The novel coronavirus has had an impact on nearly every aspect of our daily lives — and the same holds true for retail. John Riddle, president and CEO of Howard’s, shares how the Southern California retailer has adjusted to this “new normal.”
Rob Stott: All right. We are back now on the Independent Thinking podcast and a right now catching up with someone who, it’s been a while since we talked John Riddle, but it’s nice to reconnect two guys that were in different spaces the last time that you and I were chatting about retail and now here we are coming back together for the Independent Thinking podcast. So appreciate you taking the time.
John Riddle: Thanks a lot, Rob. Glad to be on the Independent Thinking podcast and to be with you and as you might guess, good to always reconnect with a fellow Pennsylvanian and somebody that benefits from those great Pennsylvania public schools.
Rob Stott: Oh yeah, absolutely. No, it’s a good time always, you know, the hometown stuff. I got to throw this out there now that you mentioned that I was, you mentioned that you were from York, were you a public school kid?
John Riddle: I was, a public school system in a town called Hanover, which is famous in our neck of the woods, Rob, for Utz potato chips and Snyder’s pretzels. And a long time ago, a big shoe company called the Hanover Shoe. I grew up in the public school system of Hanover. And I didn’t go too far to college. I went to York College, which was a 1770s early school that was founded by Ben Franklin and did four years there and graduated in 1979, believe it or not. And worked during those four years. I was living on campus, but my dad had two stores in York and so I worked for older brothers of mine while I was in college during my school time there.
Rob Stott: Gotcha. I got the Catholic bug in high school, so I did public school through K through eighth and I don’t know if you, Lasalle College High School rings a bell, but that’s-
John Riddle: Oh, sure it does.
Rob Stott: All right. So that was my high school and then stuck in PA, went out to Duquesne in Pittsburgh. So another Catholic college. But-
John Riddle: Yeah, great school. Pittsburgh’s blessed with three really great schools and I think it’s been one of the factors probably Don from Don’s Appliance and his team could validate this, but it’s been one of the big factors, I think, Pittsburgh has stayed a healthy city because of places like Duquesne and Pitt and Carnegie Mellon sort of keeping that city together.
Rob Stott: Absolutely. And funny fact that I don’t know how many people know this, but those three schools are all on the same road, just about a two miles apart from one … on Forbes Avenue there in Pittsburgh.
John Riddle: That’s right.
Rob Stott: You could drive two miles up and down Forbes and hit all three schools, which is pretty cool.
John Riddle: You bet. And all great schools.
Rob Stott: Yeah. Yeah. So PA, still kicking it but appreciate, like I said, you hopping on. Last time we connected, you had just retired from LG, a wonderful career there. But now president and CEO of Howard’s out on the other side of the country. So how is a California life treating you and what’s been happening since we last talked?
John Riddle: A little bit harder to get to work in the mornings because I carry a surfboard with me in my car, but just Southern California is a great place. I’ve lived out here a couple of times in my career, Rob, so once with Maytag and once with what was a former public Fortune 500 company called Fleetwood, which was a big recreational vehicle and home-builder company. And I was based here for a number of years with both those companies. So always have liked Howard’s. Howard’s has just been a Southern California institution for almost 75 years. Really rooted in the community of the Southern California market and was part of my customer base at Maytag and Phillips Electronics and at LG Electronics. So Howard’s was a big part of my career for probably 20 years or more as part of a customer base.
So I think Howard’s, as I thought about Howard’s over the years, they were distinguished for a lot of the quality they did for customers and customer service. the shopping experiences and the installation and delivery and things that Howard Roach, the founder of the company had built with his team and probably very interesting I think for me and looking at Howard’s was that it’s one of the oldest ESOPs employee-owned companies in the United States. Howard’s became an ESOP in 1976 and that’s around the time that the concept of an ESOP first was launched in America and so that really added, I think, a really interesting part of one of the oldest appliance dealers in the US. And it was sort of 360 for me because my dad started his appliance and TV business in ’46, the same time that Howard Roach did Howard’s, the same year. And when my dad got out of the Army and came home, he launched a dealership in Pennsylvania. And so it’s, although the two businesses are quite a bit different in areas of the country and size and all those kinds of things, very similar routes to growing up in the family business that I grew up in. So I think all those things made it a really interesting thing for me to be a part of.
