From Where I Sit: Episode 11 with Ed Stack Transcript

Tom McGee:

Welcome to From Where I Sit, I’m your host, Tom McGee, President and CEO of ICSC, the preeminent membership organization serving the commercial real estate and retail industries. Each episode, I’ll be joined by top experts to explore the trends impacting communities and commerce and the spaces where people shop, dine, work, play and gather.

Joining us today on the latest episode of From Where I Sit is Ed Stack, executive chairman of DICK’S Sporting Goods.

For nearly 40 years, Ed served as the retailer’s chairman and CEO, leading the company through a remarkable period of growth.  This included the evolution of DICK’S from two stores in upstate New York to a Fortune 500 company with more than 850 stores under the DICK’s Sporting Goods umbrella.

Ed, thanks for joining the podcast today.

Ed Stack:

Thanks for having me. I’m looking forward to it.

Tom:

I am so looking forward to this conversation. As I mentioned to you, I'm a sportsaholic and I'm thrilled to talk about the House of Sport, which we'll get to in a moment. But I first just want to talk about you a little bit and the growth of DICK’S. As I mentioned in the introduction, you went from two stores. You have over 850 stores today, Fortune 500 company. I know somebody like you is very driven, very focused for sure. You don't have that kind of success without being, but do you ever just sit back and pinch yourself and go, how did I, mean, my goodness, look at what I accomplished.

Ed:

Well, I don't think I ever look at it as look what I accomplished, but I, in those introspective moments, kind of look back and think what have we and the whole team accomplished? Because it, to build a business like this, it takes a lot of people, it takes a lot of advisors, partners. So it was a lot of people that got it to where it is today. But every once in a while you do look back in those introspective moments and go, boy, it's been a wonderful journey. Now, Tom, that's not to say that there weren't times during this journey that you walk out banging your head against the wall and think, what am I doing? But it's been great overall for sure.

Tom:

I love the reference to team. That's certainly true in building a business. And it's also so important so important as you’re a sporting goods retailer to make references to teams. Your dad started the company with two stores, Dick's Bait and Tackle in upstate New York. You're what you are today. This is an enormous organization. As you reflect a little bit, what do you credit most about the growth? What are some of the key lessons that you learned in this trajectory?

Ed:

Well, I think there's a couple of things. So my father started the business and I bought it when there was two small stores in Binghamton, New York. But the one thing that he always kind of drilled into us is that you need to take care of the customers. They are absolutely the key. Customers today we call athletes. So we serve all athletes. But I learned a lot from him about, you got to take care of those athletes that are walking into the store because they've got a lot of other places that they can go buy. They don't have to come to us.

Another thing that I really did though, is I read everything I could from different leaders and entrepreneurs in the, in the industry, Sam Walton, Jack Welch, John DeLorean, things that people did well, things that got them in trouble. And I think, I never met Sam Walton, but I think Sam Walton was probably the most influential or at least his ideas and philosophy in the business were probably most influential for our success. Now he was really focused on giving the customer a great value and giving them what they want. But also his real estate strategy is something that we employed about just kind of growing in these concentric circles. Some of our competitors kind of jumped all over the country. They have stores in New York and Chicago and LA and Florida, but they didn't really concentrate on an area of the country. And we just grew in these concentric circles from Binghamton and then up route 81 to Syracuse and then down route 90 to Rochester and then over to Albany and Buffalo and Erie, Pennsylvania. And that was really a big key to our success because, not that we were very big at the time, but you started to get some scale in understanding that athlete or that consumer. And Sam Walton was probably the most influential. And then Jack Welch was pretty influential for how he tried to build teams and trying to be requiring of those teams to be number one or number two in whatever category they did business in.

So those were probably the two that I spent the most amount of time reading about and trying to understand. Like I said, I never met Sam Walton, but I was fortunate to meet Jack Welch playing golf one day and he couldn't have been a nicer guy when I got to meet him.

Tom:

There was an article that you listed out your kind of eight winning lessons and you talked about the influence of Sam Walton and Jack Welch, reading about them. I was fascinated by the concentric circles and the conversation around—could you just tell a little bit more about that? Because I really think that's quite ingenious. And I hadn't really thought about the relationship between what you did and what Walmart did and just this concept of kind of perfecting it in these smaller markets before—because the logic a lot of folks of a retailer is to immediately go to New York or immediately go to Los Angeles. And that wasn't your strategy at all.

