stores. Its main competitors were Barney’s and other larger department stores in New York City. 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 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, [expanding] around the country 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.

Sheer dominance often kept competition out of Mitchells/Richards’ 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 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. For example, we have an exclusive relationship with Zegna in our Westport store.”

Vendors

Good vendor relations were essential to retail clothiers. Because its competitors were larger and therefore able to exert more leverage with suppliers, Mitchells/Richards had to find other ways to strengthen its connections. (Exhibit 3 shows a representative list of vendors.) Managing vendor relations often involved traveling the world and spending time, social as well as business, with those from whom the firm 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 in 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,


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our vendors helped us reassure the owners that we were nice people. The same goes for bankers, by the way. We use the Bank of New York and when our lender needs a new suit, we go to his home or to his office to fit him, personalizing the relationship.

Marketing

Mitchells/Richards’ marketing efforts were largely word-of-mouth advertising. Satisfied customers were free buzz-creators. Otherwise, marketing was done carefully, gracefully, personally, and internally, without benefit of an outside agency. The firm did not want to overwhelm its clients or do anything to jeopardize its high level of service. Only once did Mitchells/Richards buy from American Express a list of people who were buying $5,000 to $10,000 worth of clothes from other stores. The family used the list to market directly to these individuals, on a one-time basis, using gift certificates and discounts on specific items.

Mitchells/Richards published a fashion image lifestyle magazine called Forum twice a year along with hundreds of other direct mail pieces, many personalized. Everyone who bought a million-dollar home in the area received a box with wooden hangers and a $100 gift certificate. The response rate for the package exceeded 25%. When the Post Office increased postage from $.34 to $.37 Mitchells/Richards mailed packets of $.03 stamps to 500 of its best customers. E-mail marketing, still in early stages of development, was to be used carefully, with a personal touch. Community involvement was important to the Mitchell family and considered key to the stores’ success. Another family marketing tradition was to distribute free coffee and the New York Times at railroad stations from Westport to Greenwich, with a promotional piece inserted in the newspaper.

Customer Service

You Never Know Who the Next Big Customer Will Be

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 associates 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.”4 Jack Mitchell’s customer service strategy was simple: “We listen, we learn, and we hug,” he said. “We are passionate and we love what we do.”

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


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Everyone, from the accountant to the CEO to those in shipping and receiving, was required to work on the floor at some point. Jack continued:

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 make sure that when the customer opens his garment, it’s pressed properly and so he feels hugged. That’s [also] why the tailor shops are on the premises.5

Serving Customers at Their Convenience

The Mitchells were always accessible to customers, even after hours and on Sundays when the store was closed. The store’s voice-mail message offered 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 latecomers 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 Sunday when he 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.6

Turning Customers into Clients

Mitchells/Richards sales associates strove to turn customers into clients. A client was someone who spent in excess of $5,000 over a 12-month period in the course of the last three years. Sales associates recognized and knew each client by name. “You have to believe,” Jack insisted, “in personal relationships, not transactions. 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.”7 Part of what turned customers into clients was Jack’s hands-on approach, both internally and externally. He often telephoned to compliment a sales associate who sold $1,000 worth of merchandise to a new customer, and every new customer, no matter what they bought, received a personal note signed by Jack. (See Exhibit 4 for an example.) “Even if someone came in for the first time 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

5 Mitchell (2003), p. 25.

6 Mitchell (2003), p. 44.

7 Mitchell (2003), p. 16.


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visit.”8 A returning customer who spent $2,000 or more also received a note from Jack at least once a year.

The first thing Jack did every morning before leaving home was to review a printout listing the previous day’s transactions. He was inclined, whenever he was bored, to check activity on the computer. “Like I once knew all the stats on Joe DiMaggio and Mickey Mantle,” Jack explained, “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.”9 Customers were not bombarded with notes, according to Bob Mitchell, because “sometimes good service is knowing when to leave a customer alone. 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 [invite] them to come in should be specific. The one-to-one marketing should enhance the level of service, not dilute it.”

A program called New Arrivals was geared toward brand preference. Digital photographs were taken when a new line of a particular brand came in, and cards were sent to the top 50 customers who preferred that brand and had given their permission for notices to be sent. Other one-to-one marketing activities were more casual. A sales associate who noticed a woman examining a piece of jewelry and recalled that her birthday or anniversary was approaching, might apprise her husband of her seeming preference.10

Jack, Bill, and their family worked hard to enable their sales associates to provide extraordinary levels of service. Part of the strategy for encouraging good service was to create a principle-based, instead of rules-based, system. Jack explained, “We do not think that 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.” For every principle, there was a story. (See Exhibit 5 for Mitchells/Richards Vision, Mission, Principles, and Strategy.) Bob told another story:

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 might have had to call the “traffic” department and fill out a form, and it wouldn’t have worked. The woman would have had to find something else to wear to the ball.

