The Big Interview

If you see an impeccably dressed man on Bay St., chances are good he shops at Harry Rosen. The upscale menswear retailer has been dressing the sartorially sophisticated Canadian man since 1954, and boasts an impressive share of the upscale men’s market of just over 40 percent. Meanwhile, faced with a weakening economy and stepped-up competition, Harry Rosen is poised to meet these challenges.
Glenn Ives, Chair of Deloitte, (GI) recently spoke with Larry Rosen, CEO of Harry Rosen, (LR).

*This interview has been edited for length and clarity.

GI: You began working on the floor of your father’s store in the mid-1980s. The ‘80s and ‘90s were like a bloodbath for Canadian retailers, with big names like Eaton’s and Simpsons disappearing. What allowed Harry Rosen to not only survive but prosper during those years?
LR: There is nothing better for learning than going through a business cycle. You learn those essential items, like what your customer really looks for and how important managing your balance sheet is. In 2008, reportedly the worst recession of all time, we skated through fairly unscathed. Right now everybody says we’re in challenging times, and I know we are well-positioned to deal with it. I look at going through these adverse times as earning your stripes.

GI: It looks like the casualties could pile up again in your market soon: Holt Renfrew is expanding its menswear footprint, and Saks Fifth Avenue and Nordstrom are coming to Canada. How you are preparing to defend against these new competitors?
LR: When we found out four, five years ago that there was going to be an invasion of Canada from high-end American department stores, it forced us to seek to understand why people choose us and how we came to command such a strong market share.
We decided we had to hone in on our service proposition, our knowledge of the customers and the markets in Canada, the fact that we are the experts in menswear – and to reinforce that message. We developed a strategy that included a $100-million capital campaign, in which we upgraded and expanded our entire network of stores so that whenever people came to our stores, they would always hit a strong, state-of-the-art Harry Rosen experience.
We took the attitude that these entrants were going to create better-end retail clusters, and that with our new stores and our superior service, we could build our business. All the A+ malls where the new competitors are located are getting new anchors, and we’re benefiting from it. In other malls, we’re making sure there is a clear distinction between the levels of service, the taste level of the merchandise, the way we present the merchandise, and the beauty of our stores. So far, everything has shown that our analysis is right: our businesses are growing in all those markets, despite the new entrants.
We’re making sure that on every single metric, we win the battle. And because we know how to weather business cycles, we had the capital to be able to execute against our plan.

GI: Speaking of real estate, you considered opening a kind of satellite store in West Vancouver, why did you decide not to? The degree of research you did to reach that decision interests me; I think that’s what makes you successful.
LR: Thank you. When the average size of your store is almost 20,000-square feet, you can’t afford to make a bad real estate decision. We’ve never had a store where we haven’t been profitable in the first quarter. It’s essential for us to be productive and profitable from the get-go. We’ve got to be very careful, studying demographics and analyzing our existing customer behaviour, before we make a decision.

GI: Any thoughts of trying the US?
LR: The idea of expanding internationally is intriguing. But, for the next three years, we’ve got enough on our plate to ensure we cement our expansion in Canada. The States will still be there in five years.

GI: At one point you were interested in expanding your business lines. Have you given any more thought to that recently?
LR: Years ago we studied if our brand could branch into women’s wear, and we had some consultants look at our research. They told us, “The strength of your brand is the masculine image.” Brands who do both menswear and womenswear get known for one and not the other; and the ‘other’ is a weak link. So, our strategy is to develop business lines and expand stores to the extent the Canadian menswear market will allow it. We focused on our shoe business, for example, and it has grown by 20 percent a year over the past 10 years. We’re now working on skin care. And, we’ve increased our footprint by 20 percent over the last five years with our store- expansion program. We’re an ambitious group. We would love to acquire a complementary retail business, but that’s more of a long-term project.

GI: How are you playing the e-commerce space?
LR: We have a strong e-commerce business, but we’d been struggling to try to find something that distinguishes us: E-commerce is by nature impersonal and our differentiator is personal service. We’ll be launching a new system chain-wide this spring that allows customers to connect with their regular associate directly, through a web chat via our website, if they want advice or help processing a sale online. This is how we can personalize the experience and bring our expertise to our e-commerce operations. There’s also a widget on our website through which a customer can request an online chat with an associate at the nearest store. Since we started testing the system, associates told me things like: “It’s really exciting, I made a sale at three in the morning!” They weren’t working in the middle of the night, but the customer had completed the sale after chatting with the associate earlier. We think this is going to be a big success.

GI: Speaking of the support systems - the back-office stuff - does Harry Rosen have an advantage there?
LR: We have highly customized systems. One is a state-of-the-art client information system that helps our associates organize their service schedule around doing the right thing for customers; people have actually offered to buy this system from us. We also developed a system we’re launching soon to help our associates engage with customers online. We work hard on this part of the business. It’s not about having the most sophisticated system -- it’s about customizing it to support the kind of business you want to run. And we’ve been successful at it.

GI: When you head to the office these days, what do you worry about?
LR: We cannot control the Canadian dollar, or the price of oil, or the weather. So we try to focus on what we can control, and to minimize the risks. One of the biggest risks these days, of course, is the many new entrants to this market. Among other things, they want our people. So we’re trying to make sure our people understand their career with us. Our benefits and our remuneration are at the top of the game, and we’re not giving our people a reason to want to leave. So far we’ve been pretty successful.

GI: It’s not surprising your people are here to stay -- Harry Rosen’s strong corporate culture has been recognized. What do you do to keep that alive and vibrant?
LR: I am proud our company’s been named in the Canada’s Most Admired Corporate Cultures program. When you have a strong, well-defined culture, it makes being a leader so much easier because people clearly understand what the right thing to do is. In our case, it’s the focus on the customer. Everyone in the company lives that. I remember sitting in executive meetings with my father and a customer would call about a pair of socks. My father would hold the meeting up to talk to the customer about socks. Everybody knows why we are here: to add value to our customers’ lives and build lifelong relations with our customers, associates, vendors, and landlords. It’s wonderful when you have culture that supports the vision.

GI: You talk a lot about your team. How do you keep a team like that together, and how do you keep from becoming insular?
LR: Our executive management group is our top 15 people, with an average tenure of 18 years. Each is a wonderfully talented retailer. And we have a culture of not believing our own BS: Harry is a big believer in travelling the world and looking at how other people are doing retail, and listening and learning from our vendors. There is a sense of continuous improvement in our team. But we also bring in new people, people with the right attitude.

GI: I know that you’re involved in quite a lot of charitable activity. How important is this to you and to the company?
LR: We used to give a little here and there. Then in 2000, one of our dear colleagues, Bob Humphrey, died of pancreatic cancer. We decided to ask our clients and associates is they wanted us to be involved in supporting cancer research. Based on that emphatic feedback, we dove in. Throughout the years we’ve organized runs and golf tournaments, including our own Golf To Conquer Cancer, which is now heading into its third record-breaking year.
We tend to support prostate cancer research initiatives because we notice a lot of clients have prostates. [Laughs.] Last year we bought 7,000 pairs of socks to sell across the chain to raise funds for Prostate Cancer Canada. We sold every single one, which allowed us to make a very significant donation. We do as much as we can to raise money for that cause, and that’s meaningful for our people. It makes us feel fulfilled that we can have an impact on society. It can’t all be about business and profit, right?