Ed:

No, no, I mean, he talked about, and I don't remember all the towns he went in, but you know, so in Arkansas, was this town, then he went to the next town and another concentric town and stayed in kind of the same neighborhood, if you will. And kind of just built out these concentric circles. And that was really, I think that was a big key to our success because we could easily get to them. The consumer, the athlete wasn't very different from Binghamton to Syracuse to Rochester. The climate was relatively the same. in our business, the, you know—when the baseball sea—baseball season starts in Florida a lot earlier than it does in Buffalo, New York in the spring. So you didn't have to do—

Tom:

Does it ever start in Buffalo, New York?

Ed:

It does. Buffalo is a great town. We love Buffalo, but yeah. So those concentric, that whole idea of the concentric circles was really important to us. And like I said, I credit Sam Walton's strategy that we creatively borrowed, so to speak.

Tom:

It's fascinating to listen to, because I mean, let's face it, you're a legend in the retail industry and it's just fascinating to hear how one legend learned from another in regards to real estate strategies. So that's a good lesson for us all. And one of the things you said about learning the market and the concept of learning your customer, the athlete. And I think that at least my observation going to a DICK’S store, particularly the House of Sport is that they’re somewhat tailored to the individual market that they're in. I mean, what's going on in Minneapolis and that store is different than a store in a different climate and a different geography, isn't it?

Ed:

Yeah, absolutely. And you've got to, you've got to regionalize it. There's a lot of things that are core to any place in the country, but there are a number of things that you have to make sure that you are rooted in that community. So we'll sell a lot of Vikings merchandise up in Minneapolis.

Tom:

A lot of hockey merchandise too, right?

Ed:

A lot of hockey merchandise. Yes. Yes. We won't sell a lot of Miami Dolphins merchandise up there. So we really have to try to tailor that assortment to the market. And like I said, if you take our baseball displays and our baseball merchandise will come in much earlier in those Southern stores than it will up in the Northern stores. So yeah, there's things like that you have to do.

Tom:

I’m sure in the Pittsburgh store, you're selling a lot of Steelers and Pirates, Penguins.

Ed:

We do, for sure.

Tom:

So let's talk about the House of Sport. I just think walking into the House of Sport, you're immersed in everything about athletics and it is the poster child for experiential retail. It's also a big investment. It's a big build out. Let's first start with just kind of the basic concept. What inspired you to do that? You're already very successful. DICK’S Sporting Goods is national, very successful. And then you take this turn to build these mega experiential stores. What inspired you to do that?

Ed:

Well we talked probably, I'm going to say, it was probably now 10 years ago. We embarked on this idea of building what would be the store of the future and what would be the future in retail. And as we looked at this and we started to build it out and we designed the whole thing in our office, down in the basement of our office, we've got a significant space that we can build out most any department, compartment of the store. So we designed this whole thing and we built some pieces of it downstairs in our lab store. As we walked through it, we said, I said to the team, I said, it didn't translate from paper to reality the way we anticipated. And that happens sometimes. And we looked at it and said, it's not different enough from what we're doing right now. So we scrapped it. And we came back probably now almost six years ago. And I said, we need to build this whole store of the future. And we characterize it as the ecosystem of the future because it was going to have a digital component of it and a participative component of it, the product, community, all this. And as we did this, and the thing that I laid out to the team as we started to design this is we need to build the concept that will kill DICK’S Sporting Goods. We need to build the concept that if somebody else built this store, we're out of business. And that's what we did here. The first one we did was in Rochester, New York. And it was right across the street from a very traditional 50,000 square foot store that we had done.

And the whole idea was to kill DICK’S Sporting Goods, that if somebody opened this up, we couldn't compete. And right in the, it was right across the street. So from the front door of the new House of Sport store, you could see our old store and we got it all done and we kind of gathered around and kind of walked through it. The first time it was all completely done. I looked across the street and I said, I sure would not want to be across the street if somebody opened up this store. And so that was the whole idea of it.

And we talk about, some people ask me, so what would you be worried about in the business? And one of the things that we worry about and that we focus on is that we don't want to wake up someday and be a tired old chain because you can see the—so many retailers that is what happened to them. And we said, we have to constantly continue to reinvent ourselves and so that we don't wake up to be a tired old chain. So that's what House of Sport has done.

