Tag: It's how we play the game

The story of how Dick’s Sporting Goods grew from a modest store in New York to one of the premier retail chains in the country is a fascinating page-turner.

Ed Stack is the son of Richard “Dick” Stack, who founded Dick’s Sporting Goods in Binghamton, New York in 1948. By the time Ed hit teenage years, Dick forced him to work part-time at the store because it was the family business and what put food on the table. Ed hated the work because it stripped him of valuable time to play baseball. Ed’s misery stopped when he went to college with the dream of becoming a lawyer. A few jobs here and there happened. One thing led to the next and suddenly Ed found himself back working at his father’s business. Ed applied what he learned while away from his father and improved the business. As Dick’s health declined, Ed gradually took over the company and ran the show. Father and son had vastly different opinions on how the company should operate. Eventually, Ed and his sister Kim bought out his father to gain total control.

The gripping account of Dick’s Sporting Goods’ transformation over the years includes valuable lessons to entrepreneurs, business leaders and students.

• The business twice came close to bankruptcy, all because of the ambition to grow too big too fast. Through the near-death experience of Dick’s, readers can see that hyper growth is usually the rope that business leaders use to hang themselves. Grow too fast without supporting systems, especially cash flow management, and you may find yourself insolvent
• To Ed, it’s very important 1/ walk the store and talk to the customer; 2/ pay attention to competitors and market trends; 3/ grow quietly under the radar as much as possible to avoid competition; and 4/ constantly change to stay competitive

I particularly like the chapters in which he walked the audience through the decision to stop selling guns at Dick’s. The ban on firearms sale hurt the company’s bottom line, but it was a brave decision. Not every CEO prioritizes doing the right thing over pleasing investors and their personal interests. Ed did that and as someone who advocates for gun control, I am thankful to him for doing that. I hope that the example that Dick’s Sporting Goods shows can inspire other leaders to take a stand and do the right thing.

If you look for a nice business read, I’ll recommend “It’s how we play the game“. And here are a few highlights:

On the danger of growing too fast

“We did. Our available cash dwindled. Store sales couldn’t come in big or fast enough to keep up with our needs. Another indication that our operations were out of whack: our shrink numbers rose to 2 percent of sales, double what’s usually regarded in the industry as acceptable. All of these issues were directly tied to our expanding too fast. This wasn’t measured growth. In 1996, all of these factors converged simultaneously: We had no money and no prospect of getting more—we were up against our credit limit. We had too much cash tied up in too much inventory and no way to relieve that situation besides slashing costs and taking losses on our merchandise. We were crushed by high operating and capital costs that we’d brought on ourselves. We used primitive systems incapable of helping us run so large a company. And we were spread across too wide an area, without the logistics in place to keep merchandise moving smoothly.”

“Not only did we open too many stores too quickly, we opened bigger stores—we introduced a new Dick’s prototype that measured a whopping sixty thousand square feet. The architecture we put into these cathedrals cost more to build—fancy floors, which were just plain stupid, because nobody noticed. Expensive fixtures. Design details that added up fast. The changes probably boosted our overhead with no return on our investment and did nothing to drive additional sales.

We located them in markets where we really didn’t know what we were doing; in one year we opened three stores in Cincinnati, three in Philadelphia, and three in Baltimore, all cities in which we had little on-the-ground history or insight. We didn’t take time to understand the hunting and fishing business there. What did we know about the catfish culture in Cincinnati, or fishing for rockfish and blue crab in the Chesapeake Bay? Not much. That showed in low sales volumes. At the same time, we made other mistakes. These stores were overinventoried and cost more to run, market, and supply.”

Business lessons for retailers

“He considered it a disservice to that shopper to have him leave the store without everything he needed to get the best possible results from his purchase. He roamed the floor through the day, visiting with customers, making sure that each one felt, every minute he was in the store, that he was looked after. The moment the front door opened, we were to be on hand to greet the guy walking in and be ready to answer his questions or show him around. Treat him as you would a guest at your house, I remember him telling me: “If you had a visitor there, you wouldn’t keep doing what you’re doing. You’d drop it to say hello and make him feel at home.”

That was a lesson that stayed with me. You can have the greatest merchandise in town, but if you don’t throw your energy into customer service, you won’t keep people coming back. To this day, nothing annoys me more than to walk into a store unacknowledged. I hate having to roam the aisles looking for help. At 345 Court Street, that never happened.”

