Last weekend I attended Ellevate Network’s combined San Diego and Orange Country event She Sells: Brunch with Retail Entrepreneur Kelly Cosenza. I carpooled with fellow Ellevate San Diego members and discovered the Outlets of San Clemente are only 30 minutes from Encinitas (without traffic, it was a Saturday morning).
The event was held in the luxurious VIP lounge, and I learned from the outlet’s marketing director Nicky See that customers can achieve VIP status and lounge access by showing outlet shopping receipts to the customer service office. The lounge is sometimes referred to as “hubby daycare” where women can drop off their husbands to watch TV while they shop. The lounge can also be booked for events such as this. Random note: One of the most surprising luxury aspects of the lounge was the heated toilet seats! This three-year-old center is living up to its motto that even though it has 70% outlet stores, it doesn’t discount your experience. I learned that Craig Realty Group, the outlet’s owner, hires a local marketing team for each of its centers, so a marketing person in a distant city is not trying to create relevant experiences for the local area. The outlet also features several women-owned businesses and executives. Shopping insider tip: if you visit the customer service center of any outlet mall, you will likely find coupons for shopping.
Onto the event content!
Ellevate OC Leader Judith Lukomski moderated a talk with retail entrepreneur Kelly Cosenza, founder and owner of Daisy Shoppe fashion and gift boutiques. Kelly opened her first retail store in Brea, California when she was 24 years old. This passion project quickly grew into a multi-million dollar enterprise. Kelly created a unique and highly-successful niche with the Daisy Shoppe—one where a family-friendly atmosphere permeates the stores. She also designs many of the best-selling products herself. Daisy Shoppe’s sales numbers compare to those of many national woman’s ready-to-wear chains, with rising sales numbers year over year in an era where many offline retailers are struggling.
The Family Business
Kelly grew up in an entrepreneurial family. Her mom opened a boutique in the Pasadena Hotel 52 years ago, during her senior year of high school. Her mom married a real estate developer who assisted in finding mall locations for her shop. Kelly says she grew up “in the back of malls.” Her dad thought her career path should be in real estate, so she interned in real estate during college. She found that real estate didn’t offer enough creativity for her, despite the financial benefits. Kelly made a big decision to turn down a job offer after that internship, and she decided to work as a manager in her mom’s store to learn about the retail business in-depth. Kelly then secured a business loan and signed a 10-year lease in Brea Mall, which was a huge commitment. Her store survived the recession and she’s opened a new location every November for the past four years. Kelly started her store successfully because of the tools she learned from her parents about business and finance.
Cultivating her brand has been the easiest part of the business for her, she says. The store’s brand is based on the style she loves, on her own taste. She shares the same taste as her mom and says that if you put a rack full of items in front of both her and her mom, they will pick out the same things. On the abundance of pink in the store and brand, she says her first kitchen was all pink, pink is very “her.”
But personal taste is only one part of her secret to success. Rigorous data analysis is another huge piece of the puzzle. Each of Kelly’s stores is customized based on customer preferences in the area. She studies the sales reports every day in order to see what’s selling and what’s not, in each particular store, to tailor the shop experience to the market. For example, the LA store has a different customer, price point, and merchandise compared to the outlets and more suburban locations.
“People are the hardest part [of the business], they can make or break you,” Kelly says. She has become much more patient with people over the years. Kelly manages 50 employees across four stores and a warehouse. She says spending time with the key people in your business is important, but you need to set limits on when and how much time to spend with each person. She likes to spend 10-15 minutes with the store managers to see what’s going on. Sales reps call her all day long, and cultivating a relationship with them is important, but she sets clear expectations by telling them exactly which days and times she’s available to place her orders. Kelly says she can walk into any store and immediately see what is merchandised wrong, but she’s learned not to lead with errors when talking to the store team. She likes the compliment sandwich technique of starting with something positive. She has softened her approach in management because she says people who don’t like working for you don’t do a good job.
For people management, she says it’s also important to remember that chance happens, and even if you think you have all your ducks in a row, something drops out and you end up short-staffed. For example, three key people left last year right before the holidays, when she had a newborn, partly because of chance. “The people part is the unpredictable part of the whole thing,” Kelly says. If you think you have a complete team, you should hire three more people in case others drop out by chance. She’s always hiring, because of employees’ personal circumstances like a partner moving or kids getting sick, not because of employee dissatisfaction.
