If you were to ask consumers what sort of people are most likely to become retail entrepreneurs then it is a fair bet that very few of them would choose NASA scientists. However, in the case of one Florida company, that is exactly what has happened.
Businessman Alex Mehr has made a habit of buying up businesses that need a shake-up and whilst retail might seem a million miles away from retail, the change in occupation seems to be paying off.
Along with his co-director Tai Lopez, Mehr founded Retail Ecommerce Ventures (REV), a business that’s prime purpose is to find distressed brands and give them a new lease of life.
Mehr originally hit the headlines when he founded internet sensation dating app Zoosk. After growing the business and learning some lessons along the way, he finally cashed in with a $300m sale back in 2014.
With those lessons and a sizable war chest in his back pocket, Alex Mehr decided to transfer his skills to retail settings and alongside Lopez has been making waves.
Finding favourite brands
Mehr and Lopez have a simple formula; find well-loved brands that have fallen on hard times and reintroduce them to their fans in a new form.
This is a formula that has served them well with the remarkable turnaround of clothing brand Dressbarn proving that old bricks and mortar stores really can move into the internet age.
It’s a turnaround that certainly is eye-catching. From its sale in liquidation last year, Dressbarn is now reporting over 3.5m unique visitors to its website in June (an 18% increase over May) and a bullish $165m sales forecast for the coming year.
Mehr will be expecting to sprinkle a little more of that magic dust on their other acquisitions that include Linens ’N Things and the Franklin Mint that they purchased in June from Sequential Brands Group and their latest purchase Modell’s sporting goods, bought into the fold in August this year.
What is the attraction?
With a background in a funky internet business you’d think that a purely bricks-and-mortar retailer would be the last place that these guys would be looking for opportunities, but nothing could be further from the truth.
Mehr’s prime goal is to find businesses that have been underperforming for some time and where the turnaround formula can be brought to bear.
The big benefit of these old established brands (Modell’s is 131-years old) is that they have an established presence and high consumer awareness and Mehr points out, “If you look at people who aren’t into sports, they know of Modell’s — it’s well-respected and an old brand. It’s something people have grown up with.”
This gives what is in legal terms a start-up business a leg up on the ladder of brand awareness. Where any normal startup will need to do everything from the basics like brand guidelines through to list building, with old established brands these are all in place.
“What we’re doing is the same thing as internet startups with one major difference — instead of building a startup, we could just buy a massive brand with a built-in customer base and brand affinity and awareness and jumpstart it,” Mehr said. “It’s a hybrid model.”
This hybrid model also includes using the latest tech to streamline the order fulfilment process and ensure that the back-office is as lean as possible.
As part of the Rev stable, all companies have the ability to use dropshipping and piggyback on services such as Amazon Marketplace and the Shopify Plus platform used by brands such as Staples, Heinz and Khloe Kardashian’s Good American.
With the closure of all the physical stores and the move to a lean process, REV is said to be running Dressbarn with only 30 people which is impressive given their $65m turnover.
Reconnecting with customers
One of the biggest issues that problem brands have is that their customers have left them and whilst many may have fond thoughts for the shop of their youth, in fact, convenience and the world of internet shopping has taken over.
Possibly the biggest challenge for any turnaround executive is in how to reconnect with those customers.
Within the target assessment process, the REV executives look at how easy that will be and whether it will realistically be possible to bring former consumers back into the fold.
Once they had launched the new Dressbarn website for example the company used web outreach activities to find former customers and introduce them back to the brand.
This active and very modern method of marketing has paid dividends with increased turnover the result.
Alongside this are the efforts to bring new consumers to the reinvigorated business and without a doubt, the experience in web marketing of Mehr and Lopez proves incredibly valuable here.
The acquisition activity of the last few months doesn’t seem to be a ‘flash in the pan’ either.
Mehr believes that there may be 54 or so companies that are likely to suffer a similar fate as Modell’s and Dressbarn in the not too distant future so it looks like the supply of potential targets is healthy.
Is it a sensible move to buy up businesses that according to most commentators have had their day?
Looking at the early results from REV it seems that there may be some legs in it.
Interesting related article: “What is Brand Management?“