The Third Growth Option with Benno Duenkelsbuehler and Guests
Welcome to The Third Growth Option, where we're not just talking about growth—we're making it our mission.
At TGO, we understand that success isn't a fixed destination; it's an ongoing journey with twists, turns, and unexpected detours that take us to new places. Those moments are our Third Growth Options, where we throw away binary choices to create our own path.
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The Third Growth Option with Benno Duenkelsbuehler and Guests
New Rules of Retail with Warren Shoulberg
Are you looking for a Third Growth Option ℠ ?
Curious about how HomeSense, a TJ Maxx-owned chain, is poised to revolutionize the home goods market? We talk about the history of retail disruption, from the rise of discount stores in the 1950s to the seismic shifts brought about by the internet in the 1990s. Discover why the retail industry has often lagged behind new competitors and learn from examples like Walmart's delayed response to Amazon. We also forecast HomeSense's growth, drawing parallels with the successful expansions of TJ Maxx and Marshalls, and envision a future where HomeSense locations might rival the scale of HomeGoods.
Always growing.
Benno Duenkelsbuehler
CEO & Chief Sherpa of (re)ALIGN
Hey, welcome to the Third Growth Officer podcast, where we talk about all things growth, yes, even and especially those hard parts where you shed some skin and pick yourself up by the bootstraps. Hey, I'm Benno Dunkelspüler, growth Sherpa and OG hashtag growth nerd. We're on a mission to redefine success inside and outside the business, one TGO episode at a time.
Speaker 2:Hi, I'm Warren Schulberg. I'm a business journalist. I focus on the home furnishings and the retail space, and I'm based in Atlanta, Georgia.
Speaker 1:All right, Warren welcome to Third Growth Option Podcast. I'm based in Atlanta, georgia. All right, warren. Welcome to Third Growth Option Podcast. I'm Benno.
Speaker 1:For those of you who don't know me, I am super excited to have Warren. You are an award-winning journalist, retail, home industry insider leader. You really dive deeply into channel news, player news and today we're going to dive into HomeSense, which is a TJ Maxx-owned chain of home stores, kind of the latest retail disruptor that opened in Canada 2001 and then opened stores in the UK and Europe 2008-ish, yeah, and then opened US stores 2017 and, you know, currently up to don't know 50 or 60 stores and, knowing tj max, they'll be in the hundreds pretty soon. Here, I'm sure, yep, um, but I kind of want to bracket the conversation around home sense and retail disruption. Um, you know, sort of at the beginning and at the end of this conversation just talking a little bit about growth and change topics.
Speaker 1:So you and john toller actually did a great webinar a few months ago, uh, about the latest retail disruption, uh, and they appear mostly in the 80s and 90s and specialty retail in the early 2000s. My question to you is how do you see market participants, sellers of product, react to these kinds of changes throughout your career. You know there's always a big bad wolf that comes in. And then how do people react to that?
Speaker 2:So the retail industry always loves to have a crisis du jour and they love the latest disruptor on the block. And you know that goes back to the 1950s when discount stores came around and put a hit on department stores. So it's been a constantly changing cast of characters and the industry usually reacts pretty poorly to it. They dig in their heels and they say this ain't going to happen, it's not happening, Not happening, Not going to happen to me, and we're going to stick with the guys that we've been doing business with and this internet thing. It's never going to catch on.
Speaker 1:People are never going to Amazon is losing money. They're losing money. They can't stick around, Right?
Speaker 2:right, I remember that in the 90s.
Speaker 2:Yeah, I mean, maybe they'll buy a CD or a book from them, but they'll never buy clothing or shoes or anything else. So maybe it will be a little bit and this wasn't just little guys that that had that kind of attitude. You look at Walmart. It took Walmart 10 years to really come to grips with the fact that Amazon was out there and was eating their lunch and and that they had to do something. And it took them another five or eight years to figure out what was the right thing for them to do. So this is kind of pervasive. And so the guys that we've got coming around now whether it's specifically in the home space or more more open, in general merchandise or in the grocery field they're just the latest and smart players are figuring out that these guys aren't going away. So you know, and the guys that aren't figuring it out are located next to Montgomery Wards and and Caldor discount stores.
Speaker 1:So yeah, and and Blockbuster and Kodak discount stores. So yeah, and Blockbuster and Kodak. Yep, yeah, yeah, exactly, yep, yep. I call it the five stages of grief right Denial, anger, bargaining, depression, followed by acceptance. Acceptance yeah, as you say five or 10 years later.