And then what we've taken some very key elements of House of Sport and put them into our, what we call our field house concept. And that is our more traditional 50 to 60,000 square foot store, taking some key elements of what we learned in House of Sport and putting them in the more traditional field house type concept.

Tom:

I love the, starting the most basic thing. We wanted to build something that would, that could kill your traditional DICK’S. And so I, I just, I mean, not many leaders think that way, but that's a, that's a very transformative thought, right? I mean, that's the way you should think as a leader. Yeah. What could put me out of business?

Ed:

We're students of retail and students of business. And if you take a look at kind of, one of the most successful industries over the last 30 or 40 years would be the technology business, the technology industry. And the technology industry is constantly reinventing themselves and putting their previous technology kind of in the graveyard, if you will. And we felt that we really need to do the same thing. So we've constantly innovated our business. And every once in a while, we take a giant leap forward. And I think with House of Sport, we've made that giant leap forward from what's going on from a retail standpoint and certainly from a sports retail in our industry.

Tom:

I have to ask, the existing store in Rochester that was across the street, is that still there?

Ed:

No, no, no. We closed, we relocated it. We closed that as we opened this one. No, it was right across the street.

Tom:

For those folks that are listening that have never visited a House of Sport. First of all, I'd recommend that you do it, particularly if you're a sports fan, it's absolutely awesome. And it truly is immersive. I mean, it has, at least the one that I went to has a field in the back. I know in certain locations, it has a hockey rink that that can be used in—Just the scale of it, golf bays, opportunities to run many running tracks. It's just off the chart. It's spectacular.

The scale of it is enormous. So how do you, site selection, identifying locations to place it? What's the strategy around that? Where are you looking to build out these types of stores?

Ed:

We want to be kind of at main and main for the most part in whatever a particular trade area is. And what we have found out is, we've done this, is that we can have, we can have more House of Sport stores in a market than we originally thought. We thought it would really be really more of a true hub and spoke that we've got this, this large format, 120 to 140,000 square foot House of Sport store. And then surrounding it would be more of the more traditional 50,000 square foot stores and put aspects of House of Sport into those. What we've now found out is that the dwell time, average ticket, kind of where it draws from, we can have more of these in a market than we originally anticipated.

So we'll take our hometown of Pittsburgh as an example. We thought that we would have one, maybe two House of Sport stores in Pittsburgh. We'll probably have four or possibly five. We've got one opened up right now. We've got another one under construction, another one that will probably convert to a House of Sport in next year. So, and we'll probably have four or five of them.

We've also found that we can put these in smaller markets than we anticipated. So we tested these in some smaller markets, our original hometown of Binghamton, New York. We put one in just outside Binghamton in Johnson City that is very successful, very profitable. Champaign, Illinois, we've got one. So we found that we can put these in smaller markets and more per market than we anticipated. So we'll try to be at the right location in a trade area.

Tom:

Just to delve a little bit deeper on that, is that because people are spending more time when they're going to the store too? And they're—because it struck me, I mean, you're hosting the practices there and the parents can hang out and watch the kids play. There's even bars or cocktails in some of them as well, isn't there?

Ed:

No, we haven't gotten to that point yet.

Tom:

Okay, coffee, maybe just a coffee bar.

Ed:

Just some coffee. But we are looking at it one in California that we're doing outside San Diego. It's a little bit bigger and we're contemplating putting in a sports restaurant. Not sure we're going to have alcohol there, but you can come in and you can get a burger and a hot dog and those kinds of things and have a food and drink component of it. And there may be some alcohol. We're not sure depending on—there's a lot of things that change when you start serving alcohol. But yeah, we're thinking about adding a food component to some of these now.

Tom:

Yeah. You get the parents to linger, that then become captive customers as well. So it's a place for the community to gather. I mean, that's really, I mean, ultimately, I always say retail and marketplaces bring a community together, brings life to a community. And that's what's happening in a House of Sport. Some would see it as a big risk to do this though, too. I mean, they're big capital investment. Even the concept that you said, what could destroy, what could put us out of business? And when you make decisions like that, to allocate capital to such a significant, ambitious growth plan. What are some of the things that you're thinking about when you're making those decisions? The characteristics, the data that you're evaluating?