Rob Stott: No, that’s really awesome. And I know you, I mean you talk about 360, it’s kind of cool coming back to that and seeing that the retail out west and how that can be just sort of different from what you might be used to having grown up in PA. But entering year two now, so I know we talked a little bit before we hopped on about your path to president and CEO there at Howard’s and officially named president and CEO last March, March, 2019. And entering year two, I’m sure you weren’t thinking as you sort of did that strategic planning at the outset that a global pandemic would be sort of in front of you, but I mean how, maybe not specifically for a pandemic, but you think about situations like this and kind of crisis planning, how does that factor into the retail side of things and what you can do sort of in your type of role to prepare to handle a situation like that?
John Riddle: I think a number of things, I think you have to, within a smaller company you have to watch for best practices and things that are unfolding to analyze always, number one, the safety of your organization and the people in your organization and the safety obviously of your contract operators that work hand in hand with your company and your vendors. And also certainly, Rob, for all the customers that you are supported. I think when I came here, Howard’s customer list was around three-quarters of a million households. So when you have that kind of customer base that’s been accumulated over 75 years, you have to take something like COVID-19 and really take it as a serious threat. And I think look at things that you can do to minimize any safety risk.
But secondly, as a smaller company, how do you maintain the health of the organization economically to be able to get through that pandemic and be able to get to the other side of things and survive. So it’s not a situation that anyone’s going to look at as thriving within a crisis. But I do think that within a smaller company that has less scale, certainly maybe less retained earnings or less assets, those kinds of factors, you have to certainly think about what you’re going to do to be able to survive as well.
Rob Stott: Right. Now kind of honing in and looking specifically at this situation, I know, California, I think, it was one of the first states that, through those stay at home orders out there, sort of brought a whole new wrinkle to the kind of challenge that retailers were facing. And I know independence in particular, you guys, I know have a robust website and platform there, but what steps did you take to sort of position yourselves well to not suffer necessarily during a situation like this as these mandates were coming down?
John Riddle: Well, I do think it was quite a bit at an early time. Governor Newsome, the governor of California, I think will score highly when we get through this in my view, because I think he was extremely proactive and navigated in a state that I think the census this year, Rob, will probably list California at 40 million people. So it’s a state that’s bigger than the country of Canada, by far the largest state in the United States. And if you look at Southern California where Howard’s is, probably 24, 25 million people in Southern California. So as you look at metropolitan New York, and I think about all the years that I flew in and out of LaGuardia with LG and seeing a sign that said the 19 million people in New York and the boroughs and Connecticut and New Jersey, this is a larger market. And so that type of change when you have people that are being told to stay home and only under situations where they need essentials to go out and so forth.
We were up against something that really nowhere else in the country had jumped on that early. And I think it was an extremely positive thing in the way that California rolled it out. And most of the city governments in Los Angeles and Orange County and Riverside and San Bernardino, the counties that we operate in, were all pretty aligned on following the support of the governor. So you didn’t have this sort of mixture situation that maybe existed in New York as you look at in New York between the governor’s office and the mayor’s office in New York or what have you. So I think we had some things to our advantage, I think, starting out with, but I think more than anything else, California was very clear from the start that appliance dealerships were essential and that people could not go without their appliances if they failed.
And we know, of course, that you know about 63, 64% of all the appliances purchased in the United States are replacement purchases, that are desperation purchases. And that volume, that 80,000 units a day in the US is a big part of Southern California’s business as well. So we had to stay open somehow for those customers and figure things out. And I think, for us, it really involved two or three things. One was first to really set things in motion from a safety point of view. So all areas of our business in our stores, our headquarters, our customer service department, our supply chain and distribution operation for all of our staff, we instituted almost immediately all the processes that you would do from a standpoint of outfitting the employees with masks and gloves. We hired a firm that specializes in sanitation so that every operation of Howard’s had a daily routine, deep cleaning and then employees did also periodic cleanings within all of their department areas from a sanitization standpoint as well.
So I think all those things and distancing each other, we mapped out our floors in our stores for six-foot distances and educated our staff on how to educate our customers when they came in the stores to be in that six-foot distancing. Our employees last year, we outfitted with iPads and giving them tablets to be able to use, obviously at the time that we did it last year was for other benefits, but this enabled our sales staff to stay within talking range of a customer but do everything from a transactional standpoint with the customer and not have to leave them or walk away or pass by other customers in the store and so forth. And we limited the presence of customers to no more than 10 in our stores at the same time. So I think having those kinds of processes, Rob, were very, very important to us.
