Hear how Draper James leverages the “fabric platforming” process to help maintain healthy inventory levels, how customer data supported its newest store opening in Southlake, TX, its pop up at The Market @ Macy’s Herald Square, and when Reese Witherspoon will drop in next (kidding, we can’t really tell you that).

Our guest is John Horten, Vice President of Operations for Draper James where he oversees stores and warehouse operations, IT and customer service. John is a change agent for retailers and manufacturers alike.

We explore how Draper James provides quality and value by knowing its customers, and how learning to sew your own shirt at a manufacturing facility helps move the needle in future discussions with suppliers.

Episode 34 of RETHINK Retail was recorded on October 8, 2019

TRANSCRIPTION

Julia Raymond:
Hi, today we’re kicking off another episode of Rethink Retail with my guest, John Horten. John is the Vice President of Operations at Draper James. John, can you tell us a little bit about yourself and your professional background? For example I noticed you’ve worked with notable brand Gap as Director of Global Supply Chain Strategy, a couple years before joining Draper James?

John Horten:
Absolutely. Well, first of all, thanks for having me. I love talking retail, so very excited to be chatting with you. I joined Draper James over a year ago. Prior to that, my experience has been a mix of industry roles and consulting roles. Started my career with Accenture and their management consulting practice. Worked on a few projects across a couple of different industries before eventually finding my way into their retail practice. Did that for almost a decade, before I wanted to experience life on the other side. My client at the time was an inc, and they offered me a position in their corporate strategy department helping to lead their largest strategic initiatives.

John Horten:
From there, I joined Gap, where I was leading strategy implementation for their responsive supply chain. Got lured back into consulting from Gap to open up the US practice for a Asian-based consultancy that grew out of one of the world’s largest garment manufacturers.

Julia Raymond:
Wow.

John Horten:
Highlight of that job was definitely spending 12 months in Hong Kong. And about a year ago, this amazing opportunity popped up with Draper James to lead operations, and I was really just intrigued by the idea of joining a company with such a strong brand, yet really early in its growth journey.

Julia Raymond:
Definitely. I really like the synopsis you just gave us. Was it an easy transition? Was your experience in Hong Kong and with the apparel suppliers part of the transition that you made to Draper James? Has that helped you in your role now?

John Horten:
Absolutely. I think getting to see things kind of on multiple sides of the table has really been helpful for me in my career. So actually working for one of the largest garment manufacturers definitely has given me some insight into how they operate, which is very valuable in my current role. Also, just getting to spend time actually at the factories. So, going up into China from Hong Kong and spending a week actually absorbing how they operate. One of my favorite things I did during that time was I actually got to sew my own dress shirt-

Julia Raymond:
Oh, wow.

John Horten:
It took three days for me to do it. They do it in about 15 minutes.

Julia Raymond:
Wow.

John Horten:
But getting to see, kind of sewing each stitch and understanding the quality process that’s involved. And you know, making sure that it’s really a garment that they’re proud of, that really shows you kind of hands-on experience of what that process is like.

Julia Raymond:
Absolutely. And you said it took only 15 minutes for them to sew a dress shirt, but it took you three days. So was the process-

John Horten:
They had some strict quality assurance programs in place.

John Horten:
And they wanted to make sure that my shirt met the standards. So, I can tell you that there were many times that I would complete a stitch and it would get undone for me to do again until it was perfect.

Julia Raymond:
Oh my gosh, I’ve been there trying to repair some of my own clothes and I’m like, “I can’t do this. I have to go to the tailor.” So I can kind of imagine what that experience was like. It’s really cool that you got the hands-on opportunities in Hong Kong at the factory. That’s really interesting stuff. And do you still wear the shirt today?

John Horten:
No. We didn’t get to pick our fabric. It’s a yellow shirt. It’s not exactly my taste, but it lives in my closet as a relic of the time I spent there.

Julia Raymond:
Oh, that’s funny. That’s great. Well, maybe one day you can use it for something. Well, moving onto Draper James, I know this is a really interesting brand, has a lot of buzz around it. Mostly because I think it was founded by Reese Witherspoon in 2015, and everyone loves her. So since then, you guys have seen such considerable growth. Really exciting. From your perspective, how does Draper James differentiate itself from other brands in the pretty saturated apparel industry?

John Horten:
Yes. The company definitely has had a lot of success in its early years, which has been great. Reese’s vision for the brand really seems to resonate with customers, and I also think it fills a void in the market. We have an amazing design team here. They’re able to capture the spirit of an authentic Southern lifestyle and translate that into a way that really appeals to the masses.

