25 Jul Dean & DeLuca – Who, What, Where, When and Why?
Dean & DeLuca – Who, What, Where, When and Why?
Last week’s most clicked article was not a good vibe type story, rather it was one highlighting the shuttering of several Dean & Deluca locations around the globe. Dean & DeLuca for those who don’t know, was one of the great food markets of Manhattan that maybe got a little too great. Growing up in and around Manhattan it was always a favorite stop on a walk-through SoHo for a chocolate, a pastry, or a gift for mom. The clean white walls and ceilings, meticulously and masterfully merchandised products supported by bustling lines of New Yorkers and tourists alike, an institution. As often is the case, when people or operators of a unique business get good at something, the money floods in trying to replicate it and force it to grow. I’ll admit, there was a time I tried courting Dean & DeLuca for expansion to Birmingham MI. To me it seemed a classic fit, a high-end food market in a highly walkable and affluent downtown, how would it fail?
Expansion should be a calculated decision, extensive thought ought to go into the 5Ws. You may remember this adage from a writing class, but its applicable to business as well. Who, What, Where, When and Why? Thinking through these questions might shed light on what went wrong at Dean & DeLuca:
Who: For starters, not the founders, they sold out to a foreign real estate company. How might that change business? What might have been lost? The attention to detail? The ability to recognize the need for a specific product, even if it wasn’t hard driving to the bottom line? Training their people? The passion? Instead they likely got a growth-oriented expansion plan, which likely lost sight of some of the core values that made Dean & DeLuca such a crowd pleaser. Did they value the small independent fine purveyors of New York, to put?
What: A specialty grocery store, café and patisserie. The original location caters to the New York’s elite and tourists, these are extremely hard demographics and spending patterns to find analogs to. Could it be that this concept does not translate well for expansion? Or are there other types of locations that would make sense, but can we make sense of the locations? Airports? City Centers? Affluent Suburbs? What are the tradeoffs to each?
Where: One of the key components to strong strategic growth for a retailer is answering this question: “Where can I maximize my sales volume and minimize my real estate expense?” It wouldn’t be fair to say that Dean & DeLuca didn’t do some homework on where to put their next locations, but how accurate were there predictions on volume to real estate expense? What about the logistics of these new locations? New York City may be the easiest place in the United States to the get the most obscure of groceries and fine foods, after all it is the busiest Port on the Eastern Seaboard. Hawaii by contrast is one of the most challenging places to get groceries. For starters, it’s an island in the middle of the Pacific Ocean the additional transit time and costs will undoubtedly inhibit the ability for a location here to carry the breadth of product it could carry in New York City and almost certainly impact the price of goods. Also, because it is an island, import standards are even more stringent than on the mainland. At the foot stool to the Ritz Carleton in Waikiki Beach, Honolulu might sound like a stellar address, but at what cost? Are the visitors to the Ritz stopping in for a coffee, probably, are they bringing a mill crêpe to their friend’s house for dessert, probably not. I’m not sure the expansion should have headed out to the islands before proving its concept in other areas first. The real estate expense in Waikiki Beach compounded by the extraordinary logistical challenges of operating on an island, would have certainly given me cause for caution. Perhaps a market like Denver’s Cherry Creek or one of Chicago’s wealthy neighborhoods would have been a more strategic step toward World domination of the luxury food space.
When: This is often a hard one to understand. Complex cycles of the economy, changing tastes, fluctuation in consumer spending habits are only the tip of the iceberg. When are we in the business cycle, is now the time to expand? In the case of Dean & DeLuca the new owners’ objective was likely to grow the brand, capitalize on its exceptional pedigree within New York and perpetuate it out to the masses. But were the masses ready for it?
Why: Why take something and ask it to grow. A question business people will ask themselves regularly. For some the answer is profit, for others it lies more within ego, and still others have differing motives.
At ICONIC we often encounter retailers at various stages of their development, some have no location and an idea, some are rapidly expanding franchise businesses, independent operators with new ideas for businesses, nationals chasing unicorn sites. Understanding the 5W’s at ICONIC its imperative to successfully assisting retailers grow. Without the insight and understand your next location it’s likely that it can remain ICONIC.
As it relates to Dean & DeLuca, I would assert that the passion, dedication and consistent delivery of excellence over 30 years is what positioned the owners to sell. They had explored the idea of expansion and come to the conclusion that either they were not prepared for the journey, or that they would inevitably compromise the values that had made it what it was, and that was not an acceptable path for them. Their name is ICONIC in many circles and will remain that way for some time to come, perhaps someone new will try their hand at World Domination of the luxury grocery space.
Thank you for reading, I look forward to hearing your thoughts on the topic, so please comment, email or call!
Kees Janeway – Managing Partner, ICONIC Real Estate