Industry icon Bernie Brennan moves into retail’s boom town: the web
By Mary Wagner
One might think a retail career started in the Sears of two generations ago and shaped by the poised-to-pass-into-history full-service department store model would be winding down. This is not the case for Bernard F. “Bernie” Brennan. The 68-year-old former CEO of Montgomery Ward Holding Co., Household Merchandising and Save-A-Stop Inc., and former National Retail Federation chairman, is putting his decades of experience and personal financial resources to work in a new venue: the Internet.
Brennan has deep roots in traditional retail. Today, however, he looks back for only one reason: to import what’s relevant from that accumulated knowledge to e-commerce. And he’s doing so as chairman of, advisor to and investor in e-commerce platform vendor eFashionSolutions LLC.
“Retail has always been exciting to me,” says Brennan, who became chairman of eFashionSolutions a year ago after consulting for the company and acquiring a major stake. “Now, the way you can impact e-commerce, and have a material impact immediately, is unique.”
Investing in software
EFashionSolutions is Brennan’s first venture into e-commerce, but he’s not a stranger to newer technology supporting retail business. Since departing Montgomery Ward in 1996 after an 11-year run during a tumultuous period in the retailer’s decline, he has spent the intervening years as an investor in and director at a number of software companies focused on price optimization.
His store operations and merchandising experience translated into a ready understanding of that then-emerging variety of software: basically, it did on an automated, data-driven basis what merchandisers had long done manually in stores. MarketMax, which later merged into SAS Institute, was one of the early developers of software for merchandise planning and in-season merchandise management. As its managing director, Brennan helped oversee its gradual migration into the arena of price optimization. Another company with which Brennan was associated as director and investor, Spotlight Solutions, also was a pioneer in price optimization software.
“Price optimization is basically an algorithm-based methodology that says, if you have this amount of product and you plan to be out of it on this date, then your sell-through should be this amount every week. It monitors consumer behavior and tells you what their response is so you can adjust your prices. And it’s as effective on the Internet as it is in a retail store,” Brennan says.
A key role for Brennan at eFashionSolutions, the online power behind luxury and urban brands ranging from Oscar de la Renta to Baby Phat, is reinforcing that kind of data-driven rigor in the merchandise planning that eFashionSolutions supports for the 25 fashion brands on its platform. For example, eFashionSolutions’ proprietary content management system includes template-based style guides that allow brand managers to swap out products and images online based on what’s selling or not selling. Brennan is now working with CEO and co-founder Edward P. Foy Jr. to build algorithm-based business rule technology that will execute changes to a brand’s site based on customer response: for instance, if a product is selling at a specific rate, it will be moved to a landing page.
Brennan’s long experience in the hard metrics of merchandise planning and pricing is a complement to the 36-year-old Foy’s experience in fashion and technology, but retail is common ground. Foy started his career in Macy’s executive training program and later joined Calvin Klein Jeanswear’s wholesale business, where he worked in management information systems. A company he founded in 1998, CyberRetail.com, gave him early exposure to the world of e-commerce.
“We share the same vision from a merchandising point of view,” Foy says. “Buyers do certain things based on what information is telling them to do. We both feel we are at a point where technology can automate much of that process and put a lot more intelligence around presentation online.”
Short hop
While it may seem a long jump from store-based retail to technology-driven online commerce, Brennan doesn’t see it that way. From his early days at Sears and his knowledge of its catalog business, he already understood that people are willing to buy remotely, under the right circumstances. “Because I realized how much business could be done in a catalog, I was comfortable that once technology and customer service issues were sorted out, consumers would really react to e-commerce,” he says.
Still, the world of virtual merchandising wasn’t even on the horizon when the Chicago high-schooler took his first job at Sears. And it’s even farther from the Brennan family’s long history in store retail. Brennan’s grandfather, father and four of his brothers worked for Sears. Brother Edward A. Brennan went on to become chairman and CEO of Sears, a job he held for nine years until his retirement in 1995.
“It was all anybody talked about around the house, and it was what I became interested in,” Brennan says.
After earning a degree in business from The University of St. Thomas in Minnesota, Brennan started his professional career in Sears’ Minneapolis executive training program, later moving into merchandising positions and eventually serving as director of management development for Sears in Chicago.
Brennan left Sears for the wholesale side of the business to become CEO of Sav-A-Stop, a vendor of non-food products to supermarkets and convenience stores. After participating in the sale of that company to Sara Lee Corp. in the early 1980s, Brennan served as executive vice president at Montgomery Ward until he was recruited to be CEO of Household Merchandising, a large, diversified retailer whose companies included Vons Supermarkets and a number of furniture retailers. Brennan eventually participated in management’s leveraged buyout of Household Merchandising from parent company Household International, and in the subsequent sale of several of its units.
Brennan returned to Montgomery Ward in 1985 to become chairman and CEO of Montgomery Ward Holding Co., which included the company’s retail group as well as its direct marketing Signature Group. Brennan led management’s leveraged buyout of Ward’s retail division in 1988 in an effort to reverse the retail chain’s declining fortunes. However, the retailer ultimately declared bankruptcy in 1997, shortly after Brennan left the company.
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