Ed:

Well, we tested this. we built three of them. We've got 21 of these now. We'll have 35 at the end of the year, but we've been at this for four years now. So we built three of them, Rochester, New York, Knoxville, Tennessee, and the one up in Minneapolis that you visited. And kind of ran the bugs out of it, if you will. Now it started, they started right out of the box better than we anticipated. But then we, we refined them and said, okay, under this set of economics, we can do this much business. This is what all the—built the P&L, refined the P&L and find that these things are very, are very productive right now.

We found that they're very productive for ourselves. And we found that they're very productive for the shopping center or the malls that we are in. It brings an entirely different group of shoppers to a mall, increases the traffic count on the malls pretty significantly. People are banging on our door now to get our stores in some of these, many of these malls, have a vacant department store. So Ross Park in Pittsburgh, Pennsylvania, David Simon's mall was a vacant Sears building. We made a deal with David. We went into that Sears building. We stripped it down to the studs and it looks very similar to Minneapolis. Minneapolis was a former Sears box. And so as opposed to having a dead anchor, we make a deal. The economics are right. We put a House of Sport in there. It's great for us. It's great for them. And a lot of times these wings of the mall that have this vacant department store or maybe a very underperforming department store that they can get back is not the best leased wing of the mall from a tenant standpoint, bringing traffic to the mall, kind of the rent that they'd be paying the landlord. And with a House of Sport there, it kind of opens that all up and they've been able to rent the space out to a higher quality tenant at higher prices. So everybody wins.

Tom:

Well, it would strike me that, I mean, your athletes, your customers that are coming in tend to be probably a lot of families, a lot of parents with young kids, which is ideal for a mall. Is that part of the strategy? Is that the ideal location, kind of an anchor in a mall or is that just one of many possibilities?

Ed:

It's one of a few possibilities. So it could be a, it could be a freestanding—if we've found a piece of dirt, that was a freestanding piece of dirt, we build it right there as long as it's the right piece of real estate. So we've got an option on a piece of dirt in Rancho Cucamonga. That's just a piece of dirt. And we anticipate building a House of Sport there. If we can get through all the permits and all of the things that are required to get that done. But we're going to go to the best piece of real estate we can find at the economics that can provide us the return that we need.

Tom:

Rancho Cucamonga, that's out in the Inland Empire of Southern California. Fast growing area. A lot of families are moving out there.

Ed:

We think it'll be great area for us.

Tom:

Before we leave House of Sport, just the—because it is so experiential and immersive and you were talking about the future of retail. Do you view the House of Sport as somewhat, not that other retailers are going to try to emulate the size and scale of what you're doing, but is that a lesson for retail in general, the need to be much more experiential, to be much more engaging with your customer?

Ed:

I think every retail business has to kind of define what their sharp point is. What's their point of differentiation in the marketplace? And is it like what we're doing? The athlete walks into the store and they instantly get it that this is much different than anything else that's out there. And so I think everybody's got to define what is their reason for being and what they're bringing to the marketplace that will drive people to come to them. And you can't just be one of many out there. You really have to find a way to distinguish yourself and find your place in the marketplace. The why somebody goes to their buddy and says, I was at DICK’S House of Sport. You have to go. A high school kid who’s a baseball player says to his buddies or a girl who's a softball player saying, we got to go to House of Sport. You wouldn't believe the selection of gloves they've got there. They've got every bat that's made. There's got to be that, that point that people tell other people why they need to go to that, that particular location and every business has to figure that out for themselves.

Tom:

Yeah, what's your purpose? Why do you exist, at the end of the day? I mean, certainly when you're walking in the House of Sport, you totally get it's different. I mean, it's a unique experience.

One of the things that DICK’S has also been a leader on is, just the integration of digital e-commerce with physical retail. And on the surface, a lot of people wouldn't expect that sporting goods. You'd say, okay, it's going to be a more physical kind of experience. I need to try on that glove, try on the cleats. And I think really during the pandemic was somewhat of an inflection point for DICK’S. I mean, the stores were closed for a period of time. And then all of a sudden you guys really moved very quickly to curbside pickup and have grown your digital business pretty significantly at the same time you're expanding your physical footprint. Talk about that integration because that's something that we, ICSC, talks about all the time, that halo impact of having a store and the positive impact it has on digital and vice versa.

