Resiliency and Innovation in Challenging Times with Ronald Blahnik

When I joined Hibbett in 2016, there was a need to revitalize the organization. Ultimately, it was all centered on the customer experience. So the role I picked up was helping shape the corporate strategy, working with senior leadership of the company. I started an innovation organization that does research as well, and then set about trying to prepare the IT organization for the digital transformation that was to lie ahead over the next several years.

The COVID experience was a challenge for everybody. Like in any aspect of leadership, it's how you respond to the scenario. For us, we're associate and customer focused. We serve the underserved and rural America, which did not experience COVID necessarily the way a New York City did. Our desire to get back to work was heightened when the pandemic hit. We were actually forced to close our corporate office. We managed to arrange to have our DC remain open to continue shipping, though we had to invest immediately into protocols and separation of duties to help people be safe. From a leadership perspective, we instituted daily standups. Rather than meeting with the CEO once a week, we met daily with all the senior leaders and talked about the challenges and what we had to do to overcome them as a team, to allow us to continue operations and to reopen our stores. We were back in the office in six weeks, and all our stores were open by the end of May of 2020. Many of our peers in the industry were still closed a year later. That kind of response, resiliency, the ability and desire to make change where it needed to be made to fulfill our commitments to shareholders and customers made us lean into adversity as opposed to shy away from it.

Oh, sorry. The distribution center. That's what moves our products to our stores. If you think about port to port, door to door, and then door to store, that element breaks down. Inventory ships the right product to the right store was a big challenge for us because you had to deal with transportation challenges as well. Were people going to show up for work? Were people going to show up with their trucks to deliver? We went through a pretty big transformation in that timeframe. We abandoned our in-house fleet in favor of a variety of carrier options from FedEx, UPS, and others to get our product to stores. We weren't going to be stopped. In fact, we accelerated during that process. Rather than weekly deliveries, we moved to daily deliveries. We made a lot of changes during that timeframe, all of which ultimately achieved greater customer satisfaction and loyalty. If we're going to footnote the whole thing, we doubled in size during the pandemic. A lot of companies can't say that. We picked up a lot of market share and drove a lot of customer loyalty, particularly in the products we provided.

Certainly. When I was answering Shelley's question, I think one thing that helps people understand where we were just seven years ago is that we didn't have a website and weren't doing any e-commerce at all. But because of the folks brought to bear on the team and my background, I knew there were three things critical to being successful in that space: a single view of the customer, a single view of inventory, and the ability to deliver from any location in the chain. Rather than delivering out of our DC, which ships maybe 10 to 15 percent of the product in terms of packages we mail out annually for orders (which is north of 3 million), we deliver from our stores and route orders to locations with available inventory closer to your home. During a time when everyone was trying to figure out how to speed the last mile, we were already doing it. Our average delivery time to home was generally a day and a half, very competitive with the Amazons of the world. We have since taken that to the next level with four-hour delivery via local delivery. Supply chain was key to driving value and improving our customer experience. That included implementing RFID in nine months. Radio frequency identification has been around for about 30 years, used in the military first, but now our partners like Nike, Adidas, and others tag their merchandise with RFID tags to track it through their supply chain. We simply leveraged that as it hit ours, so we had accurate accounting of what we had in stores. When we said it was available for you to buy while shopping online in your neighborhood, you could rely that when you showed up at the store or asked for it to be shipped, it was there. The reduction in canceled orders and the surge in customer satisfaction were all benefits of having more accurate inventory. A single view of inventory and the ability to deliver were keys to increasing our e-commerce business substantially.

As I mentioned in the previous response, moving from our own local fleet to leveraging a fleet where the truck was going to move and the driver was the variable helped us beat that challenge. The size of UPS or FedEx, being able to get our product shipped same day instead of building pallets that go out once a week, helped us significantly. We also leveraged some private shippers. We did whatever we had to do to get product to stores. Bottom line: it's about making sure the product gets there and is available for sale before it begins to age out. As for the biggest lesson in leadership, it's about being on the same page, pulling together, and recognizing that it's not your problem or his or her problem—it's our problem. We need to solve it together. We need to recognize the varied experience around the leadership table. Being open and honest about solving the problem, acknowledging that you may not have the answer but someone else does, leads to a better result. And knowing that we can't wait to perfect everything; we need to fix and repair daily, making moves in the right direction. We did a ton of napkin math, which our CEO, being an economist, is fond of. He taught us to listen. Going down to precision and decimal points isn't appropriate at this level in this timeframe. The situation requires immediate response, quick reaction, best effort to get the desired result, and then check and adjust along the way. We were transparent about that. We looked at our metrics every day, all the things driving sales, supply chain, and customer loyalty, and adjusted as needed. The biggest thing was driving communication. People often overlook the value of communication and listening. We'd be in each other's offices, on Teams, addressing issues right away. Time was of the essence, and that changed the speed of how we did business, a practice that continues today. We still meet as senior leadership every day at 11 o'clock for our standup. On Mondays, we review the past week and plan for the new one. The entire senior leadership team has 24 hours to communicate that to everyone in the company. I meet with my team Monday afternoon, and they meet with all their teams by noon the next day. That has helped us all understand where we are and how we contribute. Getting connected and understanding how you're part of it was hugely valuable. Turnover during that period was extremely low. While many opted for work from home, we provided that flexibility too, but their connection to being part of something special drove loyalty and reduced turnover.

