Check out the full transcript below.

Richie: [00:00:02] Hey, it’s Richie Siegel the founder of Loose Threads. I hope you, your family and your team are hanging in there during these challenging times.  

Richie: [00:00:08] This is Offense vs Defense where we talk with leaders across the consumer economy about how they’re managing their business, balancing playing offense with playing defense. Defense is about cutting back as much as possible to preserve cash. Offense means making calculated investments and taking risks that put your company in a stronger position. Just like in sports, a team can’t win by only playing defense. And the companies that can weather this storm and make opportunistic investments will emerge in a stronger position than where they entered. 

Richie: This week we spoke with Ryan Babenzien, CEO of GREATS, which makes timeless sneakers for men and women. Since GREATS is now part of Steve Martin, the company was in a much stronger position to weather the pandemic, but it hasn’t been without its challenges. Ryan and I spoke about how the initiative Brands for Better helped anchor his early response, how the brand is doubling down on digital at the expense of wholesale and retail and where the brand goes from here in this new world. 

Here’s how Ryan and his team have navigated the crisis so far.  

Ryan: [00:01:05] Well, the first reaction was like, how do we get the team safe? I had been getting a bunch of intel from a startup that was in the medical telemedicine business here in New York. He was like, hey, I just got off the phone with 80 doctors that I employ. And they’re telling me that this is a disaster about to happen. They told us to work from home if we could. And I just took that and said, fuck it, we’re doing it, too. 

Richie: And when is this? 

Ryan: This was like a week before America started to unravel. So early March. And my first immediate reaction risk was to save the team. The company is built this way. We all have laptops. We use slack. We already use Zoom. We were doing these things like this anyway. We didn’t have to work from home policy we have now, but it was easy for us to do. And then it was Ok, the team is safe and then I just sort of looked at the world and I’m like, wow. Our revenue fell off a cliff, as it did everybody. 

Ryan: The stock market at that point was hitting triggers twice a day. It was ugly. It took me a few days, maybe a week to sort of come up with a way of like, what are we going to do to get out of this. Out of my own sadness and go forward. Brands for Better got put together and we jumped heavily into that. And we just wanted to get involved and do good for the community. That was it. I really wasn’t thinking about revenue. I wasn’t thinking about growth, I was thinking about survival and contribution, which is very different than what I normally think of. And we just started to inch forward.  

Richie: [00:02:45] So you’re part of Steve Madden now, is that right? 

Ryan: Yeah. 

Richie: How did that change how you both processed and responded versus if you were still an independent company?  

Ryan: [00:02:55] Well, frankly, in this environment, this is the greatest position we could possibly be. And unfortunately, there’s just a lot of digital natives that are just not going to make it. We didn’t have to think about this sort of cash component. Look, we’ve made our own, Steve Madden has their own challenges, which are, as you can imagine, a mostly wholesale business, sort of very real. And we have a different set of challenges. 

Ryan: We were sort of expanding our wholesale business, but that’s over. That is literally shelved. But we didn’t have the considerations of, like raising capital, and that allowed us to focus on what we do to get through this. But we made our own cuts. The stores, the entire retail team was furloughed. We even furloughed some people in the office because we just didn’t need it. And some of that will be permanent. But for GREATS that may have even saved us and in a way we’re in a better position than most. 

Ryan: And now, as a sort of normalization starts to show itself, I just think we’re in the best position we’ve ever been in as a brand ever, because I think this is going to now be a digital land grab. And what was going to happen over five years is now happening in five months. And that’s what we’ve always believed in. That’s what we built the business for. That’s our DNA. And even though we were going to do more wholesale and open some stores, that was still a very small percentage of our business. It was complementary to our core business, which is digital. And now we’re just gonna get there faster and we have the resources to do that. And I think that’s the big differentiator. 

Ryan: There’s going to be people trying to start this way and it’s gonna be fairly hard. And there will be some people trying to shift into this. And that’s gonna be really hard. And as that giant window is open, we’re flying right through. And what that means is we’ve had our two biggest revenue days of the year in the last six weeks.  

Richie: [00:04:48] Have you seen that this is the new holiday? Because somebody I’ve talked to, said they’re doing more than they were doing during holiday right now.

