A Conversation with Ken Hicks, former CEO, Foot Locker
Conventional wisdom in the retail industry today is that smaller stores are better—they better fit into fast-growing urban environments and are more easily navigated by time-crunched consumers.
Yet Ken Hicks, former CEO of Foot Locker, challenges that notion. Ken, who retired in mid-2015 after overseeing impressive sales-per-square-foot as well as revenue and profit growth at the footwear retailer, also served in a leadership position at JC Penney.
Always in Transition
For Ken, the retail industry being in the midst of transition is nothing new. “It’s always been in transition,” he said. “First it was mom and pops, and then it was department stores, then specialty, then discounter, then big.-box, now the internet. We’ve gone through a number of transitions, and people always worry that the new thing is going to kill everything that preceded it. Malls were going to kill mom and pops; big boxes were going to kill the mall. Retail is an industry of continual transition. We’re in a business that constantly evolves and reinvents itself. It’s not like we’ve never seen this before. We’ve seen it and managed through it multiple times. Each time, you think your whole business is going to go away.”
So how will retailers manage through this latest transition? Ken says they should start by dropping stores. “That culling hasn’t happened to the degree that it should,” he said. “The first thing I did when I got to Foot Locker was to close 600 stores. It was tough medicine but it positioned the company for future growth. From the time I got there to the time I left we had fewer stores every year, but more square footage—with the exception of the first year. We also significantly stepped up our efforts online, coordinating our stores with the content we offered our customers.”
Part of Ken’s formula for success was bigger stores. “The worst thing you can do is give a retailer too much space. The second worst thing you can do is give them not enough space. We wanted to make Foot Locker an exciting place to shop. To do that, we needed a bigger footprint that could accommodate more concepts and categories like House of Hoops, Under Armour shops, and the A-Zone for Adidas. We also worked to develop new concepts for growth opportunities for women (Six:02) and kids (Flight Zone).
“JC Penney has the opposite problem,” Ken added. “They’ve got too much space. So the tendency is to fill it up with stuff that doesn’t excite consumers.”
Ken suggested the answer to the square footage question can only be found by determining how much space you need to tell a story and create an inviting experience. That may entail paring back inventory and repurposing space. He adds, “it also involves improving presentations to tell stories to encourage the customers to buy and expand their purchases.
“When I took over Foot Locker, we had a wall of shoes, eight or nine rows high, from the front to the back of the store. If I’m a shopper looking at that, how do I know what’s important? How do I know what’s new? We offered a few useful cues. Now if you go to our new format stores, we pared back the number of shoes on the wall. We have shadow boxes where we display the key shoes and place collateral around them. In our new format, we also put the hottest shoes in display cases near the ‘back to school’ sign. Kids in the mall would walk by the store and see the hottest shoe, then cross our threshold where I have a chance to sell them. We also placed coordinating products together so that they could find a T-shirt or socks to go with their shoes.”
Ken challenges the idea that millennials are disloyal or indifferent to brands. “They’re loyal to an idea, and if Nike is the right idea, they’re loyal to that” he said. “The secret is getting millennials — or any other customer — to buy into the brand idea. They also enjoy going to the mall, but are more targeted on where they shop.”
Younger shoppers crave experiences. “We put games in the kids’ stores, we’d engage them. We made a pyramid with the kids’ shoes so they could pick them up and even climb the fixture. I wanted a customer to go into House of Hoops and feel like Michael Jordan. Using our space to tell exciting stories and offer cool experiences worked,” he said. “We took our sales-per-square foot from $300 to almost $600.”
Foot Locker’s creative investment in stores also helps to shield it from having to compete on price with discount and online competitors racing to the bottom. “We offer an experience and a service by showcasing all the cool brands, and by making sure you get the right shoe and the right fit with motivated and knowledgeable sales associates. You have to be competitive, but you don’t have to be the lowest-priced option.”
Ken doesn’t necessarily see his brand partners as competitors, even when they open their own stores next door. “Wherever Nike opened a store in a mall we were in, our sales have gone up,” he said. “We have a better assortment, including shoes Nike made just for us. The average age of the Nike store customer is north of 35. Ours is south of 25, a customer who buys more sneakers.”
Ken believes that JC Penney started to run into trouble when it started competing outside of its established core areas. “We did well for a long time by focusing our strengths on Middle America with private brands,” he recalls. “Then the thinking started to change. I remember the buyer in our juniors and young men’s department saying ‘We really need to step up our sexiness, because we’re losing to Abercrombie.’ But I told him, ‘We’re the second largest young men’s retailer. We don’t sell to anyone over 16. We don’t sell for Saturday night. We sell for Monday through Friday at school.’ We weren’t trying to be Abercrombie. When Penney started trying to be Abercrombie, they got into trouble. In a big department store, are you going to make it darkly lit and have a model-type guy standing around with his shirt off? That can’t work. You have to be true to yourself.”
Ken anticipates that many retailers will continue to struggle because the industry has too few innovative leaders and because emerging talent is not being given the chance to develop. “A lot of leadership is learned over time,” he said. “In retail, people often don’t get the chance to really lead until later in their careers, so they’re not as proficient at leadership as they need to be.”
Ken feels the time was right for him to retire and has no regrets. “When I told the board I was leaving, they said, ‘No you can’t leave, things are good.’ I said, ‘That’s why I want to leave now. I want to hand over the keys while the engine’s humming and there’s gas in the car to a strong successor with a great team.’”