Ed:

A lot of people think that the pandemic was our inflection point from an e-comm standpoint, and it was extremely helpful. So, and I give all the credit to Lauren Hobart pulling together this curbside pickup and from a technology standpoint in, a couple of days, we pulled that together. I mean, she and the team did a wonderful job with that.

But what a lot of people don't realize is that our first e-commerce sale was in 1999. We developed a subsidiary of the company called dsports.com. And in 1999, we entered the e-commerce business. We knew this was going to be something that was more than likely going to be transformational. As we got into this at first, you couldn't make any money doing it. But we knew that we needed to understand what was going on. So we did that at first. And then in the early days of this, we partnered with my friend, Michael Rubin from GSI at the time. Now Michael runs a fabulous business, Fanatics, but we partnered with Michael and then eventually after a few years took our e-commerce business back inside our whole digital business. And it's been just, it's been a great business for us. We've really invested in this from a time standpoint, a capital standpoint, people standpoint. We've got a really robust e-commerce business, which has now been evolved into our whole digital business between what we're doing from—we can sell you a dozen golf balls or a pair of running shoes or baseball bat, winter jacket online, no problem. But it's also, we've got a company called GameChanger, which is a technology platform for youth sports where you can video and watch your son's game, grandson's game, granddaughter's game, whether it's baseball, basketball, volleyball, sitting in Minneapolis. And if somebody is living in Pittsburgh, you can then watch their game. So that digital piece has been great. And in GameChanger, virtually every month, we stream and score more games than all Major League Baseball games played since the beginning of time. It's a great business. It's very profitable business. So our whole digital business, whether it's e-comm, the GameChanger platform, the DICK’S Media Network that we've put in place with all the data that we've got. Our digital business is a really, I think it's a part of our business. People don't really understand right now and understand how big and profitable and important it is.

Our e-commerce business just down on its own is very robust and very profitable, but it's really integrated into the whole, into all of the stores for a very, very long time. The brick-and-mortar side of our business is going to be the foundation of our business. will be well over 50% of our business, but the digital side of the business is growing very fast and provides us a great growth opportunity.

Tom:

That's fascinating. The GameChanger. I need to learn more about that. That sounds pretty cool. I wish I had it when my kids were going through all the youth sports.

Are the stores you—primarily fulfillment stores for most of the e-commerce sales?

Ed:

They are. So we've got a fulfillment center also in upstate New York, but the vast majority of our e-commerce sales are fulfilled out of our stores, which helps get that product to the athlete faster, less expensively. And it's one of the reasons why our e-commerce business is as profitable as it is.

Tom:

Yeah. Traditionally, one of the challenges in e-commerce is the profitability. You have the enormous fulfillment costs. And, and I mean, you guys have the benefit of fulfilling from the stores and also the draw of getting people into the store.

Ed:

The buy online, pickup and store piece has really been helpful. I mean, people today, the most precious commodity that they have is their time. So they just want to know that I want to get this product, drive up to the spot, text their number in there and we walk it right out and put it in the trunk for them and off they go.

Tom:

Just to change gears a little bit and talk more macro, sitting in an environment where a lot's happened in the last few months from a macroeconomic perspective, new tariff regime, prospective tax changes, a lot of uncertainty in the business community. Without asking you to predict the future or anything, just talk a little bit about leading and uncertainty. You are an experienced leader, have gone through financial crises, have gone through growth spurts that have been successful. Just making decisions in a period of uncertainty. And right now, there's a tremendous amount of uncertainty. I think we can all agree with that. How do you, as a leader, just make decisions to keep moving forward, leading the team, as you said, when there's some anxiety that, you know, rightfully exists?