John Horten:
So we like to think that our apparel, accessories, and home decor products, that they represent kind of a nice intersection between excellent quality but still affordable value. Another thing is that unlike many of the direct to consumer startups that have emerged over the last decade or so, we’ve also been kind of omnichannel from the start. So we opened up our first brick and mortar store in Nashville, actually the same year that we launched e-commerce. That’s really been a important foundation of the brand from the outset.

Julia Raymond:
I’ve heard that that is a benefit because a lot of DTC brands, they eventually do open the brick and mortars and they don’t have the teams in place to deliver in that kind of environment. They know e-commerce so well, but then the other format is tricky to start in. So, approaching both at the same time makes a lot of good business sense and I didn’t know that, so that’s nice to know. Speaking of your stores, I saw on your LinkedIn the photos you posted of the South Lake Texas store. That was what, a couple of weeks ago you opened that store?

John Horten:
Yeah, just a couple of weeks ago. We had our grand opening house warming party last week, which was a big success.

Julia Raymond:
Excellent. You got a lot of good feedback?

John Horten:
Yeah, the customers are super excited. It’s great to see all that hard work kind of come to life. The customers get to shop and experience the brand, those that hadn’t gotten to get that kind of in-person experience yet.

Julia Raymond:
And I noticed, so you have three other shops I wrote down. Atlanta, Nashville, and Lexington, Kentucky. Usually we see the New York’s, the Los Angeles, the big cities. So it seems on brand for Draper James, being all about Southern charm. But is there a reason you guys didn’t choose those large cities, and how did you kind of determine where you were first going to build the stores?

John Horten:
Yeah. I guess going back to the start of the brand in 2015 when we opened our first store in Nashville, that one really made sense since it’s Reese’s hometown, so we definitely wanted a presence there. She popped into the store last week, which has always a big thrill for customers. So that definitely made sense for kind of our initial build out for our flagship location.

John Horten:
From there, like you mentioned, we kind of focused on building out in strong Southern markets. I can speak I guess most directly to the most recent opening in South Lake that you just mentioned. And with that specifically, we analyzed our e-commerce sales data, and we found that the zip code that encompassed the South Lake town center area was one of the top in the nation for us.

Julia Raymond:
Oh, wow.

John Horten:
On both in absolute value and a population adjusted basis. We’re always trying to bring the brand to locations where we already have a great concentration of fans.

John Horten:
But the bigger cities … Yeah. You mentioned some of the bigger cities, which are definitely on our roadmap. Areas like New York, Chicago, also are places that we have extremely strong e-commerce sales. So we’re definitely looking to expand as we can into those markets as well. Within the last couple of days, we launched a small pop-up in Harold Square Macy’s in New York. So you know, a good way to test kind of the New York market here, even if it’s in kind of a smaller fashion than we’re used to doing.

Julia Raymond:
Certainly. Is this pop-up, was this like a 24 to 48 hours pop-up, or is this going to be a semipermanent location?

John Horten:
We’re there for the month, so we’re participating in a program called Market at Macy’s.

Julia Raymond:
Oh, okay.

John Horten:
We’re alongside 11 other mainly direct to consumer brands. So just for the month, but kind of an exciting way for us to test the market and also get some great brand exposure to all of the foot traffic that’s going through that mall, through that Macy’s.

Julia Raymond:
For sure. And how do you decide … Obviously the inventory is I’m assuming a bit lower in the smaller format pop-up. So how do you choose what supply gets sent to the New York location?

John Horten:
Yes. For Macy’s specifically, I think it was an interesting question. We have a lot of products across a wide range of areas that we really would love to share with the consumer. One area we definitely wanted to think about is who are those shoppers in Macy’s? So definitely kind of from a price point perspective, we wanted to make sure that we were in line with the expectations of that target customer.

John Horten:
We also wanted to give the customers a chance to touch and feel some of our products that maybe they haven’t gotten to experience. We made a big push into leather handbags within the last year, and we’re finding that when customers get a chance to see them in person, to touch them, try them, the conversion is amazing. So we definitely want to have part of our assortment there around those leather bags. And then kind of lastly, we do have some great gifting items that make for easier purchases for someone that just want to participate in the brand. So, definitely have a strong gifting assortment there as well.

Julia Raymond:
And you mentioned gifting and we’re … Gosh, already approaching the holiday season. Where’s the year gone, you know?

John Horten:
Yeah.

Julia Raymond:
That’s interesting you mentioned that about your leather products specifically, because there is something different about leather. You know, just holding it and smelling it really, that maybe entices customers to go ahead and make that purchase in store versus kind of mulling it over when it’s online and they’re just looking at it from photos.

