Referring to more than two decades of retail experience, Steve Dennis offers advice to modern execs from "Leaders Leap."

Steve Dennis wrote his latest book, “Leaders Leap,” to package together a variety of retail insights. And they’re as relevant for retailers today as they were 20 years ago.

Dennis had an inside view during his time at Nieman Marcus and Sears. He confronted major periods of change for the department store world. Today, he is president of SageBerry Consulting, which he founded. He also co-hosts the “Remarkable Retail” podcast with Michael LeBlanc. “Leaders Leap” is a follow-up to a previous book — also titled “Remarkable Retail.” In it, Dennis focused on keeping customers loyal while dealing with disruption.

In “Leaders Leap,” he zooms in on the latter topic, suggesting how leaders can confront big bets and high-stakes decisions. He notes major moments in his own professional history when time constraints and seismic industry shifts collided.

Dennis joined Digital Commerce 360 to discuss his perspective in the new book. In the first part of the interview, he framed how some challenges in retail remain the same, decade after decade. He also addressed how to view emerging threats, whether they come in the form of technology or investor-backed direct-to-consumer players.

Editor’s note: This is the first in a two-part interview with Steve Dennis. It has been edited for length and clarity.

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Interview

Digital Commerce 360: This book packs together a lot of insights that you’ve had from past speeches, things you’ve written and firsthand work experiences. When did you feel the concept for it start to gel? And when did you know this was the book that you wanted to write? 

Steve Dennis, author of the book "Leaders Leap"

Steve Dennis, author of the book “Leaders Leap” | Image credit: Steve Dennis

Steve Dennis: There’s parts of the fundamental premise behind the book — or at least the problem I wanted to address — that have been kind of rattling around in my head for probably 20 years. 

Even though I don’t phrase it this way specifically in the book, it’s this question that I’ve had, which is, “If the world’s changed so much, why have we changed so little?” 

Some version of that was in my head when I was still at Sears. And then not in as powerful a way when I was at Neiman Marcus. It was kind of the same thing, because I started to see how much more from a — not so much from a technology standpoint, but where from a consumer standpoint and competitive standpoint — I started to see how slow in a lot of respects we were in evolving. But for sure when I went out on my own, some version of that question kept coming back. 

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What I had not spent any real time thinking about — or hadn’t had any real approach to it — was “What’s the next level of reasons why that happened?” So that was probably about three years ago that I started thinking about that more. And then I was like, “Well, you know, do I really want to write a book about this or not?” So two-and-a-half, three years ago was when it really started to gel.

How Dennis sees examples at Sears and Neiman Marcus as relevant today

DC360: As you put this together and were figuring out what to include and how to tell that story, what challenges did you see looking back to Sears and Neiman Marcus that are still most persistent in today’s environment?  

SD: I think there’s two big things, though they’re they’re not 100% distinct. One is the tendency to want to protect the status quo or defend the status quo. Or protect the core business, keep doing what you’ve always done. That was very evident at Sears, very evident at Neiman Marcus. I think if you look at what’s going on in the department store industry today and many other retailers like that, that timidity — or whatever you want to call it. I think what’s more in play the last five or 10 years — I guess it depends a little bit on your situation — is people consistently underestimate how much more it’s going to take from a customer value perspective to really stand out, as well as how fast things are changing. In the book, I call this “innovating to parity.” 

I think there’s still a view. Because I like to pick on department stores, I’ll just pick on department stores. But I think if you look at where Macy’s, for example, is spending their energy, there’s an aspect to which [you might think if] customer service is a little bit better, if our product assortment is a little bit better, if we deliver a little bit better value, then we’ll be successful. 

But number one, just being even doesn’t mean it will be successful, right? You’ve got to win back customers and it’s not so easy. Customers will move around quite a lot because of price. But if you already like shopping at TJ Maxx or wherever your loyalties may have shifted, just improving some of your weaknesses doesn’t get you the sale. And customers so often don’t even notice some of these changes. That’s another thing that I think people underestimate. I think we’re just in a world today where what it takes to stand out is just more demanding. And clearly the pace of change broadly speaking continues to accelerate. So there’s just this kind of fundamental underestimation of the challenge ahead, which leads to this kind of incrementalism that doesn’t add up to much typically.

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The speed of disruption in retail

DC360: What struck me, was the pace of change, in addition to disruptors — from other technology or venture-backed places — can come in very quickly. Or depending on what you do, some China-based companies have come into the picture the last few years as well.

SD: There’s an aspect of disruption, which is almost like unfair disruption in the case of Shein and Temu, because of taking advantage of regulatory issues. The shipping, the support by the Chinese government. Things like that, you could argue, is disruption. But it’s not entirely fair disruption. The venture capital backing is a little bit different. And it’s turned out many of these disruptor models are not proving to be successful. 