Speaker 2:Yep, that's pretty much right.
Speaker 1:Yep, yep that's pretty much right, yep, yep. So, uh, let's talk home sense. Um, uh, do so I. I remember going into home sense stores in the uk, uh, back in 2014 15, love them. Um, I are you, um, do you agree with me or disagree with me that they will grow 5x, 10, 10x to 200, you know, from their current 55 US stores to 200 stores, 500 stores. How do you see their trajectory?
Speaker 2:Yeah, absolutely agree. And then some you know they'll finish this year with about 70 locations. You know they'll finish this year with about 70 locations and they're opening in the US I don't know 10, 15, 20 stores a year. So you know, I look what the parent company, what TJX, did with TJ Maxx and Marshalls. When they bought Marshalls, they already had a pretty good business in TJ Maxx and people said what are you buying another chain like that? They're very similar and you don't need it. And TJX was brilliant. And they said well, we're going to open stores under both banners, often next to each other, and we're going to do twice as much business. And that's exactly what happened. So they've got you know, they've got almost 5,000 stores worldwide, 2,300 in the US total.
Speaker 2:And this is what they're going to do with HomeSense and HomeGoods. This is what they're going to do with HomeSense and HomeGoods. Homesense has, homegoods has close to 1,000 stores right now and 500 of those have come in the last five or six years. So they're starting to max out a little bit on the number of HomeGoods stores and so they're going to do exactly what they did with Max and Marshalls and have this twin strategy. So if home goods ends up with, I don't know, 1,200, 1,500 stores. Maybe that's a little aggressive. Eventually, homesense will get there too, and so this two-tier strategy, I think, is really smart and yeah.
Speaker 1:How would you describe the sweet spot of HomeSense and maybe the difference between HomeGoods and HomeSense?
Speaker 2:Okay, so so home goods stores I don't know 23,000 square feet, much bigger, on home decor, gifts, textiles, accessories, popcorn, all sorts of assorted little doodads. They have some furniture, but it tends to be kind of accent furniture, whether it's an ottoman or a little tableodads. They have some furniture, but it tends to be kind of accent furniture, whether it's an ottoman or a little table or something. Homesense stores a little bigger, about 27,000 square feet and much more heavily furniture, and to me that's the big distinction is that these guys are playing in furniture. They've got a lot of living room, they've got bedroom, they've got dining room and a lot of products that HomeGoods doesn't have so clearly differentiated in their assortments. I'm sure there's some overlap, but two different strategies, and so HomeSense, in my mind, represents much more of a threat to the traditional furniture store than home goods ever did. You know, big furniture stores said well, you know, let home goods sell decorative pillows and frying pans and they're really not going to do much harm to us HomeSense is going to do much harm to us.
Speaker 1:HomeSense is going to do that. Do you think so? Homesense will also pose a threat to specialty retailers like Pottery Barn and Crate Barrel on the low end, but just on the low end of the price spectrum.
Speaker 2:Well, yes, they will be a threat and'm not so sure it's only going to be on the low end. You know, if you look at TJX's overall strategies, they've got some premium product mixed in there. Now you know, it may be a few pieces and most of the stuff is moderate priced but they're going to play in most of the pricing points within the furniture business and Pottery Barn and West Elm and Crate and Barrel. They're they're going to be threatened by these guys, or at least they should be Right.
Speaker 1:Do you have any insights for wholesalers and manufacturers of furniture and home furnishings how they might set themselves up to succeed selling to HomeSense? What you know are any do's or don'ts in terms of how brands can succeed selling to HomeSense.
Speaker 2:Well, I think, first thing is, when the HomeSense buyers show up in their showrooms, they should open the door and, you know, offer them a cup of coffee, don't kick them out. You know, offer them a cup of coffee, don't kick them out, don't kick them out, you know. Make them comfortable, give them a snack, because and TJX is famous for not taking a lot of gifts and spiffs and free meals. But the point is that these vendors should be greeting them with open arms. You know, I look what happened with home goods and look specifically, let's say, at the textile industry bed and bath textiles. Um, they were buying some closeouts, they were buying some leftovers and uh and uh vendors begrudgingly sold them. Now HomeGoods is is selling uh, reorderable inline merchandise that these vendors are specifically developing for HomeGoods, and I think the same model will eventually coalesce for HomeSense and vendors and suppliers who are smart are going to be at the head of that line, absolutely.