We had, in one of our stores, we had an employee come back from a trip from Toronto at the very store start of COVID-19, and he came back into the store on a Saturday. We found out the Toronto and Canada at the time was not mentioned as a high-risk country. Level three was not their designation, but we found out the same day that he returned to work that they had been upgraded and we immediately took the entire staff of that store and had them go out for two weeks.
Rob Stott: Right.
John Riddle: So we acted very quickly whenever we had a situation that might, and this employee had been tested at the airport in Canada from a fever standpoint, felt no symptoms whatsoever. But rather than take any risk, we immediately made that change and we spread staff out and some headquarter staff to cover the store so we did stay open the whole time, but we had the entire staff stay home for two weeks so that we presented every employee in the company a very high road kind of positioning that under any circumstances that we had, we were going to pay for people to stay home and make sure that we safeguarded our customers and our other staff as well. So I think taking those kinds of steps helped us early on and we’ve had just a remarkable, we’ve kept our hours a little bit abbreviated.
We’re open from 10 until eight through the week and then a little bit abbreviated hours on Saturdays and Sundays. But we are open every day and we have had zero issues, Rob, within any of our employees. We’ve not had any employees, and we’ve made it very clear that anyone that felt that they wanted to, could stay home and we would allow them to stay home and so forth and take advantage of the support to stay home. But we’ve had no one do that within our company. I think some of that traces to being an employee-owned company, but I think some of it also traces to being high in their confidence the leadership at Howard’s was taking the right steps to make sure that everyone was guarded and so forth.
We also did something that I think has stayed with us and that is we added compensation to every team member in the company. And we also added compensation to our contract operators that help us in the areas of installation in the home. Our 3PL delivery provider as well, a company called DSI that you’re probably familiar with and so forth. And so we did this working with our contractors as well and all the people that are employed by Howard’s to make sure that they knew that we were going to add extra compensation during this difficult time for making sure that they felt very good, as best as you can about working during a crisis, and it has just gone off without a hitch for us and we’ve had to date no issues with anyone that we’re aware of in the company.
We’ve installed protocols, Rob, with our delivery organization so that every week they have a training meeting of the script that they read when they enter a customer’s home and what they’re going to do. They’re in masks, they’re wearing masks and they’re wearing gloves and so forth. They have sanitization sprays that they use as well in cleaning equipment and so forth. And we really buttoned it up to give high confidence, I think, to both our customers and also our staff that we could still perform deliveries. I think one of the things that’s interesting in this crisis is many of the national big-box competitors have said, well we’ll do curbside delivery. It’s just not going to do very well to do a curbside French door delivery, you know. And just very few customers that you’re going to be able to bring a washer or refrigerator or range or something to the curbside and have them be able to somehow manhandle that into the house and do it effectively and also be able to get rid of the old appliance. So we’ve continued to operate with that sort of desire to be a neighborhood element in Southern California with our customers.
Rob Stott: Ah, that’s awesome. And a lot of what you’re kind of alluding to there is, is sort of something that I was going to ask as kind of a followup in that, the buy-in that you mentioned from employees and getting them all on board with all of these changes, because it’s a lot, I mean, for someone who’s used to coming to work every day and having really a routine for how they either talk to customers or even just operate and be in the store is sort of completely altered by this. And in terms of having to stay apart from coworkers and customers and everything like that and potentially wearing this protective equipment and just a completely different type of working style. So I mean it sounds like you guys had a pretty easy time getting that buy-in and getting employees to really support all these types of changes that you were really forced to make essentially.
John Riddle: We did. And I think it has a lot to do, Rob, with a couple of things. I think one, the things that I described, I think two, within an ESOP like Howard’s, you have a very, very tenured staff in many cases. And so we have a lot of folks that have been here for years and decades with the company. And I think with that you get a feeling of confidence for the people that are younger in their tenure with the company to sort of look up to them, from a leadership standpoint as well. And I think our team has done a great job in that area. The other part of it is, in my view, is leadership during these kinds of crisis times, whether it’s in a business or a sports team or the military or whatever the case might be, I just don’t feel that you can lead from behind.
