August 30, 2007, 12:00 AM

Looking Ahead

(Page 2 of 2)

Though the company briefly emerged from bankruptcy in 1999, Montgomery Ward stores closed their doors permanently in early 2001 in one of the biggest retail liquidations in U.S. history. Last year, though, Montgomery Ward resurfaced as an online store and catalog retailer under the new ownership of Cedar Rapids, Iowa-based Direct Marketing Services Inc., which purchased the former company’s name and trademarks for an undisclosed amount.

With the demise of Montgomery Ward stores front-page news at the time and Brennan the company’s largest individual shareholder, what went wrong at Montgomery Ward may be the question Brennan has been asked most frequently in his professional life. Among other issues facing the company, Brennan places near the top the capital crunch caused by the buyout: at $3.8 billion, it was at that point the country’s largest-ever management-led leveraged buyout. Brennan says Ward’s stores were poorly-located and at the time of the buyout the company hadn’t opened new stores in years. “Lack of capital was a major issue and it was heavily dependent on its credit card base,” he says.

It also was an inescapable fact that major new competition had emerged in the marketplace. It was a threat facing not just Montgomery Ward but other department stores as well as shopping malls, which had been enjoying a long run as consumers’ preferred shopping destination.

“The lifestyle shopping center-the outdoor, open center that allows big box and small specialty stores to exist concurrently-is the new paradigm,” Brennan says. “Customers want variety and options, and the traditional department store doesn’t have the appeal that it once did. And there are just many more players in the market, and everybody is taking a piece of the business.”

A new sweet spot

The online venue is one of those players, and it’s in the intersection of traditional retail and online retail that Brennan has found a new sweet spot. While retail managers have been receiving reports and data via computer monitor for years, retail was slower than other industry sectors to latch onto the rest of what information technology could do to improve results, Brennan contends. He estimates that retail traditionally spent only about 1.5% to 2% of sales on technology, less than any other industry.

But he says that’s different now. “There has been an enormous change in retailers recognizing what software can do to enhance business,” he observes. “Retailers have found that contemporary technology can have a profound impact on their profitability.” And the more tech-focused investors now putting money into retail are spending more on software than was spent in the past, he adds.

Though Brennan has spent his years since Montgomery Ward involved with several companies, he now is working exclusively with eFashionSolutions. “From the first meeting, I thought it was a major opportunity. I liked the management team and I thoroughly understood the strategy,” he explains.

That strategy is to deliver turnkey support for developing, launching, maintaining and optimizing the e-commerce operations of luxury and urban fashion brands, brands that are in many cases backed by a celebrity presence. A common denominator, and one that distinguishes the company from competitors Amazon Enterprise Solutions and GSI Commerce Inc., is an exclusive focus on fashion, say Brennan and Foy.

On that score, Foy’s experience leads. Foy and his co-founder and wife Jennifer Silano Foy, the company’s president and creative director, met during a tour of duty at Calvin Klein. The pair started their company with no outside funding, hiring only from the fashion industry and building it to sales of $17 million on credit cards and personal debt before realizing they would need investment-and senior-level expertise-to take it to the next level, Foy says.

In July 2006 the company completed a $17.4 million round of financing; Brennan was a major investor. At that time, eFashionSolutions reported it had realized a compounded annual revenue growth rate of more than 81% since it was founded in 2002. Brennan says the comparable business of the brands on the company’s platform-a metric akin to offline comparable-store sales-has been up by more than 25% a year for each of the last two years.

“Bernie Brennan brings big management experience to the table, and at the same time he’s got just enough entrepreneurial and small company experience so that he’s able to push us from an execution point of view,” Foy says.

And if Foy sees part of Brennan’s role as holding his team’s feet to the fire, that’s fine with Brennan, who sees his involvement the same way. Every day, Brennan and eFashionSolution’s management log on to the web from wherever they are, go through the previous day’s sales, review metrics and make adjustments. “That’s the role I have played with this team, to really drive through the retail metrics,” Brennan says. “What is so unique about e-commerce is that if you have your metrics in place and good content management technology behind things, it truly is amazing what you can do and how it affects your business.”

mary@verticalwebmedia.com

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