• These CEOs Stuck To Stores in Digital Era. They Say the Strategy Pays Unexpected Dividends.

    New to the job, Petco’s CEO recalls he was advised to close the pet supplier’s stores at a time when predictions were common about the impending death of brick-and-mortar-retail.

    Ron Coughlin was making the transition from serving as an executive at computer maker HP to the head of San Diego-based Petco.

    “I was running the PC division at HP,” Coughlin said during a keynote session at the National Retail Federation’s conference in New York that ran Sunday through Tuesday. “Then I had come into Petco, and I can’t tell you how many smart people came in and told me I needed to get rid of my stores. ... Those smart people couldn’t have been more wrong.”

    The Petco chain now has about 1,500 locations and is expanding as Americans keep showing their devotion to their canines and felines. And beyond its growing core business, the retailer last year debuted a Petco farm-and-feed store and plans to have 10 open in rural areas by the end of the year, Coughlin said.

    He was among several retail CEOs, including heads of Target and Whole Foods, to explain the importance of physical real estate — stores — and their expanding appreciation of brick-and-mortar in a digital era during sessions at the NRF’s 113th annual “Big Show,” a convention at the Javits Center in Manhattan. The conference brought together more than 35,000 attendees, including 1,000 exhibitors and 350 speakers.

    During the event, several retail executives outlined their growth plans and described how stores are an important cog in their operations, providing a site for retailers to fulfill online orders and receive returns. They are also a venue for retailers to establish and deepen emotional connections with shoppers and communities, according to officials. At the conference, like the head of Petco, Target’s CEO talked about something involving his stores he couldn't predict.

    One Target store outside Buffalo, New York, provided a safe refuge for some residents during that city’s deadly, record-breaking snow storms in December, a story that made national news.

    With these advantages in mind, some retailers are expanding their physical footprints, just like Petco. For example, Austin, Texas-based Whole Foods Market, with more than 500 stores now, has 50 more in the pipeline, CEO Jason Buechel said at the NRF convention.

    Pitfalls and Advantages

    Of course, the U.S. retail environment has not proved positive for every player. Bed Bath & Beyond, a Union, New Jersey-based chain, reported that its financial woes may force it to file for bankruptcy protection, and it’s already in the process of closing 150 stores. And Woodcliff Lake, New Jersey-based Party City may also be taking that route, by seeking Chapter 11, The Wall Street Journal has reported.

    Coughlin said his game plan for Petco was to make it a health-and-wellness center for pets as well as a one-stop-shop for their owners, offering veterinary and grooming services as well as products like food. And when competing with rivals such as Walmart, Amazon and Chewy, stores are critical for Petco, according to the CEO. Some 70% to 80% of Petco’s e-commerce orders are fulfilled at stores, Coughlin said.

    “I need that physical location,” he said. “We really leverage them for strategic advantage.”

    Petco is also branching out to rural areas, which Coughlin said defies stereotypes.

    “I visited a bunch of these markets,” he said. “They have Starbucks. They have Paneras. … These are underserved markets.”

    His company launched this summer a Neighborhood Farm & Pet Supply store in Floresville, Texas, with 10 planned to be open this year. About 14% of the U.S. population live in rural areas, according to Petco.

    “So all of a sudden we’re in the chick business,” Coughlin said. “We’re in the bovine business. We’re in the equine business. I’ve never been at a grand opening that had horses before, and it’s super fun.”

    In Floresville, the CEO said a resident thanked him for opening the store, saying he would no longer have to drive two hours to San Antonio to get food for his animals.

    Whole Foods Expands Pipeline

    Whole Foods, owned by e-commerce giant Amazon, is also branching out to smaller markets, Buechel said. It is slated to open a 31,718-square-foot supermarket at 2905 W. Main St. in Bozeman, Montana, on Feb. 1. That will be the first Whole Foods in that state, the CEO said.

    The grocer isn't abandoning growth in urban areas, and last week debuted a 42,000-square-foot Whole Foods in One Wall Street at 66 Broadway in Manhattan, Buechel said.

    Asked if Whole Foods is investing in digital services or stores, he answered, "The answer is both. ... Our very best customers are shopping both.”

    Buechel added, “I’m constantly getting questions from folks thinking that physical stores are dead. For us it is the exact opposite We are so bullish about our potential to continue to add stores. We currently have about 50 stores in our pipeline. We’re looking to grow that to at least a hundred."

    Whole Foods is also exploring new store concepts for areas where "we may not be able to get the real estate we’re looking for," according to Buechel, "ultimately new ways that we can serve customers by how we may lay out a store — the size or shape, etc.‘’

    Not only Buechel but Minneapolis-based Target CEO Brian Cornell talked about how stores help retailers make an emotional connection to theirs customers and should help their communities. For example, Cornell and one his fellow Target executives told an anecdote about one of their store directors in a Buffalo suburb who let several people into his store to find shelter with his team during the city's blizzards — which killed a number of people — around Christmas time.

    Those residents inside the store were given hot chocolate from the in-store Starbucks and their children were supplied with coloring books, to "bring a little joy to that moment," Cornell said.

    "That's going to be a story, I think, that we'll talk about for years and years to come," he said.

    Source: www.CoStar.com