In addition, Mitchells/Richards sent out customer satisfaction surveys two to four times per year and offered a small gift certificate to anyone who completed the survey. The most recent survey had found 94% of respondents extremely or very satisfied.

The Importance of Sales Associates

The Mitchell family placed a great deal of trust in the sales associates who ultimately were key to the customer relationships. Sales associates were the first priority, followed by customers and products. “The relationship,” explained Jack, “is not between the store and the customer, but [between] the sales associate and the customer.” Associates were hired and coached to run their client relationships like their own business and they recognized the value in that approach. “There’s

8 Mitchell (2003), p. 31.

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

10 Mitchell (2003), p. 154.


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nothing I can’t do,” remarked Robert Harcairk, an Armani rep and sales associate for eight years. “I have complete freedom within the confines of the organization. That includes opening the store for Robert Redford in the middle of the night.”11

Because of that essential connection, Mitchells/Richards had a specific hiring strategy, which was to hire experienced, passionate people. The firm looked for people who were the best at what they did. Explained Jack: “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 and loves to excel, to be the best.”12 The Mitchells looked for people who were 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 very important. Jack observed:

Sales associates stay a long time. The vast majority of people are ten-plus years with us.13 Our model is to hire people with experience because we can take people who are good, productive people and . . . enhance their productivity. We can take 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. [At Saks] when she got a good customer, she would call the New York store and ask them to send her more stuff, because [Greenwich was] 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 Richards she has flourished.

Information Technology

In 1989, Mitchells began to build a computer system to support the business. “The idea was to look at what sales associates were already doing and to 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. 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 whether 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.14

System development was done in-house exploiting Russ’s technology background, which proved valuable in the deployment philosophy as well. “If we didn’t do our own development, whether it would be as successful or not, I’m not sure,” mused Russ. “Maybe, but the key to the technology is to come up with a 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 the technology. It sounds so simple, but it is not.” 11 “Retailer of the Year,” MR Magazine, November 2001, p. 62.

12 Mitchell (2003), p. 92.

13 Store managers averaged 17 years, head tailors 30 years.

14 “Retailer of the Year,” MR Magazine, November 2001, p. 57.


12

Customization was important to the Mitchells. “We have a business where we have husbands and wives who buy things for each other; there is a household level versus individual level of purchase and each is very detailed,” explained Russ. “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 pick up stuff for husbands.”

In 2002, the Mitchells/Richards database contained information on 200,000 people and 80,000 households.15 Households were defined as two people, usually a husband and wife; children were separated into individual profiles.16 One sales associate would be assigned to one profile. There were 80 computer terminals between the two Mitchells/Richards stores. A list of the top 1% of customers as well as overall sales rankings could be displayed at the push of a button. Spending changes and habits were noted together with every purchase ever made, and when. Anniversaries, birthdays, 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 obtained a phone number and some personal information. Data were neither sold nor shared with anyone outside the firm. Profiles were built not by survey or questionnaire, but by the associates’ interactions with customers. The goal was to learn more about customers as they purchased more and to enable 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,” observed Russ.

Mitchells/Richards regarded technology highly, but held itself in check when it came to the Internet. “We are a learning organization,” explained Jack with respect to the balance of energy.

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.

“I knew online was not the way to go,” Russ maintained. “I knew our customers were not going to shop that way.”

Growth

Women’s Fashion

A women’s department was added to the Mitchells’ Westport store in 1969 and to the Richards store in 2000. It was seen as the principle driver of future growth. Remarked Jack of the difference between men’s and women’s fashion: “Women’s fashion is revolutionary, men’s fashion is evolutionary.”17 In 2004 the stores’ business was split evenly. Although the atmosphere was still skewed toward men’s, women’s fashion was receiving more and more attention. “There is more volatility in women’s clothing and more consumer need due to the high fashion element,” Bob explained.

15 Eighty percent of customers lived within a 15-mile radius of the store.

16 Primarily adult children.

17 Jenkins (1999), p. A23.


13

Women are more motivated by clothing than men. A woman is spending two to three times what a man is spending. . . . 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 Mitchells 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 clothing. “I think we have proven that the relationship is getting even more important. Women want someone to be honest, who will offer an opinion, do alterations, and follow through,” Bob observed. “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.”