“And it reinforced a truth that has been demonstrated to me time and again, which is that the moment a business stops evolving, the moment its leaders sit back and think, Everything’s good, that’s when it starts to fail. Maybe that’s especially true for retail. Change has to be a constant. Improvement can never end. You have to stay fresh to your customers, and to do that you have to be perpetually rethinking everything you do, questioning your every assumption. You have to be willing to sometimes blow up everything in the name of staying focused, and exciting, and better—and ahead of your competition.”

“One of the principles that guided Walton was to grow his business quietly, unobtrusively, to stay below the radar so that his competition didn’t notice him. He did it by expanding his geographic reach in concentric circles, radiating out from his launching point in tiny Bentonville. We replicated Sam Walton’s strategy. From Binghamton, our expansion had come in small, outward steps—to Syracuse, then Rochester, then Buffalo. From there we moved in the early nineties to Albany, New York, about 130 miles northeast of Binghamton; put a second store in Buffalo; then opened another ninety miles to the southwest in Erie, Pennsylvania. After that we slid eastward to Springfield, Massachusetts, eighty miles from Albany, and Hartford, Connecticut, twenty-five miles south of Springfield. These were small or medium-sized markets, which gave us a shot at customers without having to worry too much about a bigger, better-capitalized competitor moving in on us.”

“The key to everything I’ve talked about—the way the stores looked, the products we sold, the booming sales—was that our leadership team kept visiting our stores. I’d spend two days a week, three weeks a month, out in the field. I’d fly into a city such as Charlotte, where we had several stores, and all the store managers would meet me and our team from Pittsburgh at one store. We’d walk the aisles and talk to them. More important, we’d listen. I wasn’t there to critique their operations.

I wanted them to tell me what their customers were saying—about the store, about particular products they liked or didn’t like, about what they wanted but we didn’t have. I wanted these managers to tell me what we were doing right and, more urgently, what we were screwing up. The longer these visits went on, the more enthusiastic the managers and their staffs were about talking, because it became clear that we sincerely wanted to know what they thought. The insight they offered was the difference for Dick’s. It kept us relevant to our customers, and it kept us alert to shifting trends in popular taste.

“I’ll give you an example of how one of these visits changed our business. In 1997, a group of us went to Baltimore to walk through our stores there. Our manager in Columbia was a guy named John Jones. I asked him how things were going, and he told me that kids were coming into the store all the time, asking for this new product, a compression base layer that football players had started wearing under their pads. ”

Life lessons

“When you dig down into the roots of success, it has little to do with brilliance. I’ve known plenty of geniuses who didn’t amount to much, and quite a few numbskulls who’ve done well. We all have. Life teaches that success also has little to do with talent—we’ve all met really talented, creative people who can’t translate that talent into a successful career. No, success is all about what’s inside you, and the most important element of success is simple perseverance—often tedious, sometimes soul crushing, but the great differentiator in whether smarts, talent, and education add up to something bigger. Great musicians practice to perfection. Engineers refine and test, refine and test again. Athletes never stop training. And my dad, knocked on his ass, got up, dusted himself off, and got back in the fight”

“And a thought came to me, in my father’s voice—a memory decades old, from an exchange otherwise forgotten—delivered in his signature tough-guy style: “If you start something, you finish it. End of conversation.” I might have just as easily conjured another voice, my gramp’s: “If you tee off on number one, you putt out on eighteen.”

“Once seated at a table, he and I exchanged pleasantries for a few minutes before he reiterated that Callaway wanted to open us up. But before we do, he said, I have to ask you a question. Who were you bootlegging the product from?

“Bruce,” I said, “I can’t tell you that.” “Well, if you don’t tell me,” he shot back, “we won’t open you up.”

“Bruce, I’m not going to tell you,” I said. “I don’t think it’s our job to police your brand, and I’m not going to tell you.”

I could see he was getting angry. “If you don’t tell me,” he said again, “we won’t open you up.” It was pretty clear to me by now that getting the names of the people selling us product was the real reason I was there. I doubted he ever planned to bring us aboard.

I looked him in the eye. “Bruce, my mother taught me two things, growing up. Number one, you go to church on Sunday. And number two, you don’t rat on your friends. I’m not going to tell you.”
Bruce said it was a shame that we wouldn’t be doing business.

“I said that I guessed the meeting was over.”