When speaking with Tai Lopez, the executive chairman of one of the more disruptive retail companies in the pandemic period, it could be expected that the conversation would center around one topic: retailing. But that's not the case.
Instead, a dialogue with Lopez, head of Retail Ecommerce Ventures (REV), spans multitudes of topics, from neuroscience to movies to books to chess and, yes, retail. Because in his expansive vision, they all touch each other. Take this quote, for example, from one of Lopez’s favorite books, Geoffrey Moore's “Crossing The Chasm”:
“The number-one corporate objective, when crossing the chasm, is to secure a distribution channel into the mainstream market, one with which the pragmatist customer will be comfortable,” Moore writes. “This objective comes before revenues, before profits, before press, even before customer satisfaction. All these other factors can be fixed later – but only if the channel is established.”
Almost every word of the quote correlates to Lopez’ business approach. He has secured a distribution channel into the mainstream market for many retail brands, and will do so for many more in the future. The distribution channel is digital, one in which the mass market has become comfortable with recency and frequency.
Lopez’s approach to retail has involved buying up distressed brick-and-mortar retail brands like Modell’s, Linens ‘n Things, Dressbarn and Pier 1 Imports and giving them a new digital life. It is a model that has been copied by a few other companies recently, as the digital shift continues to gain traction and many brands continue to struggle – but no firm has approached the practice with Lopez’s level of clarity.
“Most of the world are not visionaries or early adopters – they're pragmatists,” Lopez told PYMNTS. “People have slowly become comfortable with the fact that everybody they know is buying online, so they figure they’ll try it. And like Jeff Bezos did, they start with low-risk items. Bezos started with books, because buying a book is a low-risk transaction. And now people are buying everything online, including cars and real estate. This eCommerce trend was happening well before COVID. To me, COVID reminds me of what Vladimir Lenin said: ‘There are decades when nothing happens and weeks where decades happen.’”
With McKinsey Consulting and others espousing the theory that COVID has shrunk a decade’s worth of change into a few months, Lopez’s observation certainly holds water. But that hasn’t stopped the whisper machine surrounding the retail industry from doubting his methods or business model.
Retail Ecommerce Ventures has paid good money for the intellectual property, inventory and eCommerce rights for brands that other people have left for dead. It paid $3.6 million for Modell’s, a New York City-based sporting goods retailer that couldn’t compete with Amazon, Big Apple lease prices or big-box retailers like Dick’s Sporting Goods. It paid $20 million for Pier 1, a home furnishings and accessories retailer that took a hit from overexpansion, Amazon and the success of online furniture retailers like Wayfair and Overstock.
The company’s stated purpose is “scaling ethical companies: moving the needle for both our investors and the world at large.” While it undoubtedly has that purpose along with its valuation algorithms and investor equations, Lopez noted that his main method of evaluating companies comes down to one word: trust. There have been various methods of proving or disproving that intangible element over the years, but for Lopez, it’s more a sense of the company. For example, he liked the metrics as well as the vibe around Modell’s, which has been a New York City institution since 1889. He liked the stories he heard about the kids who bought their first sneakers there, or their first New York Yankees hat.
REV’s portfolio contains the aforementioned recognizable brands as well as one-time mail-order power The Franklin Mint, dating site Zoosk, Mentorbox and The Book People. Not all of them are COVID casualties. And when asked if he thinks the digital shift that has spurred the problems and opportunities in the current market, Lopez went to neuroscience. The amygdala, he noted, consists of a pair of pea-sized neurons in the center of the brain, where fears and other emotions are stored. It’s Lopez’s belief that COVID has entered that area of the brain, and that consumers will suffer from the trauma of the event. One of the ways they are dealing with their fear of physical retail is by heading to eCommerce – and it’s not a habit that Lopez expects to be broken.
“I don't see people flocking to the massive indoor malls that have defined the last 15 years of American shopping,” he said. “I remember going to malls last year and they were like ghost towns then. All these people that are investing in malls are very possibly wasting their money. These things are just going to get smacked.”
Lopez predicts that brick-and-mortar retail will get worse before it gets better, and he believes the fourth-quarter selling season will be a watershed event in the digital transformation. As physical retail gets “smacked,” his company will be there to evaluate the distressed brands and possibly give them the REV treatment, which is a dedicated management team, synergies where they make sense and a laser focus on eCommerce. How many brands will that be?
“You know, my business partner Alex (CEO Alex Mehr) likes money more than me,” Lopez joked. “He'd like to be on the very top of the Forbes list. Me, I just like the adventure, and I'm a chess player. To me, it's a fun game of making the right moves. I mean, Warren Buffett has about 91 brands in his portfolio, so they have obviously built that over quite a long time. When we think the price and the intangibles are right, we will grow.”