In this exclusive Q&A, Hanna Andersson CEO Mike Edwards (former CEO of eBags) shares insights into his strategies for competing in the $160 billion global children’s market; the company’s new Innovation Studio initiative; the importance of social media and influencers at Hanna Andersson and much more.
In addition to his roles at Hanna Andersson and eBags, Edwards’ extensive retail resume includes: EVP, Global Merchandising at Staples; President, CEO & Investor at Borders, Inc.; President & CEO, Director and Investor, lucy activewear; EVP Operations, JOANN Stores; EVP Merchandising and CMO, West Marine; and VP and GMM, Golfsmith; SVP and GMM, CompUSA. He also held roles at Target Stores and May Department Stores early in his retail career.
Retail TouchPoints (RTP): You recently moved from the CEO position at eBags to Hanna Andersson — what prompted the switch?
Mike Edwards: After selling eBags I decided to take a bit of a sabbatical and figure out what’s next. I was researching companies I could run and spent due diligence on three finalists. What impressed me most about Hanna Andersson was the quality and long-standing position of the brand in the marketplace, as well as the quality of the owners behind the business. Both of those things are super important from a CEO perspective. It’s vitally important to have backing from a financial standpoint and the ability to propel the brand.
RTP: What are your goals for your first year as CEO at Hanna Andersson?
Edwards: For me, the first year is generally a little bit of a reset year — putting in processes, getting the right talent and redefining or strengthening the brand position in the marketplace. Then I think further about growth in years two, three and four. Thinking about it from a three-year perspective, my goal is to take Hanna Andersson from a relatively unknown upscale children’s brand to a global brand. I like to say ‘double double’ — I want to double the size of the company, then double it again. I have my eye on a billion-dollar number for the company.
We compete in the $160 billion global children’s market, which is organically growing at 4% a year. There are very few currently playing the space and market consolidation is strong (Gymboree recently closing as an example).
I am bringing my digital experience to the brand to tell the story in ways it has not been told before. We’re also expanding partnerships with Amazon and opening international channels next year. The majority of our budget this year will focus on the customer experience, improving fulfillment, the online experience, contact center and/or building stores.
RTP: What are your plans for global expansion?
Edwards: My goal is that in a year or two, more than 10% of our sales will be international. It’s a very small percentage today. We’ll use traditional marketplaces overseas, freight consolidators to help get our products out globally, then from there we will reassess which countries to target and why.
RTP: What kind of leadership changes have you completed so far?
Edwards: Seven of our nine senior managers are new. We have a new Head of Merchandising; we created a VP of Brand and Content; we added a new SVP of Planning; we created a new CFO/COO role; and we expanded our Head of Stores role to include employee, call center and brand-related responsibilities. We also strengthened our partnerships and sourcing teams to better manage the supply chain, and we added a true Strategic Planning function. A lot of other changes to come.
RTP: Can you fill us in on your recently launched Innovation Studio initiative that you’re working on in conjunction with iterate.ai?
Edwards: We originally dreamed this up when I was at eBags because we just couldn’t seem to separate IT business priorities from innovation initiative, so we created two separate paths. We have learned that you have to break things apart and have the freedom to run, test, fail, learn and iterate; that’s why I like it as a separate committee. And we wanted to make sure we had an outside perspective on what is happening in the marketplace, so we partnered with iterate.ai.
The Innovation Studio is an incubation bed for a lot of technologies. We plan to identify 10 areas from a technology standpoint that could use a digital jumpstart at Hanna Andersson. We’ll test some each quarter and plan to find three or four that hit home runs. This year, going into the fourth quarter, we are launching several new technologies, including Yottaa, Reflektion, Stylitics and Narvar. These are all completely new to our platform and we’re already seeing nice conversion stats.
As we advance into the future we’ll think more about our mobile strategy. And we’ll look to see if there is an IoT play in the children’s market. We know we can’t be the transactional player like Amazon — we have to win on experience and content.
RTP: How do you determine the ROI business case and funding for tech innovation initiatives?
Edwards: While it depends on the technology and level of spend, if we can see a two-year payback on any invested capital, that meets our model. But frankly we’re seeing a less than one-year payback on the technologies we’ve rolled out recently.
And generally, we have not added funding into the business. We have deprioritized some of our current IT projects to fund some programs, and other funding is from growth assumptions on our cashflow. Almost everything we’re doing is a gross profit return, so we’re just reallocating our resources.
RTP: How are you managing or changing marketing efforts?
Edwards: We are shifting our marketing spend pretty dramatically this holiday season to focus on acquisition vs. retention: At least 40% of the spend is on acquisition right now. For the top of the funnel we’re using more video content and we’re investing in UX conversion, including payment and quicker two- to four-day shipping. Those are our biggest shifts for this year.
YouTube is incredibly important to us, as well as Facebook when it comes to customer acquisition. And we want to make sure newly acquired customers come back, so we have mechanisms in place from a CRM perspective. For example, we’re moving off traditional last click, pay-as-you-go.