Ed:

To have the confidence that you're going to come out the other side is really important. And based on the balance sheet that we have, kind of the foundation that our businesses will come out of this on the other side. And I suspect it'll be just fine, but it will be sloppy and it will be uncomfortable. And there will be some pain along the way, but we just—It's kind of interesting you bring that up. I think part of the key is communicating with the team so they don't get whipped up over things that can't be controlled or they don't get nervous about things that are really under control. So last week, we had around 400 of our senior team members all together in the auditorium and talked about what was going on and talk about how we plan to handle this and what we're going to do. And just similar to what you just said, hey, we've been through 9/11. We've been through the Financial Crisis. We've been through the pandemic. We've been through other ups and downs and we've got a solid balance sheet. We're going to be prudent and thoughtful on how we manage through this uncertainty right now. We're not going to pull our horns in either. We're not going to panic and kind of throw our hands up and go, yeah, we're just going to batten down the hatches. We're going to be conservative, but places where we still think we should invest, we're going to go and invest. And we've made a deal to some House of Sport stores. We're still making those deals right now that we think are those strategic important deals.

So we're not going to put our head in the sand, but we're going to be thoughtful about the decisions we make. And then we make sure we communicate those to our team so they understand specifically what we're doing and there's not water cooler talk about what's happening and am I going to lose my job? How's the business? And we're really very communicative with everybody.

Tom:

A lot of transparency around what's going on. Well-spoken from an experienced business and successful business leader. So appreciate those thoughts. Let's talk a little bit more. You built this incredible sporting goods franchise. You as a sports fan, what are your sports? What are your teams?

Ed:

I mean, I grew up playing baseball, football and loved every minute of it. Like so many kids, I had a dream, but God didn't give me the physical attributes or the talent.

Tom:

You couldn't hit the curve ball.

Ed:

I couldn't hit the curve ball, but I loved everything about growing up playing sports, whether it's the teammate aspect of it, the fact that you have something to do. I mean, it was just, I loved everything about playing sports. And as, as I got older and into the business, you start to realize how important those things were. You were learning things you're going to apply later in your life that you didn't know you were learning. And some of those things were a pain in the neck, whether it was like, I didn't like losing, I didn't like striking out. I didn't—the adversity of it all you didn't like, and you didn't go, well, you know what, this little bit of adversity, that'll help me later in my life. You don't think that way, but it really did. So you learn how to be a teammate. You learn how you have to depend on other people to do their job. You learn how to win gracefully and lose gracefully. So all of those things, as I got older, I started to realize, hey, this was, I learned a lot through this.

And then with this youth sports funding crisis that's going on in the country, and we did some research on it and realized kids weren't having an opportunity to play, especially in some tougher neighborhoods because of the economics and we, we'd always been involved in sports and kids trying to help them play. In 2013, we really formalized our Sports Matter Foundation. And we have now invested well over $150 million in youth sports to give kids the ability to play that couldn't play. Because I really believe that kids need sports. That kids need a place to go. They need a place where they feel like they belong. They need a place to be with their friends. They need a place where they feel that they're making a difference. They need a place where their coaches can mentor them. Some of these coaches really have more impact on the kids about going to school, staying off academic probation, doing their homework and all those things. Because those coaches make a decision that's most important to those kids. And that's who gets to play on Friday night.

We really formalized this whole Sports Matter Foundation because it's so important for these kids to be able to have the opportunity to play and be together and learn so many things.

Tom:

No, that's so important. I agree with everything you just said, the impact of sports on life and life lessons. You don't realize it at the time, but you went and learned how to win, learned how to lose. You'd learn how to deal with adversity and you're right. Coaches. I mean, my goodness, I can remember some of my coaches and just the influence I could, I could hear some of those cliches that they drilled into my head over and over again.

Ed:

I've often said, and I get in a little bit of trouble for saying this, I don't remember every teacher I ever had. I remember every coach I ever had. And these coaches have such an impact on these kids. So it's really important to be able to give back to the communities and to give these kids the opportunity to apply.

Tom:

I agree. Well, Ed, you've been so generous with your time. Any final thoughts for the listeners around DICK’S, retail?

Ed:

I really appreciate you having me. It was great to talk to you and kind of get some of the things out there that we've done in our business, both positive and we made a lot of mistakes along the way also, believe me. But if this helps a few people and how they approach their business and makes them a bit successful, I'm happy we're able to do this.

Tom:

Well, was such a joy to speak to you. I mean, to speak to somebody like yourself, so successful and really legendary, and the industry we both love retail.

Ed:

Alright, Tom, thank you very much. I really enjoyed it. Thank you.

Tom:

Please follow and rate this podcast five stars on Apple and Spotify and share it with others that might find it interesting. Thanks for listening.