John Horten:
Absolutely.

Julia Raymond:
Really cool.

Julia Raymond:
So, I noticed you wrote an article last year on LinkedIn. And in the article, you noted that overstocks and out-of-stocks cost retailers $1.1 trillion globally. And that really stuck out to me. It’s not billion, it’s trillion. That’s a lot of money left on the table. And you said that today more than ever, it’s really hard for retailers to maintain healthy inventory levels and not incur these costs. So, what are some of the reasons for that?

John Horten:
Yeah, absolutely. Discipline inventory management is so important. And as you mentioned, I think it’s getting harder each year. Customers just have access to more information, more data. And with that, more substitute products. One of the things that we’re seeing in response is that retailers are adding more and more collections into their year.

John Horten:
So they’re trying to consistently turn out more new styles, kind of in the sense of fast fashion to make sure that there’s constantly newness in the store. And trying to constantly predict, you know, forecast for those new items is significantly harder than when you have a portfolio of basic products. Like maybe the Gap did in the ’80s and ’90s with khakis and jeans.

Julia Raymond:
Exactly. And you mentioned, it’s interesting because you said the retailers, they’re trying to keep up, right? So they’re rolling out a ton of new inventory, more products. We see that with fast fashion. But then we see just recently Forever 21 filing for bankruptcy. So what do you think, is the market saturated? What’s the issue that they’re running into?

John Horten:
Yeah. I don’t know if the market necessarily is saturated, but I think there’s always going to be a place for excellent product. Some of these retailers we are seeing are experiencing extremely unhealthy inventory levels. I know H&M made an announcement about a year ago about kind of how over stocked they were within some of their product.

John Horten:
So, think some of these more bullish buys that companies are making, they’re turning out to be getting them into a bad place, which leads kind of to a consistent spiral of over inventory. Which leads to markdowns, which leads to kind of trained customer behavior around waiting out for those optimal price ranges. Which means that when you put new products into the stores, customers aren’t going to make those purchases, just knowing that they can wait and eventually find that product on a much deeper discount.

Julia Raymond:
Naturally. Right. And so you mentioned they’re really bullish on their buys and they’re encountering unhealthy inventory levels. And as you said, encouraging some consumer behaviors that aren’t great for when they do have those higher price items that come in. So what are some ways from your experience that retailers manage a healthy inventory level? Does it come down to who’s managing it? Does it come down to the tools that are available? What are the factors at play?

John Horten:
Yeah. I think it’s a lot of different factors, and you definitely just hit on a few of them. There are certainly tools that retailers are using to help maintain healthy inventory. There’s sophisticated software that can apply advanced statistical models for forecasting and safety stock calculations.

John Horten:
But at the end of the day, I think it’s a much broader exercise that needs to be a cross functional effort to help address the issue. One of the simplest ways that I like to address the challenge is really by focusing on product lead times. If you think about it, if you’re forecasting customer demand six to 12 months in advance of when that product’s going to launch, it’s really hard to meet customer expectations. So, shifting this process a little bit closer to market gives you as a retailer much more time to better understand what that customer demand is going to be.

Julia Raymond:
Exactly. But does that strain your operations?

John Horten:
It does add more to your internal operations. There’s additional decision making that you have to make and there’s less time to do that. But I think it’s just the way that retail is evolving. You’re not going to make one decision and then forget about that, and then hope six months later that you made the right one. You need to create a more responsive, flexible organization where you can adapt to those customer changing demands. I can give you an example of how we’re doing that at Draper James, which is really around fabric platforming. This is a tool that we use to reduce our lead times, but it also helps to keep our inventory in check. So what we do is we keep a core set of strategic fabrics on hand at our factories. And what happens is we unexpectedly exceed our predicted demand for specific style.

John Horten:
We can quickly replenish that back into stock because the fabric is there and ready to go. So, the side benefit of this is that we can be a little bit more cautious with our initial buys and avoid some of those overstock issues. And if we do run into a situation where a specific style is not selling as well as we expected, well, we can use that fabric and cut it into a different silhouette within that same fabric. So, this is just one tool that we’re doing to kind of avoid those overstocks, and kind of try to avoid that heavy markdown cadence that a lot of retailers are in.

Julia Raymond:
Well, that’s interesting. Fabric platforming is what you called. Yeah?

John Horten:
Yes.

Julia Raymond:
Fabric platforming. And how do you choose those strategic fabrics? Is it based on the items that sell well in store historically?