And so in a headquarters environment here we ran some flexible kind of work from home capabilities and so forth and we spread people out. We had, fortunately, extra space in our headquarters so we took our customer service team and spread them out so that they could properly do social distancing and so forth. But there’s not a day that I have not been here. And I’ve taken pains to make sure that, although I’m wearing safety equipment and a mask and gloves and so forth, I am very visible to the organization. And in a small organization where you have 200 or less people, you’ve got to be able, in my opinion, to do that because it just, it’s not going to set the right note if you say, “Hey, we want to continue to serve our customers and be sort of a landmark in our neighborhoods in Southern California. But by the way, I’m going to work from my place in Huntington Beach.” That’s just that’s not just a great way in my opinion for a leader to conduct things. So it’s been a big part, I think, of us staying together as a team.
Rob Stott: Oh, that’s awesome. And I mean what’s the response been or can you speak to how customers have responded to this and are they still engaging, whether, be it through coming into the store or how is the website performing and stuff like that. Are they still, what kind of feedback have you gotten?
John Riddle: Yeah, I think the website is certainly, we had not obviously planned it, but we had done a lot of work. We launched a new website for Howard’s last May. A lot of work that we had done from the board point of view, we know that we needed to do a lot of work. I think a lot of regional dealers, Rob, as you and I go back and look at the channel, a lot of regional dealers just do not fare well if you look at comparisons amongst the Lowe’s, the Depot’s, the Best Buys and even Sears where I think one of the things that Eddie did do well with Sears was that he really enhanced the loyalty programs and some of the things on the website and it helped Sears. But I think that, in general, many regionals are behind the times on what they’re doing from an eCommerce website standpoint.
So we launched a new website in May. We relaunched again the end of 2019 and we had a lot of work going through that we had worked starting in January with Nationwide on preparation for launching an entire newly designed website this month. And so we had a lot of things moving in the right direction to improve online shopping experiences within Howards.com and a big part of that, that we added to in March when this crisis came up was chat. So being able to provide live chat and to get that sort of personalized one-on-one kind of contact capability in an industry where people oftentimes need some type of consultation, either on dimensions or whatever they’re replacing and so forth. And then this month we launched our Zoom capability as well where we do Zoom calls by appointment with customers in-store, which we’re really excited about as well. And the eCommerce side of our business is up dramatically in March and April as I think most retailers would vouch for, but probably higher for us because this market had no one else really open doing home delivery. There was curbside delivery available. But the big differentiator, I think, for Howard’s connecting the eCommerce and the website experience was that capability of still being able to do home delivery.
Rob Stott: Oh, that’s awesome. And I know, I mean for sure, I know we’ve heard anecdotally from members and others throughout the channel that adding those things like chat and other website enhancements have certainly been of help to them during this time. So it’s always good to hear that those things are coming through and providing value. Are there any other challenges that you’re facing right now that you kind of either didn’t anticipate or just sort of, as you’re looking at kind of your response to this and things you’ve had to do that you’re still sort of trying to get a grasp on or trying to figure out as you manage the situation in this crisis?
John Riddle: Well, I think some of the challenges have been looking at supply, there was an increase by probably a 15 multiplier, Rob, in the area of a product like freezers that we certainly didn’t anticipate. And you got to be careful with those kinds of things, I think as a retailer because those can, that faucet can turn off as quickly as it turned on. But certainly some aspects of supply and some manufacturers, well all manufacturers, have certainly faced similar challenges in their manufacturing facilities. And so we’ve had some manufacturers have plants that have gone down for a couple of weeks because of a COVID scare or COVID instances within their facilities. And so we’ve had to watch supply and make sure that we had product on order and could manage that from a standpoint of our supply chain and be able to see how that’s going to mix out going down the road.
And also as you might guess with companies like Best Buy, particularly with some of the steps that Best Buy took in closing down their stores and having only curbside delivery and so forth. That’s a big part of the business that went a little bit idle. And when they come back online, as we now see, I think Best Buy’s announced that they’re going to start home deliveries at the end of this month again with installing and so forth. And also I think they’re going to look at, by market, as to opening their stores back up and what have you. So as they come back online or any other major retailer comes back online, we have to watch as that could interrupt our Memorial Day or 4th of July inventory or supply as well.