Ryan: [00:04:56] No, we’re not. We’ve re-done our forecasts and it’s not going to be what we thought it was going to be this year. But categorically, there are some that have just seen tremendous growth. Our category is like you’re not really going anywhere, you’re not really going to rush out and buy sneakers. But people still are. And now they’re starting to go back out and they can’t go to stores. There’s a lot of reasons why digital native brands right now are going to win. One, ad rates have just plummeted across the board, whether it’s Facebook, Instagram, television.  

Richie: [00:05:29] Have you been investing more as a result of that? 

Ryan: [00:05:31] We’re going to. This is sort of that window where the digital-land-grab is like digitally-native brands got a challenge when ad rates got too expensive, which caused acquisition costs to go up. Well, that just got reset. That’s one opportunity. Then the other is people are still going to buy things, except they are not going to do it in all these stores that are going to be at 50% occupancy or closing or whatever sort of restructure happens there. So that’s a double whammy for digital. And I really believe we’re going to be able to sort of capture A lot of opportunities there. And there are signals that are showing that, quantifiable data that says that. So this crisis is horrible. I would have never wished for this as a competitive advantage if I wrote a wish list. But we’re still a business and we’re going to grow it.  

Richie: [00:06:21] Where have you been making investments as other people have been cutting back?  

Ryan: [00:06:29] These are all things that were under way anyway. We were rebuilding our Website. And that started in January and it went live yesterday. Every two years we do this. And two years in Internet-time is like a decade. So we did that and we’re investing more in people, a.k.a. influencers, whatever you want to call it. We’re investing more in other channels and we’ve never done TV, but we very well will because, one, the rates have gotten incredibly low. And two, it’s a really measurable channel, like it’s not terrestrial TV and the way people used to think of it, it’s smart. TV is with IP addresses that you can measure. So we like that.  

Richie: [00:07:23] As you sit here now, 10 weeks later, what do you wish you knew then that you know now?  

Ryan: [00:07:31] I thought it was going to be two years. I just thought that information was overly optimistic for the most part. And no, I mean, we didn’t wait. Who said this? Tim Armstrong. I stole the code of his, he said, “great managers manage the known and great leaders manage the unknown.” That was like two weeks before COVID at was just sticking in my mind. And then all of a sudden COVID happened. And it was about making decisions, really, really hard ones really quickly, with partial information. We did that, like I’m actually quite proud. Like I was actually calling my friends and be like, dude, shut down your office. If you get it wrong, you work from home for a week. If you get it right, you save somebody from dying. Think of it that way. And like when you put it in that context, it’s fucking choice becomes really simple. It’s a hard situation, easy choice.  

Richie: [00:08:24] How did you handle customer communication? Like, what are we disclosing? How does that differ what you normally do? What did you want them to feel and think as everyone was going through this?  

Ryan: [00:08:33] Well, we didn’t want to be let go by a bunch of shoes. We turned off all marketing. One hundred percent, zero prospecting dollars were being spent. Brand better came to be. And this is sort of like if we didn’t have Brand Better our last eight weeks don’t look like it did. So, like, it’s not meaningful to me personally and to the brand because it actually focused our purpose. 

Ryan: We are like, OK, I don’t want to try to market sneakers right now. Now I want to market sneakers because the more we sell, the more we get to donate to City Harvest like that became the mission. Sell shoes to give away money to people that need it. That’s what we did. We invested everything in that. And we ran promotions. We invested in ads. We communicated every which way we could and still are because it still works and people have responded to it.  

Richie: [00:09:31] Do you plan to continue that premise as life gets back to normal over time? Because from my understanding, there wasn’t necessarily a big social cause as part of the brand. Is that fair to say previously?  

Ryan: [00:09:40] Not at that elevated level. Yes.  

Richie: [00:09:43] Do you think that’s something that changes going forward? Do you think that’s just this moment in time, like as I made you reassess what that can do, both good in the world and for the business?  

Ryan: [00:09:51] Yeah. Look, our purpose of premium quality responsibly made that is what the new site tells you. There was a whole marketing plan around that has been sort of paused. But the sustainability or the purpose and the responsibility part is there, fully baked. Now we’re sort of layering this social component to it. So, yeah, that will be part of our brand forever. And we’ve done this, like we’ve done these things ad hoc, like for three years We’ve worked with Robinhood organization.