John Horten:
Yeah, so it’s a cross functional effort with our merchandising design and production teams. At the end of the day, what we want is we want a single fabric that our customers love, but that can be used across multiple different styles. So we do look kind of into our path to figure out what are those core fabrics that have been successful. And then our design team works to find multiple ways that we can use that fabric to bring it to the customers.

Julia Raymond:
That makes sense. So, kind of multipurpose fabrics.

John Horten:
Exactly.

Julia Raymond:
Excellent. And what are some best practices when you’re sourcing suppliers, or just in your role that you’ve had to apply with the increasing demands of customers and just how fast paced retail is right now?

John Horten:
Yeah. Our goal at Draper is really to build longterm collaborative partnerships with a handful of suppliers. So these partners for us, they form a close knit network of vendors that we hope can grow and prosper alongside us. When looking at new suppliers, there’s definitely a range of quantitative and qualitative factors that we assess.

John Horten:
First off, suppliers that don’t meet our compliance and sustainability standards, those are just a nonstarter. But from there we like to analyze samples that those suppliers will make for us, and we look at those for cost capability, and of course the quality of the workmanship. We also want to get a better understanding of the factories capacity, any minimum order constraints, as well as how important we are to their business. And then finally, I like to assess their communication ability. I want to know that they’re easy to work with, and someone that we can envision ourselves working with for many years.

Julia Raymond:
Certainly. So you actually probably physically go and meet them in person and tour the facilities, it sounds like?

John Horten:
Yes, we do that. As well, we’re seeing a lot of suppliers now that have US-based offices, which is great. So there’s point of contact here that we can work with in our time zone. They can even come by our office to handle it for samples or to work through issues with us face to face. So that definitely saves time and makes that relationship even better when you have that personal one-on-one connection.

Julia Raymond:
So I came across something, and I saw that you guys were one of the first at Draper James to launch cardboard free returns. We see that all the time we’re getting Amazon packages. They come in one day, but you get four boxes. And it’s like, “Wow, that could have been in one box. What a waste.” So can you tell me a little bit about the inspiration to start this program and how customers can get involved?

John Horten:
Yeah. It’s a part time job, breaking down all those boxes, getting it ready for recycling. So we definitely wanted to listen to our customers on this, and we learned in general that returns were a frustration and a pain point for them. So we made the decision to outsource our returns process. We’re working with a company called Happy Returns. So far, the process has really been a win-win for both Draper and our customers. Returns are fast and easy for them.

John Horten:
They can put them in the mail, they can drop them at one of our stores, or they can drop them at one of over 400 Happy Return locations. And those sit in companies like Paper Source. And you can just walk in there, no box, no paperwork, and drop your return off and your refund is instantly credit to you. So it’s really producing a lot of the friction in the process.

John Horten:
So when Happy Returns came to us and they wanted to talk about cardboard free returns, it’s definitely something that we were super excited about. The way that works is for those products that are dropped off at the Happy Return bars, those are aggregated and sent in reusable packaging back to our warehouse. And then that reusable packaging is then eventually sent back to the return bars, so it’s kind of a more sustainable method to help reduce our overall carbon footprint.

Julia Raymond:
Amazing. It sounds like from start to finish it’s a low carbon footprint, because the reusable packaging and aggregating the products instead of sending them one by one.

John Horten:
Exactly. Yes. We found that our customers really like to do those returns in person, which is great. That’s definitely an added benefit for everyone to have kind of one less package going individually by the mail back to our warehouse.

Julia Raymond:
Exactly. Love that. Well, it’s been great to have you on the show. So I want to close out with just one last question, and it’s about the future. So John, when you’re looking to 2020, what are you most excited about? Whether it’s the retail industry, or just with Draper James specifically.

John Horten:
All right. Yeah. If we look to 2020, there’s definitely a lot to be excited about, both for Draper James and for kind of retail as a whole. I think we’ve seen that there’s a lot of opportunity for companies that are still in their early growth stages to continue that growth, and to continue to take market share from some of the larger players. For us specifically, I’m excited about the continued opportunity for brick and mortar expansion.

John Horten:
I love getting the chance to build out our stores and to give customers in those areas. A chance to really experience the brand as a whole in person. If you haven’t been to one of our stores, you definitely need to check one out. They’re fantastic, designed to feel like you were walking into Reese’s living room. So they’re warm, they’re inviting. And of course, full of beautiful product. So, excited to find more ways for us to engage in person, and of course, in online with a new set of customers.

Julia Raymond:
I love that, and I definitely am looking forward to visiting a store in person. The pictures you’ve posted and the other ones I’ve seen look beautiful.

John Horten:
Great.

Julia Raymond:
I loved having you on the show. Thanks for joining today.

John Horten:
Yeah. Thanks so much for having me.