I think also other challenges that we had to face early are just with things that you’re doing with keeping spirits as high as you can with staff and the combination of problems, Rob, that they have at home because all of a sudden you have kids at home and obviously if you’re a parent or even a grandparent and you have kids with you that aren’t normally with you or they’re in school and so forth, how do you manage that from a standpoint of your work schedule and how do you deal with that?
I think trying to also look at things like PPP and other elements of the Cares Act and the government’s support. How do you get set up with your bank to make sure, and Nationwide’s done a nice job of supporting information in that area. From what I can see, probably most of the buying groups, you know have. But I know because I used it with Nationwide, it gave us the capability to be fully educated as a dealer as to how to get ready for the application process and that payroll protection plan. And then local government stuff, we had inspectors coming in some of our locations in Los Angeles County that were a bit more aggressive and maybe not as familiar with what the Governor’s edict was out of Sacramento as an essential retailer. And so we had to sort of be on our toes pretty quickly to help our store operations team if they had an overzealous inspector from one of the county governments or local governments as well. So I think those things are things that you wouldn’t know until you go through something like this crisis on how to handle it.
Rob Stott: Right, right, for sure. And I know, kind of looking to now on the other side of it, as you start to see States that are getting ready at, opinions aside, that are getting ready to open up at this point, I mean I know that that puts a lot of focus now too on the other side of things on how you come out of this. So is that something that you guys have thought about yet, what it looks like on the other side of this or how you sort of get back to whatever business in this new normal is going to look like? How do you start to prepare for something like that?
John Riddle: I think the way that you prepare for it is to look at things in stages. I think that Governor Kemp in Georgia certainly, a lot of conversation going around maybe coming back too fast. And I think here in California, my opinion is that Newsome and his staff in Sacramento are going to be, from what they’ve said a lot more sort of phased in their approach. So I think for us, looking at store hours and staffing, our marketing budgets, what we’re doing from a standpoint of home delivery and installation and our inventory levels from a forecasting standpoint for Memorial Day and then 4th of July. I think all those things are based on a sort of phased-in approach of how we’re going to look at things. We also are looking at what we do for launching, going back into normal, what we’re doing for launching some of the stuff that we’ve done for new store remodels.
We had completed four locations of story remodels in Los Angeles market last year. We have a brand new location in Long Beach that’s coming online in a place called Marina Pacifica, which is a very high end of the Pacific Coast Highway up in the Long Beach area. And obviously working with general contractors and people that you know may have gone totally gone out or dark during this period of the crisis that sort of puts a time crunch on you to try to hit store launch timeframes and so forth. So all those areas I think are things that we would be watching pretty closely planning.
The other part of this is, we’re doing some things in our stores for technology and connectivity for home appliances and consumer electronics. And those areas for us, Rob, have pretty well gone on hold. So we’re looking to get those back on track, but we want to make sure that as we bring them on track, we’re also maintaining things like social distancing and so forth, that we’re not doing things within store kiosks or live product vignettes that have too many people in a location at a time and we’re unable to have safe behaviors.
Rob Stott: That’s crazy. I mean just the way that everyday business is going to be impacted. It’s not something, even as you phase it in, it’s kind of interesting to sort of hear your take on it that it’s clear that it’s going to be this way for a while as far as some of these safety measures are concerned. And I mean maybe some changes permanent in a sense. So it’ll be interesting to see sort of how they come together and what retail looks like on the other side of this. So Mr. John Riddle, I took up a lot of your time more than I know I planned for, but I appreciate you coming on and chatting with us here and offering some really awesome insights into what business is like and how you have been managing through this.
John Riddle: Thank you, Rob, and thanks for everything you’re doing for us with the Independent Thinking podcast. I think back to when I was a kid and how much my dad learned and appreciated from the things that came out of the trade area and the buying group channel to be able to help him as an independent business person to be up to speed and certainly speaking for our channel, we appreciate very much everything that you and your team are doing on these kinds of measures to help share best practices and so forth.
Rob Stott: We appreciate it and hey, I’m just happy we got to reconnect as part of Nationwide and Howard’s here. So this is a lot of fun and something I hope we get to do again in the not too distant future, maybe under different circumstances with no pandemic happening.
John Riddle: Come visit us in Southern California during the wintertime, if you can, Rob.
Rob Stott: I will take you up on that for sure. That was awesome. Thank you.