Ryan:  In February 2017, we donated a week’s worth of profits to ACLU when the president put a travel ban on Muslims, which we totally disagreed with as a brand. And I wrote a big blog post about it and made that commitment to like that idea is not new to greats like this has been going on since we founded. It just didn’t have this sort of total bow wrapped around it. And now it does. Which is great. That’s part of a brand’s evolution anyway. I could just start taking these things that were always there and then putting them all together and then it takes in and coalesces.  

Richie: [00:10:59] You mentioned before shelving wholesale plans, retail, etc. How are you thinking about the non-digital channels now and I guess what’s changed vs. pre-COVID? 

Ryan: [00:11:08] Well, we are just about to open our second store in Brooklyn, fully built, soft launched, open for about twelve days, and then psssh. Look in the immediate and let’s just call out the rest of the year. I just don’t think retail exists as retail. There can still be a box and it can provide function, but it’ll be slanted towards the digital part of it as like a pickup service or a drop off. Which is already happening and was already happening in retail. And now this is accelerated. So the way we’re thinking about it is the way we’ve been thinking about it. 

Ryan: We’re just like, oh, shit, we just jumped five years forward. So that’s how we’re thinking about it. What I think that means for GREATS is there will be no other stores this year, for sure. Even though we had planned some, we may even get rid of one because it’s a market issue. So if I had a store in Texas, it would not be as impacted as the store in Soho. And that’s not a GREATS issue. That’s a Soho versus Austin issue. And I’m looking at Soho and I’m saying to myself, so who is a tourist driven shopping neighborhood? People from the Tri-State area go there on weekends. They’re not doing that. And I don’t think they’re ever going to do that again, ever. That’s radical to say. But I just don’t see it happening. So, like, why do we need a store in Soho? We don’t. But that’s how we’re thinking about retail. Like, it’s gonna be an even smaller part of our business than it previously was. Wholesale, we had spent eight months opening a few select accounts. They’re all gone. Every one of those orders is evaporated, canceled. They’re in trouble. 

Ryan: So we’re not spending any energy there, you know, like we’re just going to go back to what we were doing. And that’s focusing on the digital. And I think the time is right to do that. I think the opportunity for us today is as good or maybe even better than it was six years ago when we were the first digitally-native sneaker brand. Things have changed so rapidly in the last six weeks and with favorable tailwinds for brands like us.  

Richie: [00:13:31] The question our retail store location is really interesting because I was thinking about this in terms of warehouses also like if you have a warehouse in a blue state, which likely is going to take a much more conservative approach to shelter-in-place and stay-at-home, the chance that you’re not able to ship fulfill is very real versus if you’re in a red state like Texas, the chances are going to get open or stay open is a lot higher. 

Richie: Are you thinking about the geopolitical implications now?  Of where fulfillment goes or where the future retailer goes?

Ryan: [00:14:04] I’m not spending a lot of time on it because even our own distribution, which is here in the tristate area, like it’s owned and operated by the company and it hasn’t shut down, it got all the safety of tools put in. But like it’s functioning and it’s been functioning and we’re in a hot zone, if you will. Right. I know I haven’t thought about it because I didn’t have to. 

Ryan: Most of us think about things when we’re forced to do that. Like we do want to overcomplicate it, it is already complicated. Logistics was not an issue, supply chain, that’s another issue. Italy shut down like I was like, OK, like, we’ve got to figure this out. Like, how are we going to do this? They’re back open and running at partial capacity. And thankfully, we’re in a market where we’re making the market like nobody else is calling their factory. We’re like, hey, I need stuff. So we don’t have a competitor over there. Taken a factory inventory even though they’re operating at 40 percent capacity. So that will probably exist for quite a while.  

Richie: [00:15:07] What about when it comes to newness? You talked about a new website, has this made you rethink launching products in this environment or even into the future? Supply chain delays, a ricochet into holiday and so forth, potentially. How do you think about that part?  

Ryan: [00:15:21] Again, this is just accelerating what we were already doing. So we had already developed a bunch of new stuff for spring and summer, and that’s currently not available by GREATS and that’s flowing in. So it’ll look like a new thing. The one thing we’re going to make that we never considered is house slippers. We just think people are gonna be home for forever and they’re just going to want something that will be an opportunistic category expansion. We’re gonna definitely play around with masks. You know, we just think we can make fun of cool fabrics and provide what is essentially an accessory that you will likely need for a very long time. 

Ryan: Like until there’s a. Vaccine. And even when there is a vaccine, I think it goes into COVID season every year.  Like any other sort of flu, that you just protect yourself.