Sometimes people aren’t the right fit for the brand, and Kelly dreads these conversations but parting ways usually ends up being good for business and good for each person who was previously unhappy. Holding onto people who are not a good fit can drive the business down, which is not good for anyone involved. Retaining these employees can act like a cancer which creates more havoc the longer it lingers. She’s been afraid to fire before because it would leave a store understaffed, but she found it would have been better to be light on staff than keep a toxic employee who convinces other people to quit.
Doing what you love was also discussed. Kelly says everyone has been at a place in their life, questioning if that is what they should be doing with their life. Unhappy employees reflect their unhappiness in their job performance. You won’t succeed if you don’t love what you do. Judith says she calls this “leading with love.”
Time management and prioritizing how to invest her time is a huge part of Kelly’s life, especially now that she has a toddler at home. She loves to be on the sales floor and hear customer feedback but she can’t be in four places at once. It’s not the best use of her time. She tries to stop by each location once a week. She is very social and could get off topic quickly when talking with employees, so she’s learned to set a time limit on people for questions to prevent them from interrupting her at other times. For example, telling the team she has 15 minutes to answer their questions then she has other tasks to accomplish. Kelly is also a fan of making a list in the morning of what she wants to accomplish that day.
On the family-friendly aspects of the store merchandise: Kelly says she remembers walking into a store like Urban Outfitters with her mom and being mortified at some of the book titles offered. She says they would be appropriate in a sex store and was uncomfortable that a store aimed at teenagers offered that. This experience, along with family-friendly values being part of who she is, fueled her mission to create an environment where a customer could shop with their grandmother without feeling uncomfortable.
Merchandising And Inventory Selection
Daisy Shoppe’s merchandising is all about sorting items in the store by color and also telling a story about how the items fit together. Kelly says that having a lot of random products placed together is confusing and wouldn’t be appealing to the customer. Putting related items together helps sell additional items. And when she’s designing display walls, if she can’t find a resource that offers a product to complement the other products in the display, such as slippers to match pajamas, she designing the product herself and have it manufactured.
Kelly takes a deep dive into the data on the percentage of inventory against the percentage of sales to determine which products to carry, which complementary products to create, and how much of each to create. “The brand is driven by sales, what sells well is on brand. Chasing that business (what customers actually want) is so important, and the more I focused on that, the more growth I saw,” Kelly says.
There is a holiday push for pajamas, where 20% of sales come from the sleepwear department, so she starts planning that department in January. Some items are made overseas, so need more time. She creates a new theme for each holiday season with reusable bags in that theme. It’s inspired by a plaid PJ pant this year and coordinates. It’s a challenge to come up with something new every year, then expand on the idea and piece it together to tell a story.
Kelly’s store feels unique due to a lot of research and hard work over the years, sourcing and creating products. She says there is a limit on products available for mom and pop stores. Most retail suppliers are geared toward big box stores with 20,000 unit minimum orders. The limited availability of products made it hard to differentiate herself from other small boutiques when she was first starting out. Over the years she’s found resources for different, unique products, which takes a lot of research and planning ahead. She works with several manufacturers and takes the time to ask them a lot of questions. When she sees big-box retail buyers at the same manufacturers she’s visiting, she asks them questions about other resources/suppliers they use.
Finding the right places to give away work for free can have a great return. Kelly was talking to an importer for TJ Maxx and Nordstrom and she offered to help him create prints for free. Now he pays her for the same service. She also designs for a shopping bag importer for grocery stores as side work, which started by doing it as a favor and by asking questions of the importer. Sometimes these questions lead to buying product from the supplier’s supplier, and she feels bad about cutting out a sales rep’s commission, but saving 20% is huge in a retail business with tight margins. Curiosity is a good thing, so don’t be afraid to ask questions, even of people who may be considered your competitors!
Maxi Skirts For the Win
“The reason I have a home in Orange County, the most difficult place in the U.S. to own a home, is because of one item: Maxi skirts,” Kelly says. In November 2012, she started buying maxi skirts and offered them at a good price point. Women would come into the store and buy five at a time. This brand new category in the store, a category that didn’t exist the year before, made $350K in a year at just one store. Her sales of shirts grew 20% as well, shirts bought to complement the maxi skirts. She explains this success as offering something different, to keep people coming to the stores instead of using Amazon. The big seller at Daisy Shoppe is no longer maxi skirts, so Kelly’s working on discovering the next big new category.
When you’re hiring, how do you know the employee will be a good fit?
