Rachel Shechtman has retail in her blood. Her mother was in the gourmet food business and her grandparents and great grandparents owned a fabric store. In 2011, Shechtman launched her own rotating shop in Manhattan’s Chelsea neighborhood. STORY, her business, is entirely reinvented every three to eight weeks like a gallery, has a point of view like a magazine and sells things like a store. When we visited, the theme was Fresh STORY, a collaboration with Jet.com to promote fresh food. We spoke to Shechtman for our Making Sen$e segment about how shifting consumer habits are forcing stores to either transform or perish. That piece airs Thursday on the PBS NewsHour. You can watch our related story about retail jobs here. Below Shechtman discusses why she thinks traditional stores are struggling. The conversation has been edited and condensed for clarity and length.
— Diane Lincoln Estes, Making Sen$e producer
PAUL SOLMAN: So you’re a magazine or a store?
RACHEL SHECHTMAN: We’re both. It’s really retail as a media channel. If a magazine tells stories by writing articles and taking pictures, we tell stories through merchandise and events. And then, magazines have advertisers, and we have sponsors. For example, the editorial narrative for Fresh STORY is informed by and inspired by fresh ingredients from Jet.com and merchandise that’s connected to it. And then, we’ve done a ton of events, ranging from a conversation with Mario Batali to a cooking class for kids to a make your own bitters class. And I think that’s one of the things that’s probably one of the biggest surprises since launching STORY. There have been many happy accidents, and people yearning for a community in a physical world. There are couples who have met at STORY and started dating. There are people who’ve quit jobs, because they’ve come to events and they’ve been inspired and motivated. I think the more and more technology isolates us and automates things, the more we want human connection. To me, so much about the future of retail is community and bringing people together.
PAUL SOLMAN: Is retail dying or transforming?
RACHEL SHECHTMAN: I think it’s doing both. I think it’s evolving, and I think it’s an exciting time, because there’s more risk in not taking risk. But it’s hard to say that without acknowledging that a lot of people are going to lose a lot of money and a lot of people are going to lose jobs.
PAUL SOLMAN: What explains the demise of Sears, or J.C. Penney, or goodness knows how many other near-dead or dead retail chains? Is it that they just didn’t think about the way the world is changing and that they had to relate to customers in a different way?
RACHEL SHECHTMAN: I think that there’s two different things happening simultaneously. You’re basically asking a 200-year-old business model industry to do a titanic u-turn. That doesn’t happen overnight. Then you have this thing called Wall Street. So therein lies the innovator’s dilemma, right? You’re asking this entire industry to reinvent how it creates value. Yet, the system, Wall Street, that determines its value remains unchanged. Because they’re functioning based on comparables. In other words, they’re looking at comparable sales performance. So if you’re the CEO of one of these large stores and you have a decision to make, are you going to double down and risk something that could prove very fruitful in the future, but right now, it would impact your balance sheet?
PAUL SOLMAN: And you won’t have greater profits next quarter.
RACHEL SHECHTMAN: And you won’t have greater profits and your stock’s going to tank, or you’re going to have an activist investor who’s yelling at you. Or you’re like, “Okay, I’ve got to cut costs and do this because they’re looking at my comps.” So, no offense to my friends who work on Wall Street, and to be honest, obviously nothing’s going to change about that, but therein lies the problem. That’s one huge issue.
Now, take Wall Street out of it, which is hard to do, but you now look at these stores and decisions. I think you have two massive problems. You have training and compensation structures. A lot of the skills needed, or that I think certain brands would benefit from, are different skills than are in traditional retail. It’s building relationships and doing community events. That’s a different skill set.
PAUL SOLMAN: And you need to be paid for it, more than the typical person.