Richie: Has the crisis changed anything from your own leadership style? Do you feel more optimistic or pessimistic when it comes to how the world changed around you? Or do you feel like you believe you control less than you did before? Has it changed at all?  

Ryan: [00:16:31] What’s changed for me is more tactical. I was one of those guys that just sort of overvalued, admittedly. Now I know I was wrong. As I know, working in an office and being face to face. It’s just the best way to get shit done. And I was 100 percent wrong about that. Missed it, didn’t really value work from anywhere because work from home sounds like prison. It’s not. It’s not great terminology because you don’t have to be locked in your bedroom or your second office. You need to be productive where you’re comfortable and feel good about working. And I think that’s part of the where we’re going. But to answer your question like that changed me a lot. I just realized, like, we had all these tools, we were using them not for their capacity. We’re forced to use it to their capacity. All of a sudden, my team actually gets better, tighter, more productive with less, in chaos, they’re happier for the most part, because, like, they’re not happy about the crisis, but they know that the company is thinking of their health first. They trust me. That’s changed. I’m a little bit different because of that.  

Richie: [00:17:48] Have there been any other assumptions or core assumptions pre this whole situation that it is either challenging or made you think differently about?  

Ryan: [00:17:56] Yeah, I’m going to trademark this phrase. I call it paycology, which is like the psychology of payment. This is unrelated to COVID, but it is something that I think about all the time based on quantifiable data that we have around behavior, around price and sales. And it’s a frustrating thing for me to see the way consumers behave when they are triggered with a sale, because it’s actually not the price that gets them to buy. It’s the perception that sale drives. And this crisis has sort of forced us to do some things that we don’t normally do. We went on a twenty five percent promotion in April, which is greater than our Black Friday sale. Twenty five percent off is like our maxed out we’re going on sale. 

Ryan: And as I described it to my team, like, what about brand? Look, guys, who the fuck are we? The world is at 70 percent off from Bergdorfs to Nike. So. Twenty five percent off as they know, full price right now. Like, you just have to embrace the sport and understand the market in its totality, not just like our own little bubble that we think about brand equity and what it means. And it’s impossible to quantify. And sales eroding like these are all emotional thoughts, not practical, but it is a real behavior that we can manipulate a transaction with. So I spent a lot of time thinking about that, but that’s not COVID related.  

Richie: [00:19:29] Well, kind of, though. Do you think you’ll do more now than in the future? Because it’s interesting from a brand perspective on value, your original proposition was like we already figured out, right? That’s why our prices is our price. 

Richie:  Do you see that piece changing now? And you’re going to do more of that?  

Ryan: [00:19:43] It’s not so much about price as it is about how do we get somebody to get a pair of shoes in their hand and try them on in a non retail world? Free shipping, sales, trust, brand equity. Right. Those are all things that drive that decision. And we started testing this tool that basically allows you to try it at home for free for a week. And it was incredible. We tested it for two weeks. We just updated our site. We launched a new site yesterday. So the reason it’s not on there is  I needed to get the site launched.

Ryan: But in two weeks of testing it, it was shocking, to our surprise of how successful it was. So I think the forward world for us is like we can convert a customer as long as they can actually get this thing on their foot. Like, our conversion rate is phenomenal when we get somebody to try it. And we’re focusing on that because I don’t think retail is coming back in the way that retail was built before COVID. It’ll be a pickup service. It will provide services, but it’s not browsing through stores with lots of people trying things on. And that’s okay. We still have the barrier though. How we get this in front of this many people and not in front of digitally, but like physically. And try now is one of those tools that may be sort of another bridge towards that. There’ll be more. I don’t know what they are yet. They’re not even developed yet. But that’s the sort of world we look towards.  

Richie: [00:21:19] Yeah. So it’s more like in terms of how you adapt the experience to convey that than it is just slapping a discount percentage on items over and over.  

Ryan: [00:21:27] Yeah. Because I don’t think I have to discount if I can get somebody to just try it on. We’re really well-priced like our Italian made shoe is the number one seller we’ve had forever. And it’s really value-sharp price. It’s very good. It’s friction. It’s not pricing. 