Kelly has lowered her expectations over the years. This sounds bad, but she says there is a particular problem with millennials’ ability to answer the questions correctly during the interview, making it hard to know if they are actually going to do the work involved and be good for the team. She’s weeded through a lot of people to find hardworking millennials for her retail employees. She now has a 30-day part-time trial period for new employees to set expectations and assess fit. As for management employees, she now hires people with hiring experience so they understand how hard it is to find the right people, people who will create harmony without any cattiness.
How do you know which product to design next?
By listening to the customer, which involves reading detailed sales reports every day to see what’s selling in which location. For example, animal-themed products sell well in the San Clemente outlets. There was a recent dog event at the mall where Daisy Shoppe did a dog-themed table. That location will have a dog-themed Christmas tree this year. Some of the forecasting is guessing, when she sees trends in the home decor, gift, and clothing retailers and media she consumes and finds the story in it. The hardest part about the process is timing things to arrive in the stores at a certain time. Sometimes items for certain displays are stuck on a truck for two weeks, so she has to make do with what is available in order to merchandise the products, which is frustrating. Kelly still creates/orders some things last minute when other solutions don’t come through. There is also a budget for new products, seasonally, based on a certain percentage of sales for each category of product. Planning inventory to prevent stock outs is complicated as well. The Citadel LA store was especially busy four days before Christmas last year, some items went out of stock and it cost the store $20-30K in potential sales. For some reason, that store had stronger sales during those days than other stores and other years, which made it hard to plan against stock-outs.
Your shop feels very cozy and stands out against the sterile, generic big name stores. How does that contribute to word of mouth and loyalty?
Part of being different is using different suppliers than other shops so they are not the same items you can get everywhere else. That’s part of why people love Daisy Shoppe and visit. Kelly thinks merchandising is so important in the industry saying there is always something to fix and something that can be better. She loves designing pretty setups and puts herself in different customers’ mindsets when building each display. For example, in the summer, “I have to put myself in the mindset of a skinny 20-year-old and think ‘would I wear this?'”
Merchandising by theme drives up the overall spend of each customer’s store visit. Customers will buy the pants, top, shoes, mug, bag, that all coordinate. Kelly makes it as easy as possible for the customer who doesn’t have much time, by placing it all together in the store.
How do you compete with online shopping?
This is the main complaint from many businesses, but sales are up every year she’s had. She says her point of difference from the online shops is that Daisy Shoppe “is like Pinterest in a store”. It has the cute factor which is hard to do online, it is part of creating a comfort experience. She has a website that does OK but she doesn’t invest a lot into it because that would be a separate business. Her online store is not what her current customer wants. It would also be hard to compete with online shops like Nordstrom, who invest a lot into their online experience and make it too easy to “buy shoes while at a stoplight.” She says the malls do a lot of work to bring customers in with different events, and there are still girls who want to meet their friends for coffee and walk around the mall. Kelly’s experience with the Daisy Shoppe website is that customers will print a page from the website and bring it to the store and say “my daughter or granddaughter likes this shirt.” There is only so much budget to spend, and it is a challenge to know where to spend it. Online may not be her best bet for spending that budget right now.
What do you think about the future of retail in the next 5-10 years, with so many malls becoming ghost towns with the loss of high-quality stores?
Indoor traditional malls have huge struggles. Kelly says she has slowly crept into the outlet malls that bring people into the mall for other reasons than just shopping. The former national mall tenants who got into trouble, like BCBG where Kelly would spend $200 on one item in its heyday, they didn’t adapt or change and they lost sight of what the customers wanted. Sears and JC Penney became places to shop for grandparents, they didn’t keep up with marketing to the next generation, she says. Brands that survive are ones that adapt and change. When national tenants leave indoor malls, the malls feel eerie and weird. It’s a hard place to make money. Then leasing problems bring in the cheap, low-quality stores, which makes the whole mall seem cheap and weird. But is that better than having empty stores? It’s tricky for malls, Kelly says.
Nordstrom has been excellent at adapting and changing. They “flip the store” all the time which keeps things fresh. They change fixtures, and they can sell the same boots as last year but it looks better on the new table.
“In my store, I hope customers get the feeling that I care because everything has its place. Compare this to Macy’s where things are just everywhere. It’s the human touch that is the difference,” Kelly says.
If you could leave us with just one sentence, what would it be?
“If you don’t like what you’re doing, you have to change what you’re doing. Success generally comes with loving what you do.”