We fashioned something not new in the industry but new to the combined companies of Hibbett and City Gear. It's called the 'tankys' of customer service: treating every customer as if they're the only customer. You are my customer today, and I'll treat you with due respect, under-promise and over-deliver every day. That's part of finding a way to delight shareholders and customers in new and innovative ways. No complaints if something's wrong; if everyone's smiling, we're missing something. So we ask what we're not doing that we should be doing. That leads to the next key: listening. Knowledge is power, but in the past, knowledge was power if you were smarter and knew more. Now, knowledge is power that you share to elevate others. That's what's recognized and supported. Systems, not smiles. Ensuring that solutions are high quality, reliable, and responsive to our business partners is key. We measure everything, which is absolutely key to senior leadership's goals. Every metric worth measuring, even if we might overdo it; sometimes in the detail you find opportunity. Speed is life, definitely applied to supply chain. We went from weekly to daily deliveries, then to home deliveries, then to four-hour deliveries. All that speed drives two things: making us the preferred destination for customers and delighting them. The last one, which should be on everyone's list: your mother was right. Showing people respect and being polite just works. If you bring those together and operate that way, you can accomplish a lot. Living your values ultimately yields better results.

Hibbett and City Gear differentiate through understanding our customers. The five personas that represent our target demographics recognize that individuals vary; sneakerheads in New York are different from those in Gun Barrel, Texas. It's about knowing your customer's desires. We carry high-end, highly sought-after, often short-supply athletic-inspired fashion and footwear. It's about the shoes. We dress people from toe to head. When you walk through our doors, an associate will greet you, but the next thing they're doing is looking at your feet because what you walk in with is something you're generally comfortable in. Understanding the individual who walks in an Air Force One, recognizing that platform is a 40-year-old platform rebirthed by Nike decade after decade and now seeing its best sales ever, is key. It's about helping customers express themselves and providing the product to accentuate their personal style. Other ways we differentiate, perhaps less visible, include recognizing we are part of an ecosystem. We don't compete with vendors; they do direct-to-consumer business, which is a given. But partnering rather than fighting is a differentiator, giving us favored nation status with most vendors, including Nike. Our focus on the customer is their customer. If they buy Nike products in our stores, they're loyal to Nike. Understanding how our customers shop and engage is valuable for vendors, helping them express thoughts about products and how they want them to come to market. We're part of an ecosystem and communicate that value proposition to customers they can't reach everywhere. They can't be in Paris, California, or Gun Barrel, Texas. We're an extension, complimentary to their business, not competitive. That makes our relationship special.

Today I'm wearing a pair of Vapor Maxes. They're Nikes, a platform for comfort. These are very lightweight running shoes. I have north of 50 pairs of shoes in my closet. That's a frequent conversation between my wife—I have more shoes than she does. Being part of the culture here, we wear what we sell and enjoy it. It's far more casual in the corporate environment, but it's all about the stores. We spend a lot of time in stores and distribution centers, understanding challenges and leveraging our systems to enhance their business and sales. One innovation we built is the Toe to Head app. It's an associate-facing app. We have customer-facing apps like a raffle app and Hibbett.com, but we needed something for associates. This puts product information in their hands, allowing them to build toe-to-head looks for customers. They can start with the platform you're wearing and suggest three new Air Force One colorways that just dropped, along with complementary items. As they go through that process, they build the basket, unlike traditional retail where customers just take shoes to the register. The differentiation is a curated experience with an associate who has the information to differentiate a $220 pair of shoes from an $80 pair. These are key enablers driving our innovation strategy, all mobile-based and cloud-based. The modernization over the last six years has made us far more agile to deploy these capabilities to stores rapidly.

In a sense, they do because that's how the solutions are delivered. We use local social marketing, meaning every store has its own following of people who live generally three to five miles away. Those are the ones connected to the store and who know you, know what you're looking for, and will let you know when it comes in. Think of the high-end boutique shops. At Hudson's Bay, the ninth floor of 400 Bay Street was the fashion floor for women with lots of money. Sales folks there had their little black book of best clients and would call them when something came in. We've now taken that to local social. Our Instagram posts announce when something just arrived unexpectedly or was replenished. People show up within 15 minutes of that post. We also use personal messaging. The idea is treating your customer special, understanding what they want, and providing it when something changes. If they were just in the store two days ago and it wasn't there, now it is. With 1,100 stores doing this to their local communities, the corporate brand is good, but it's the grassroots local social that dominates.

First, because we have customers across all lower 48 and many who don't live near a Hibbett location, AI could potentially drive that same in-store experience to them wherever they are. For a launch or when something gets replenished, why wouldn't we notify someone who has identified themselves as a sneakerhead? In terms of where AI is, according to Gartner, it's near the top of the hype cycle. There's a trough of disillusionment ahead, but I think the buzz is real. There are three levels at which we're engaging it. One is the digital experience, driving communications with customers through automation of texts and emails, product descriptions, and romance copy. Those are being explored. Second, in the core space of HR, payroll, finance, supply chain, merchandising, and marketing, vendors are implementing AI to drive recommendations, suggestions, and even prototyping plans, saving hundreds of person-hours in weekly or monthly work. Third, we're in the sandbox to help associates help themselves. While we have HR solutions allowing them to maintain their own data, the idea of using AI for things like requesting time off or getting information about a product without waiting for a merchant is powerful. Instead of reading a manual, they could ask a bot for the story behind a product or get answers to store challenges. That could reduce costs to help desks, HR service centers, and other teams by putting power in the hands of people who just need simple answers.

Awesome. We're very excited about what we've accomplished over the last six or seven years. But those accomplishments aren't mine; they're the team's. I work with some of the best technologists on the planet. They came to us because they wanted to be part of a transformation and feel connected to the business. That's why they're staying—they see the growth. It's a win-win.

Thank you so much. Appreciate it. Folks have a great day.