Speaker 1:Any insights in terms of the HomeSense buyer looking at direct import from manufacturers or vendors versus domestic stocking programs? So home goods was very big on building uh vendors, uh vendor partnerships with that had domestic stocking capability yeah, um, a lot depends on the product.
Speaker 2:So, uh, when it comes to upholstery, that's a product that generally needs to be domestic produced. You know, more than half of the upholstery sold in the country is still made here. Tends to be a little bit more on the custom side, but still it's there. But again, I look at home goods. Home goods was really smart at going direct to the factories in Asia and in Europe too, for that matter and direct importing. And HomeSense is going to do the same thing with furniture producers in China and Vietnam and the Philippines and Indonesia, where those products are coming from now. So you know, again, it's going to be a mix, but direct import will absolutely be part of their sourcing model.
Speaker 1:And in terms of digital versus brick and mortar, of digital versus brick and mortar, uh home goods and tj maxx. Uh, tjx companies have famously been sort of on again, off again, late to the party and the digital uh started making digital investments a few years ago, I think. Abandoned uh where? Where are they on the digital e-commerce marketing?
Speaker 2:So Max and Marshall's still have some e-com. Estimates are that it's a couple of points of their business.
Speaker 1:They rolled out Single digit like two or three percent. I'm sorry, yep yep, yep.
Speaker 2:They rolled out with great fanfare, an online shop for home goods a couple of years ago and then, with not so much fanfare, they shut it down. Yes, and I think that's going to end up being a colossal mistake that they're going to regret that they did that. You know, excuse me. You know, excuse me. Their reasoning was that they couldn't recreate that famous treasure hunt shopping experience online. So I don't know about you, but when I go shopping online, you know you fall down more rabbit holes and get digging into places you never expected to go, and to me, the online shopping experience is the ultimate treasure hunt. So I don't understand why they shut it down.
Speaker 2:You know, again, there's this perception that it's all this one-of-a-kind stuff and that's limited inventory and, yeah, a lot of it is. But again, they have a lot of inline reorderable programs that they sell day in and day out and there's no reason in the world why that can't be replicated online and serviced online and the inventories balanced between in-store and online. You know, tjx is a pretty big company. They're a $50 billion company. If their IT guys can't figure out how to manage their inventory between online and in-store, then they need a new IT department, because this is something that can be figured out. So I think it's a big mistake. I think they're walking away right now from 15% of the marketplace. You know it's fair to say it's going to be 20, 25% within the end of the decade, so I think it's a big mistake.
Speaker 1:I think it's the dumbest thing TJX has done. Billion company operating in a marketplace where, you know, somewhere between, as you say, 15 or 25% of the commerce takes place online. So let's just say 20%. That would be $10 billion out of $50 billion that they're choosing not to participate in.
Speaker 2:Yeah, not to participate in. Yeah, I don't know. You know, if I'm a shareholder, I'm saying why are you ignoring as much as a fifth of the consuming public? That's just dumb. So I'm shocked that there hasn't been more pushback from investors, from shareholders, from Wall Street. This is a decision that TJX, which doesn't make a lot of mistakes. In my mind, it's a big one.
Speaker 1:Yeah, yeah. So thank you for sort of shedding light on this home sense versus home goods dual strategy, the similarity between it and the apparel side, tj Maxx and Marshalls side. Uh, tj maxx and marshalls, um, and you know it is. I mean, you and I have both been around the block and watched. You know retail fads come and go. Uh, fads started. You know things that started as fads became like the real thing.
Speaker 1:I remember when I I was at Pottery Barn, you know we were dismissed and left out of showrooms at High Point back in the mid nineties as I, you know those guys are going away and today, you know that's a 5 billion, I don't know four, five $6 billion chain of that sells lots of furniture and home furnishings. Yeah, um. So you know the, the, the world of change and growth is, you know, is paved with uh. You know, uh, what is the the, the three monkeys of. You know hear no evil, see no evil, speak no evil and the five stages of grief. But you know, at the outset of this conversation I said, hey, let's kind of bracket. You know the HomeSense story with you know, sort of more universal growth and change, thoughts and conversations, thoughts and conversations, and uh, you and I, both being around you know the same generation. Um, uh, you and I are taking our talent to market differently today than we did 10 years ago and 20 years ago. Um, right, we are. Um, so I was thinking about this last night.