RACHEL SHECHTMAN: Yeah, but when I also talk about compensation I mean people aren’t incentivized to collaborate. So if marketing is becoming merchandising, and merchandising is becoming marketing, and you’re a buyer working in a merchandising group, you’re rewarded in bonus based on your sell performance. So then someone from marketing comes up to the buyer and says, “Oh my God, I have a great idea for this campaign. Can we spend two hours this afternoon talking about it?” So I’m the buyer, asking myself a question. Am I going to take two hours of my afternoon, brainstorming with a marketer, to help them with their idea, which is part of them doing their job well? And that’s two hours where I’m not analyzing my business to impact sell-through. So, collaboration and risk-taking, which are two things that I think inform innovation, aren’t compensated.
I can say with confidence that most large, traditional retailers, don’t think about it that way. I think now they might be starting to, but you have to do it all together. It’s not just a little bit here. You have to shake it up, and not just lay off people, but add in new blood, and be uncomfortable about it, because it might be people who have different backgrounds.
PAUL SOLMAN: How much sympathy do you have for people who run these big chain stores?
RACHEL SHECHTMAN: I have a tremendous amount of sympathy. I really think Wall Street is to blame for a lot of it. But it’s not just them. Wall Street’s not keeping people from walking into stores, Wall Street’s not responsible for store traffic being down, so don’t get me wrong.
PAUL SOLMAN: Wall Street’s not responsible for the internet. In fact, Wall Street bets on the internet. Look at Amazon’s stock price.
RACHEL SHECHTMAN: Exactly. So, I think that’s part of it. It’s not all of it, but it is a big part of it. But I think you have leadership that grew up in an era of retail, and we’re in uncharted waters. You’re not looking for the answer based on what worked 20 years ago. Markdowns, that’s not going to fix something. An exclusive launch might help you for a month or two. Nobody has the answer. It’s all connected. I said to one retail CEO, “I want you to give me an empty department store, I want you to give me 365 days, and a black ops team of talent, and let’s just go rogue and reinvent a department store.” It’s a lot easier to do that under one roof than to do that across 800 stores.
PAUL SOLMAN: And the response?
RACHEL SHECHTMAN: And the response was, “I love that idea and I would love to do it, but then we’re going to get on an earnings call, and we’re taking $50 million to invest in this, while we’re laying off 2,000 people.”
PAUL SOLMAN: How can you blame Wall Street, when Wall Street loves Amazon, which shows almost no profit at all, ever?
RACHEL SHECHTMAN: There’s a difference. Amazon’s creating the model. They’re inventing, they’re innovating, they’re creating. Retail, it’s the same business model that’s been around for 100, 200 years. I just want to be clear, this isn’t about playing the blame game. It’s not about, it’s just Wall Street. I don’t want to say that at all, I’m just saying, it’s not just the CEO. There’s not a simple answer, because it’s not a simple problem.
Let’s keep in mind, we’ve never been here before. It’s another thing when you’re creating a new path and doing something that’s never been done before. A lot of what Amazon does do is that. When you look at Macy’s, or Neiman Marcus, or Saks, or all of these brick-and-mortar brands, they’ve been around for a hundred years. They have real estate, they have employees, they have vendors. That’s not something that you can turn upside down overnight, it’s not that simple. I do think that there’s a huge opportunity to create impact at scale. And I think a lot of the answers are going to be about unlikely bedfellows. I think what that means for brands at scale, is finding talent and skill sets that are outside of coloring in the lines of sales per square foot.
PAUL SOLMAN: And so what you’re trying to do is to create an in-person experience, where sales, actually taking things out of the store, is only a part of the whole story.
RACHEL SHECHTMAN: Yeah. Also, keep in mind how much our behavior has changed because of technology. We’re used to getting new content every second on our devices. I think it takes a lot more to satiate our appetite. Also, I can go within a 10-block radius and find the same black pant in 20 different stores. Then, oh, by the way, I can get it online and receive it tomorrow and it’s half the price, so why do I need to go to the store?
PAUL SOLMAN: Right, that’s the question we all ask.
RACHEL SHECHTMAN: I think, for us, it’s about a narrative and storytelling, and how we can learn, and how we can connect, and how we can be entertained, and how we can consume in a new way.