TAKE FIVE: Richard Sexton

September 4, 2017  by Jane Chero in Business Strategy, Industry   

Intrigued by this possible new distribution channel, he pieced together an internet site for his store and began offering a selection of products for sale online in 1998 – a time when most consumers still had dial-up internet access. But within two years, the monthly sales volume from the store’s web site was equal to the annual sales of the brick-and-mortar operation.

“I realized this was something that was not going to go away,” Sexton understated.

So he rebranded the store as Carolina Rustica and began focusing on upper-end goods. His online and brick-and-mortar sales continued to soar, and the business survived and thrived through two recessions. He and his partner sold the business in 2012, but he remained there as president until 2015.

Today, Sexton is hailed as a pioneer of omnichannel retailing, and earlier this year was hired by home furnishings technology firm MicroD as chief product officer.

He recently spoke with Larry Thomas, senior business editor of Home Furnishings Business, about the enormous challenges faced by brick-and-mortar retailers today. He also offered his thoughts on that start-up bookseller that piqued his interest in the mid-1990s.

Home Furnishings Business: There has been lots of speculation that Amazon is about to ramp up its efforts to sell home furnishings. What do you think Amazon’s next move will be?

Richard Sexton: Do I think they’re going to buy a national furniture chain? I think it’s pretty likely. Or they could set up hundreds of Amazon furniture stores in a year if they wanted to. Having said that, their next move has to be consolidation. I think they have to absorb that (Whole Foods acquisition) first.

Their issue is not the front end, but the back end. It’s more on the infrastructure, logistics and fulfillment where they’re going to be focused. Drones can’t deliver a high-end sofa to your house.

That hard stuff -- the white glove, in-home delivery service – is the thing Amazon has not been able to get its arms around. Nor has Wayfair. That’s the core competency of your local furniture retailer.

HFB: Will logistics and other back-room processes play a larger role in the ability of brick-and-mortar retailers to compete with e-commerce?

Sexton: Yes. It’s the Achilles heel of Amazon. They’re all about volume. If you have a $5,000 custom built sofa that you’re delivering, the local brick-and-mortar retailer knows how to do that. That’s not an Amazon experience, and I can’t imagine it ever will be. When the product comes in, the local retailer will unbox it, inspect it, put it on their local truck, and do it efficiently.  And most importantly, the local retailer will do it in a way that results in a good customer experience. It’s personalized and has accountability. That is where the local brick-and-mortar retailers will always have the advantage -- and they should hold onto that advantage.

If Amazon ever came to me as a retailer and said, ‘we want you to do our fulfillment,’ I would tell them to walk away in not so polite words. Because you would be giving up the one thing that you can compete on. That’s where the local retailer has the ability to control the (customer) experience.

HFB: What other things do brick-and-mortar retailers need to do to stay competitive?

Sexton: To be successful, retailers need to continue to embrace who they are, which is either a regional or local furniture store, and dominate in that space. They can’t compete on a national scale for e-commerce anymore because the product discovery process doesn’t allow it. They’re going to be successful by having lots of reviews, having good content on their websites, and making sure that their store information is current and consistent so it drives traffic either to phone calls or to in-store visits.

Local furniture retailers are really, really good at taking in-store customers and converting them into buyers. Their conversion rates are much higher than your e-commerce player.

There is not an inherent (cost) advantage in being a pure-play e-commerce retailer because you have to spend a lot more upfront for customer acquisition on the e-commerce side because your conversion rates are a lot lower. Onsite conversion rates are going to be one-half percent to 1 percent. So there’s a lot of upfront investment in terms of getting visibility because you have to compete against Amazon and other big players like that.

HFB: What role should social media play in a retailer’s marketing strategy?

Sexton: I don’t think social media is necessarily the best fit for commerce, but it needs to be leveraged to express the uniqueness of the in-store experience. The objective should be to build a social following, and take those fans and turn them into advocates. You really want your followers to share your narrative to their own circles of friends and acquaintances. That’s how you get that multiplier effect.

For furniture retailers to think it’s going to be an actual source of sales revenue, I wouldn’t focus too much on that. The social channel feeds visitors to the in-store experience, and you can control it from there.  People want to keep the social experience separate from their buying experience, so that kind of brand awareness is the most effective thing to do on social media.

HFB: How do retailers address the challenge of keeping good, up-do-date product photography on their website?

Sexton:  I don’t think you need to have a photography studio, but you do need to have the discipline to take the pictures. Keeping up the product catalog is critical.

You should have the discipline and processes in place to take your own photography whenever possible, in context. As a retailer, I would be less concerned about having studio quality images.

If you’re a multi-store environment, your customer is going to expect more in terms of the digital experience. If it’s not good, it will reflect poorly on you as a brick and mortar retailer.  

HFB: Are voice-activated searches such as Amazon Echo and Google Home the next wave of search engines?

Sexton: It is. Depending upon who you ask, between 25% to 40% of all searches are being driven by voice-activated search. It’s huge. With the use of mobile phones, the ability to just speak into a little microphone has driven a lot of it. The second thing is that (sales of those devices) are growing exponentially, and are becoming integrated into people’s lives.

The impact that has on retailers is so significant because they have to optimize their site for natural language since that’s how people are interacting with them. If someone says, ‘Siri, I need to replace this old couch,’ how would you answer that question in a way that would get you to appear in the search results? That’s critical for retailers.

Google wants to make every search a local search, and that can create some real visibility challenges for retailers. They have to understand the dynamics in terms of where the searches are originating from, and build their content to answer that question.

The one thing you can’t do is stick your head in the sand and say, ‘I don’t get it. It’s too complicated.’ Talk to your grandkids or talk to your neighbor’s kids (laughs). They can educate you in terms of the product discovery process.

HFB: How have the things you learned at Carolina Rustica helped you in your new job at MicroD?

Sexton: I never take off my retail hat. I’m the voice of the retailer when we’re structuring our products. How will this help our retailers grow their business? Does this have meaning to their customers? We always want to make sure that whatever we do, it is with the mindset for creating a better experience and making our retailers more successful with their particular strategies.

The retailers today are my heroes. Retail is at such a critical point right now, and it’s so dynamic. The challenges are real. You cannot take anything for granted. And for us to be successful, we have to make them successful.