Speaker 1:I think it comes down to you and I love the game more than the rules. We're not really that. You know, like I mean, 20 years ago, you know the rule in journalism was, you know, probably more a number two pencil and a piece of paper, pencil and a piece of paper, and today it's more. Uh, you know, in addition to that, it's also doing, you know, podcasts and, uh, video and, and you know, other digital forms of communication. For you know, um, tell me from your, so I'll, I'll tell you from my perspective. You know that journey of learning new rules, like in the first 20 years of my career, you know the rules were get promoted. You know, have a W2 job, get promoted, have a nice resume. And then in the last 15 years, as an entrepreneur, the rules have been, you know, get clients and help them. You know the resume is not a thing, hasn't been a thing for me, I haven't updated mine in 15 years.
Speaker 1:So what new rules have you had to adapt to or create Maybe you wrote some rules for yourself in terms of how you practice your craft of journalism?
Speaker 2:Well, you know, the one constant has been that I'm still shooting my mouth off and second guessing people.
Speaker 2:It's really easy to do when you can sit back and you know, it's all theoretical and you can look at guys and say, boy, that was stupid, I can't believe you did that. And then you know, have a nice day. And so that's been a constant I. You know, at least in my field, in journalism, in B2B journalism, essentially, the vehicles have changed 35 journalists and we put out a weekly print edition that was, I don't know, averaged 100 pages and would be almost 300 pages for big markets and shows.
Speaker 2:Hfn right now is a weekly newsletter and that's it so, and I'm not involved in it anymore. But, um, but the way that I I bring my uh knowledge to people is just very different, the same with you. So, um, I I contribute to a number of publications, uh, I do uh, webinars, seminars, any kind of NARS that will have me and that kind of works. You know, I'd like to think that all of those years of knowledge are beneficial to people that may not know some of the backstories and that might need some help putting it into context and into perspective, without ending up saying you know.
Speaker 2:in my day we used to do it this way and that's when you get. You know when people start to roll their eyes and check their email, so you try to stay away from that.
Speaker 1:It's true that one of the constants about you is that you have this sort of you know, I think it's just a fun perspective of not taking, you know you take your work seriously, but not yourself so seriously. And you know you can even, you know, laugh at yourself and say, well, yeah, it's easy for me to, you know, throw peanuts from the peanut gallery. I'm not, you know, I'm not on the Wall Street call as an executive, you know, as a CEO of TJ Maxx, um, but uh, uh, I I always enjoy our conversations and, uh, you know, congratulations to you, I guess, warren, for figuring out ways to stay in front of people, regardless of how you know how, how they want to consume it, I guess, right.
Speaker 2:Um, I guess so, and and, as you say, you can't take a lot of this stuff seriously. You know I have a good friend who is working on crisis management, on global political issues, and he's trying to help the people of Sudan kind of make peace and prosper. And I talked to him and he's telling me about this stuff and you know I'm writing about credenzas, so it really is. Really you got to put it in perspective, put it into perspective. It is a perspective.
Speaker 1:We always used to say, hey guys, we're not saving lives here, Nope.
Speaker 2:Nope, nope.
Speaker 1:Not at all, Warren. If anybody wants to reach out to you one-on-one, what's a good place to find you?
Speaker 2:So I post most of my stuff on my website, which is warrensreportcom on my website which is warrensreportcom. Apparently, Warren Report was taken by somebody else. Yes, so it's warrensreportcom. And then I'm at wscholberg at Gmail. Scholberg, I'd say. It's spelled like it's pronounced, but that's not going to help. Scholberg is S-H-O-U-L-B-E-R-G, so WSchoulberg at Gmail. I'm on LinkedIn and you know I'm all over the place. You should be able to find me somewhere.
Speaker 1:Awesome, yeah, awesome yeah. Saying that Schalberg is spelled the way it's pronounced is kind of like saying that about Dunkelspüler is spelled the way it's pronounced. That's not helpful at all either.
Speaker 2:Yeah, which is why?
Speaker 1:everybody knows you as Benno. You know like Cher. That's it, and I think that's a smart move on your part. I guess I have a few more decades to go until I catch up with Cher, right.
Speaker 2:Well, she's on her 14th farewell tour, so you got time, yeah.
Speaker 1:I got time, Warren. This was awesome. Thank you so much for hopping on another episode together. Maybe we'll think of a third episode in the coming year. Thanks for talking about HomeSense and retail interruption and change and growth and the five stages of grief.
Speaker 2:Well, thanks for having me, Benno, always enjoy our conversation.
Speaker 1:Thanks, warren. Thank you for listening to this episode of TGO Podcast. You can find all episodes on our podcast page at wwwrealign4resultscom. You can find me, benno host of TGO podcast there as well no-transcript.