So there’s also an aspect of which if you’re competing, if you’re a publicly traded, relatively conservative company, and then you’ve got these venture capital companies which are much more moonshots, you know the VC guys are like, well one and seven works, that’s fine. “We’re ok if you don’t make any money for 10 years.” That’s very difficult to handle. So it’s hard to give advice as to how to respond to that. 

DC360: That’s the area I was curious about. Say you look at the direct-to-consumer outfits that got a lot of backing and grew quickly. They started eating up certain niche categories. Then they did not end up being sustainable long term after they went public. 

"Leaders Leap" by Steve Dennis

“Leaders Leap” by Steve Dennis | Image credit: Steve Dennis/Wonderwell Press, design by Adrian Morgan

SD: Yeah, I had a client. I don’t know; I don’t think they made this up. I think they got this from someplace else. But they used to refer to some of these brands as mosquito brands. They were annoying. And you just wanted to slap them. But they’re not ultimately gonna kill you. And I do think it’s a vexing challenge to be able to decide. 

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If you’re not responding because you are blinded to what they’re fundamentally doing, or you don’t respond because you’re working too hard to protect the status quo — even though this is not a technology-driven example — but one of the things that was very true with Sears was, in practice, we ignored the growth of Home Depot and Lowe’s, which was ultimately the thing that put Sears out of business, in my opinion.

People point to a lot of other things like [former Sears CEO] Eddie Lampert, whatever. But fundamentally, the categories of appliances and tools represented like 60% of the value at Sears. And that business over time migrated off the mall to Best Buy, Lowe’s and Home Depot. So that was a real threat. And it wasn’t because they were venture capital-funded or had some regulatory advantage or dumping by the Chinese. 

You have to have the ability to parse out what is a real business and how much you should worry about it. It isn’t always obvious. You can go back and look at some of the business models that were getting a lot of investor interest and had glorious IPOs and realize there’s really not much of a business there — at least not one that deserves that kind of valuation. And so if you were in the footwear business, you were gonna go nuts because of Allbirds, well, that you know is probably wasted energy, right? Whereas Warby Parker looks like much more of a real business. 

So it’s not always obvious. You have to build agility in your system to respond. It’s not always clear what the response should be. But it is annoying if you’re just held to different standards because of your ownership or being subject to the public markets.

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Distinguishing between mosquito-level and longer-term threats

DC360: You spoke to this, but I was curious to hear your perspective. When you have to make that call — as to “Is this a mosquito brand, or is this a real longer-term threat?” — how can that impact strategy as a result? 

SD: In the Mind Leap No. 2 [the fourth chapter of the book], when I talk about waking up, you have to do the work. You have to be open to more possibilities. But you also have to have different perspectives. But you have to develop the capacity to discern between what’s hype or for whatever reason is a narrative that’s being carried forward by the media, or carried forward by investors. Whatever might be the case. But that is not a guarantee that you’re gonna always be able to figure out what’s really going to happen. So that’s why I think the agility and creating options to respond are important. 

The other thing I’d say is related to this — which is a little bit off your question. But one of the things that people have said to me about Sears, for example, and you could say similar things about say, Macy’s or Nordstrom today. What people have said is “Oh, Sears could have been the Amazon of today” or whatever. And I said, “Well, that’s a cool story, but first of all, keep in mind that some of that was related to Sears being kind of the first everything store and some of that was because Sears had a catalog business. But I said, “Even if we had set out — that was gonna be our new strategy, we were gonna over time pivot and be basically Amazon, there is no way.”

And I can tell you — even though we looked at many options, that was not one of them — but even if somehow or other we had come to say that is what the future of the company is going to be, we never would have been able to convince our board of that. One, because we had no real capabilities to do that. But the main thing is any scenario like that would have resulted in us losing many, many billions of dollars for an extended period of time. And there was just no way our board was going to go for that. And there was no way Wall Street was going to go for that. It was such a moonshot; it would have been such a crazy idea. 

It gets a little bit back to what I talked about with the Transformation Trap [in “Leaders Leap”]. One of the reasons you want to stay out of the zone of irrelevance is, even if Macy’s comes up with some really bold strategy that’s gonna really remake the company over the next 7 to 10 years, they’re a publicly traded company with mostly value investors, and that’s not what those investors are interested in. The reality is — and I didn’t want to get too much into the capital markets stuff in this book — but there are some realities which it make it very difficult to respond to disruption, even if there is a theoretically sound option to pursue.

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Editor’s note: Read the second part of this interview with Steve Dennis, where he picks the boldest recent move in retail.

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