Richards

The Mitchell family bought the Richards family business in nearby Greenwich, Connecticut, in 1995, following over a year of negotiations. “We like to be dominant in our market,” Russ explained. Established as a men’s store in downtown Greenwich in 1954, Richards sold about $10 million a year from an 8,000-square-foot space considered by the Mitchells to be a bit crowded and dark. Richards being a mainstay of the Greenwich community, the locals were skeptical of the Mitchell family’s intentions. “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 and inventory-management systems were installed in the Greenwich store but not every system was transferred. Whereas Mitchells’ sales associates were paid on commission, Richards paid salary plus bonus based on client sales. Richards’ sales associates earned a higher base pay and received a percentage of sales from clients with whom they managed relationships. “In a non-commission environment,” Bob wondered, “how do you set goals that do not undermine team spirit? How do you individualize it 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 elaborated:

In Westport, it’s very simple out there: The sales associates earn 6% commission, so you know if someone sells $2 million a year he makes $120,000. I think commission is a good carrot for sales associates; 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 [as] or better than our competition in both scenarios, and of course, strong customer relationships are the key in both stores.18

18 Jack Mitchell, as quoted in “Retailer of the Year,” MR Magazine, November 2001, p. 45.


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

The family considered trying to create a new compensation system that combined the benefits of both, but came up short, so the computer system was adjusted to accommodate the different systems. “If it is too complicated, no one gets it,” 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 Mitchells doubled the Richards store’s business, but they wanted to do more. Looking around for a new location for the store, they discovered that the old Woolworth’s in the center of Greenwich Avenue, the town’s main shopping area, was for sale. The family had its sights set on the building, but while negotiations continued for the purchase of Richards, Saks Fifth Avenue bought the property. So the Mitchell family decided to build. For $20 million plus, the Mitchells secured, across the street from the existing Richards store, an architecturally award-winning location with what they considered to be a key element: parking. (See Exhibit 6 for images of the new Richards store in Greenwich, CT.) The new store opened in 2000. Sales boomed in 2002, after slowing briefly in 2001. “We walked into Richards, already doing well, enhanced the culture using the same people, and doubled the sales,” observed Bob. “Even with a new store, our sales per-square-foot increased.” Added Russ (always the pragmatist), “We also walked in at the best time to be selling in the history of the world.”

What Next?

Jack could not have been more pleased with the way things were going with the family business, but discussions from an earlier family meeting lingered in his mind. Should they grow? With six family members working in the stores, did the family business need to expand? Should Mitchells/Richards grow with new products and services within their existing stores, expand into new markets with their existing products or services, or even go into new markets with new products and services? They had a proven track record of growing by selling more of their existing products and services within their existing stores. But could they squeeze more sales out of their existing stores? Jack recalled Russ’s musings: “We probably do a better job of managing than most,” Russ had said, “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?”19

Would money be more wisely reinvested back into the existing businesses or put into a new store? “Like all businesses,” Jack had said, “we want more customers, which mean more market share, but the main thing we strive for is more business from our existing customers, which means more market scope (growth from new but related markets). That translates to me as greater percentage of closet.”20

19 Russell Mitchell, as quoted in “Retailer of the Year,” MR Magazine, November 2001, p. 52.

20 Mitchell (2003), p. 82.


15

Store size, hometown locations, and the presence of family members all seemed key to the success of the business, but could their success formula be altered? “We are an odd size; where could we go to have stores of a similar size? Where would the formula work?” Bob wondered. “Our name doesn’t mean anything outside these communities,” Russ added. “Should we buy an existing store? In what community? Expand our own brand? Offer our management skills or IT systems to other operations? We can go on and on about our systems and technology, but there is no substitute for being here.” And given the tight-knit nature of the Mitchell family, would any relatives volunteer to move away from home to run a store?

Jack considered these and other questions. He was concerned that deploying a growth strategy might precipitate family disharmony, but he believed that Mitchells/Richards was more than just a small retail operation. The stores were a fount of real retail knowledge and experience that could be leveraged in other locations and other businesses. But how?


16

Exhibit 1 Advance Praise for Hug Your Customers (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, Chairman of the Board and CEO, The Gillette Company

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 and CEO, NBC; Vice Chairman and 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.

—John Costas, Chairman and CEO, UBS Warburg LLC

Source: Jack Mitchell, Hug Your Customers (New York: Hyperion Press, 2003). (Quotes from jacket and inside of book.)

605-

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1939

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1973

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1969

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18

Exhibit 3 Representative List of Vendors

• Zegna • Prada

• Armani • Tod’s

• Polo Ralph Lauren • Dolce Gabbana

• Hermes • Canali

• Hickey Freeman • Missoni

Source: Company information.


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Exhibit 4 Sample Customer Correspondence

RETURNING CUSTOMER

Dear Sonny,

Thank you so very much.

I am delighted to have seen that you 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 that 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.


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Exhibit 5 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. 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.


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Exhibit 6 Images of New Richards Store, Greenwich, CT

Source: Company documents.

the mitchell family and mitchells/richards · 2019. 11. 11. · professor amy edmondson, research...

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