Ryan: But the friction to get them to see that on this computer or their mobile phone is real because conversion in retail for us was close to 50%. Like 50% of people walk in the door barter. We didn’t have as much traffic as we would have liked, but that’s the number. That is not the number on line. So, you know, how do we just get people to try? We’re focused on them. We think it’s going to work and we think we’ll win when we figure it out.  

Richie: [00:22:11] What about higher touch things, like client telling and customer texting and more one-on-one selling versus one-to-many selling?

Ryan: [00:22:20] The reason retail was so good at that when it was good is because you had experience with the product and were knowledgeable and a salesperson. But those two things are what made retail the reason you went to the place you got some guidance, you got some input. You got some knowledge base. So guess client telling tools or something that will for us will be meaningful. We’re using and always have for at least four, four years. That’s a massive move. That’s gonna be our world. You’ll be talking to a salesperson, if you will, through text, maybe even Zoom. You’ll be like this,  “Hey, guys, I see you wanted black, gray and brown. Here are new styles” and they’ll point the phone there. You’ll make a decision on what you want to try on at home, for free. We’ll get them to you, keep what you want. That’s not new. That’s actually not new. But that would become the norm.

Richie: [00:23:21] What are you spending your time on now? Where is your head at in this kind of time in the next coming weeks? 

Ryan: [00:23:30] Because we are already underway building the website, that’s a big project. It’s a 16-week undertaking. My head of marketing sort of ran point on it, but I was involved in that thing every step of the way. I’ve just got a lot of context on it. So I wanted to make sure we got that right and we really did. I’m super thrilled with that. And then, of course product, we were well on our way to, like, having a completely different merchandising mix. But that got delayed by six, seven weeks. But that’s back up and running. So now I’m spending time with it’s sort of like that’s how it goes. It’s like you’re like this thing, you spend all your time and then shift over to this thing. We were going to go international, that’s sort of now, if I really believe our opportunities to focus on the digital growth that we have domestically and we need to make sure we get that right for the rest of the year. And then everything else can sort of go back to what we were planning.  But I have a new found sort of energy about the opportunity digitally native brands got fucking slaughtered for the last couple of years when we came out. 

Ryan: We were probably the last brand to sort of come into the market when it was like had some glitter on it. Yeah and after that it was over. Facebook prices got too expensive. The whole market realized, oh my God. Like, you can’t acquire customers at a reasonable rate. D2C doesn’t work. And then COVID happened. And now you’ve got the complete opposite. 

Ryan: If you’re a wholesale brand, where are you. Right. If that’s the majority of your business, you couldn’t possibly shift your digital growth fast enough to absorb the wholesale losses. And there’s a lot of brands like that. There are brands that are right in our line of sight that I’m going to just go after it like there’s copycats that came after me, I’m taking their business.  And there are the guys that are 10 years older than me, and I’m going to take some of their business and I’m OK with that. 

Richie: What’s on the horizon that you’re excited about? Beyond the world getting better and healthier.

Ryan: [00:25:39] Well, I think that these behavior shifts have been happening. It’s just accelerating what was happening and that’s not necessarily a bad thing. I think the causation of it is bad, but the results of it won’t be. And I’m hopeful that this sort of aligns with what our brand is. We say it a lot. Buy better, buy less. I’m hopeful that consumers say, holy shit, I didn’t need all of that stuff, I didn’t need to go sort of waste the amount of time I did as I like shopping for entertainment purposes. And I hope the consumer just embraces that and understands that, like, happiness is not equated to amount of stuff. It will force brands to behave better. 

Ryan: People focus on the environment. They’ll get credit now. It will shift the whole society. There’s signals of that, it’s a boom. You got cancer, stop smoking, Boom. Stop eating cheeseburgers everyday like that. It’s unfortunate. Why we’re now going to change as an industry, but the result will be better for it. So I’m super hopeful, man. Like I said, it aligns with us as a brand. That’s not new. And I hope the consumer becomes more responsible and not just consumption. Buy the best thing you can with the money you have. And don’t worry about trying to have more of the same thing. That’s an old school thing. If you think about your grandparents, like they lived in a really satisfied way,  they didn’t need 10 pairs of dress shoes. You needed one.  

Ryan: [00:27:24] Yeah. It’ll be real interesting to see, like what this does to all the fast fashion also, which was arguably the largest proponent of more, more, more.  

Ryan:[00:27:33] But you’re seeing the impact of that. They’re being economically hurt. They’re in trouble. 

Richie: Thank you so much for doing this.