Michael Rayden knows how to turn a company around -- it's what he's done successfully four times in the past several years.
The chairman, president and CEO of Too Inc. -- the corporation that owns retail stores Limited Too and Justice -- has, since 1987, turned around Eddie Bauer, Stride Rite, Pacific Sun Wear and his current company. And what Rayden learned, especially through his most recent experience, is that the focus has to be on the product.
When Rayden joined Limited Too in 1996, the company was a subsidiary of Limited Brands, and he seized the opportunity to work with and learn from master retailer Les Wexner. At the start of Rayden's career with Limited Too, the chain's early success had slowed and sales were flagging. Rayden says part of the problem was that prior to his arrival, the strategy was to put in the stores products that were smaller-sized versions of mom's.
Going against that history, Rayden initiated a new strategy of developing a product line specially designed for the customer -- girls ages 7 to 14, or what the company calls 'tweens.
"We want to offer the customer a world of their own," Rayden says. "The focus has to be on the girl, not mom. And mom told us she wished there was a place just for the girl."
So the company has spent a great deal of time and resources doing exactly that.
"For Limited Too, the No. 1 issue is thinking about the customer," Rayden says. "You have to give them what they want. You have to think about their emotional needs and have the right product in the store. It wasn't about changing the store but simply giving them a product line that excited them."
Limited Too's customers have very specific needs. Rayden says after the company did its research, it discovered three important needs it tries to address in the stores and in its marketing efforts.
"First, these are kids, and the most important thing to them is to play and have fun," he says. "Secondly, sensory stimulation is very important, and affiliation- joining groups and sharing activities are also important. We felt that our marketing must incorporate all three of these elements. These are not required for any other age group."
The first order of business for Rayden was to focus on the girls' shopping experience.
"I really think that the first most important thing needed beyond the merchandise is to have the right type of associates in the stores," he says. "We are one of the few retailers that hires 16-year-olds. They aren't managers but sales associates. It really enhances the experience, because they want to share their life experiences with the 'tweens, and it wasn't that long ago that they were 'tweens themselves."
Rayden says those younger sales associates help stimulate an emotional attachment to the store among its customers, and that, along with having the right merchandise, packs a walloping one-two sales punch.
"The people are very important," Rayden says. "You can't sell the merchandise with the wrong people. It all clicks together, regardless of the physical plant."
The company's goal is to hire sales associates who have a genuine interest in the customers.
"The sales associates have to like being with people, be energetic and like 'tween girls," Rayden says. "The customers know when somebody is real."
Research and refocusing
From the company's direct mail campaign to television ads, the message Rayden seeks to convey is that Limited Too is a fun, almost magical place for girls to shop.
The research that led to this strategy wasn't strictly the ivory tower kind; Rayden made a point to interact with girls in various settings.
"I made a concerted effort to be where they are," he says. "For example, our design assistants interviewed girls at a gymnastics tournament. We asked them what they liked, what they didn't and what was important to them."
In addition, the company conducted focus groups with the girls and their moms, asking the same questions.
"We conducted some sophisticated consumer research," says Rayden. "And we asked Professor James McNeal with Texas A&M University -- an expert who has written three or four books on consumer behavior -- to join the board as a consultant."
Rayden says in order to emphasize this strategy of giving the customer what she wants, he put "her" picture on the front of the company's third annual report.
"The caption of the picture was 'The Boss,'" Rayden says. "She truly is the boss."
On its own
In 1999, Limited Too was one of several companies that the Limited cut loose. Limited Too kept its name, and the corporation Too Inc. was created, with Rayden at the helm. Rayden says those early days were not easy.
"The Limited had some wonderful processes for running the business," he says. "Plus, there was a sharing of resources. At that point, Limited still had Abercrombie & Fitch, Galyan's and a lot of others. There was a lot of sharing of information across multiple boundaries that was very helpful."
Then there was the lack of infrastructure to contend with following the spin-off from Limited Brands.
"We didn't have an office or a distribution center," Rayden says. "We had to stay focused on sales and earnings and pay for a new home office and distribution center. It was like being on a fast-moving treadmill to build the infrastructure."
By 2002, Rayden felt the company was in a great position.
"For the past six-and-a-half years, we had seen growth every single quarter," he says. "Just when I was thinking we had reached a turning point in the company's history, we hit a speed bump in 2003."
That speed bump was the development and subsequent opening of two additional retail concepts, Mish Mash, which offered a clothing line for teenage girls, and a joint venture with a jewelry company. The result was a major decline for the company.
"That's when a company and its people show their real character," Rayden says. "Both of those ventures took us off our focus. They spread our leadership and management talent too thin and we lost focus."
The result, he says, was that the products in Limited Too stores were all wrong. He got the company back on track by closing the Mish Mash and jewelry stores.
"We got back on our hedgehog concept of 'tween girls, got the product right and didn't have any distractions," says Rayden.
Despite the failures, Rayden is still interested in growing the company.
"Every company needs to grow," Rayden says, "especially retailers that are public companies. And we are reaching our maturity in age -- we have a great need to have another concept to grow."
After the Mish Mash experience, however, Rayden knows that any new concept must focus on the market the company knows best, the 'tweens.
"I made a misstep," says Rayden. "We couldn't be the best in the world in a different age group. We are the best where we are, with 'tweens."
Staying with its target audience, Too Inc. launched its Justice concept in 2004. Justice sells to the same market but at a lower price point. And Rayden isn't afraid that the stores will compete with Limited Too stores, saying that Justice stores appeal to a new segment of the market.
"There's been a change in the entire shopping habits of consumers with the opening of stores like Target and Old Navy," he says. "These customers are looking for lower-priced values, and they are off the malls."
Rayden has high hopes for the concept. The company opened 35 Justice stores last year, all located "off the malls," and plans to have somewhere between 60 and 65 stores opened by the end of this year.
"Our initial thoughts are that eventually we'll have more Justice stores than Limited Toos," says Rayden. "The products are at a 20 percent less price point, but with the same quality and styling."
If that prediction comes true, there will be more than 575 stores in 46 states and Puerto Rico.
Rayden says there is no limit to the potential of both stores.
"We are the world leaders and experts for this customer," he says. "We have huge opportun ities to meet their needs at multiple price points."
Rayden says this strategy is paying off, with sales at both stores growing. With this momentum, Rayden may not need his turnaround skills anytime in the near future
How to reach: Too Inc., (614) 775-3739 or www.tooinc.com