We are confident the focus on acquisition will move the needle. We saw the same thing at eBags: sales were flat for four years, then after adding these types of initiatives we say quarter-over-quarter growth.
We’ll also be investing heavily in the customer journey next year. It’s super challenging when you get into the cross-attribution model. We know there are often 20 to 100 different touch points before a customer completes a purchase. This will be an ongoing study for us.
RTP: How important is social media in your marketing efforts?
Edwards: Social channels are very important for us. We break it down into paid and organic initiatives. Both are incredibly important to our ongoing brand story. We’re actually investing heavily in paid social as something new; we’re creating more video content; and we’re also really focusing on PR, content and influencer strategies on sites including Facebook, YouTube, Instagram and Pinterest. These are far more important in connecting with our customers vs. other channels.
Regarding influencers specifically, we want to focus both on micro and celebrities. We work with Full Picture on these initiatives. A lot of micro influencers are following us and writing about us. And we’ve been lucky to have celebrities, such as Taylor Swift, wearing our products in videos.
RTP: How does Hanna Andersson differentiate itself in the children’s space?
Edwards: Hanna Andersson has been built on a tradition of quality. Our designs are exclusive and Scandinavian-influenced. We have always been known for premium fabrics, organic cotton, incredibly comfortable — meant for both play and growth. We also have been known as a brand with such good quality that you can hand it down generationally.
The biggest asset I’ve discovered is the pride and love our team has for the customer. Our contact center is based in our corporate office in Portland and I like to wander down there to find out what’s going on. That’s a real point of truth.
RTP: How have the demographics of the target market changed?
Edwards: We continue to see that 88% of our customers are females between the ages of 25 and 44. But today, families are waiting longer to have kids. When they do have kids, though, they want to be part of a brand that has an inspiring value system they can relate to, including quality and sustainability. Our “less is more” approach resonates strongly with the Millennial customers today.
The trends actually work in our favor because instead of having three kids you may have just one, but you can spend more on that one child — you ultimately want them to have the best. Larger families are more price-sensitive — many are just looking for a deal and treating apparel as disposable items.
RTP: Which brands do you see as competition with Hanna Andersson?
Edwards: Basically, any brand that sells apparel is competition. There are not a lot of specialty brands in the children’s marketplace. In our research, our customer also shops eight or nine other brands — from very high end to Walmart.
RTP: How has your past retail experience helped to prepare you for this new role?
Edwards: I’d say it’s all a cumulative journey. Both successes and failure define your career. I’m on my fourth CEO role: At this point I’m applying everything as I see that and seeing what works and what doesn’t. It’s important to be able to pivot when necessary.
My role at lucy activewear helped me learn apparel retailing; and eBags was a truly pure play tech-driven marketplace. Until you live and breathe tech every day it’s hard to understand the magnitude required to win.
RTP: Have you had any mentors along the way during your retail career?
Edwards: I thought about this and came up with many from my 35-year career. It is so important to appreciate the value of mentors and the importance of keeping a very strong network of other retail professionals. Being able to reach out to them with questions is the hallmark of a great leader.
Marcia Grassi — a professor of retail studies at Drexel — convinced me that retail was going to be my career. I thought I was going to be a technical salesperson for IBM.
Rick Fersch — ran Eddie Bauer for 20+ years — was the single most exciting merchant I’ve ever worked for. Whatever rocket fuel he was drinking, I wanted it too. He taught me the true art of merchandising. Rick recruited me to the May Company and the rest was history.
Hal Compton — CEO of CompUSA — was the single toughest person I’ve met. He taught me the discipline of execution. He was a strong mentor for me becoming a well-rounded executive.
Late Jerry Gallagher — on the board at lucy activewear — was a legend in investing. He invested in Office Depot, Whole Foods, PetSmart…as much as I wanted to prove him wrong, he was always right.
Ben LeBow — was Chairman of Borders. His business understanding was something extraordinary. He is responsible for the personal donation to create the Lebow school of business at Drexel University.
Howard Schultz — has been incredibly helpful teaching me the value of investing in the team as brand thought leaders and partners in the business. We stayed involved with lucy Activewear through his investment in the Maveron Venture Fund.
Ron Sargent and Shira Goodman — both CEOs at Staples — both were extraordinary in terms of conceptualizing every detail of a $24 billion business located in 26 countries. They always took a personal interest in my success.
Jon Nordmark — Chairman and Founder of eBags. His entrepreneurial spirt and partnership is inspiring. His love for technology is endless.
Rosalind Thompson — a peer and head of HR at Borders — taught me the value of diversity in thinking and how to recruit people. She was an incredibly trusted sounding board.
Late Dr. Bud Boltin was my CEO coach and friend. His advice on all areas of my life was a game changer. I miss talking to Bud every day. He taught me how to think and act like a CEO.