Wharton Club of New York Magazine - Spring 2014 by Wharton Alumni Club Magazine of New York

SPRING 2014

SPRING 2014 ISSUE Letter from the President ��2 Leads Council Relaunch ��3 INTERVIEWS – RETAIL ICONS Jay Baker, W’56 ��4 Neil Blumenthal, WG’10 ��8 Dave Gilboa, WG’10, GEN’10 ��8 Brendan Hoffman, C’90, WG’97 ��12 Roger Farah, W’75 ��15 James S. Cohen, W’80 ��18 CLUB: Helping Nonprofits Excel in New York ��7 University Relations ��14 Wharton Career Services in NY ��22 Take the Call! ��23 Join WCNY ��23

New York Wharton Alumni Re-Invent Retail – Again!

Executive

Committee President Kenneth Beck, WG’87, P’16 CEO Connection kbeck@ceoconnection.com Executive Vice President George Bradt, WG’85 PrimeGenesis Executive Onboarding gbradt@primegenesis.com Vice President, Finance Rosemarie Bonelli, WG’99 American International Group, Inc. Rabonelli@aol.com Vice President, Marketing & Communications Peter Hildick-Smith, C’76, WG’81, P’13 Codex-Group LLC peter@codex-group.com General Counsel and Chief Legal Officer Steven E. Sherman, W’72 Shearman & Sterling LLP sesherman@shearman.com Vice President, Career Development Charles S. Forgang, W’78, P’11 Law Offices of Charles S. Forgang cforgang@forganglaw.com Vice President, Business Development Regina Jaslow, W’97 Penn Club of New York rjaslow@pennclubny.org Vice President, Volunteer Services Diana Davenport, WG’87 The Commonwealth Fund dd@cmwf.org Vice President, Programming Jennifer Gregoriou, W’78 Jennifer Gregoriou, Management Consulting jennifergregoriou@gmail.com Vice President, University Relations Udayan Chattopadhyay, WG01 Ergo udayan@alumni.upenn.edu ••• The Wharton Business School Club of New York 75 Rockefeller Plaza, 18th Floor New York, NY, 10019 Phone : (212) 463-5559 Club website: www.WhartonNY.com

Letter from the President

pring in New York is always welcome! So are shoppers, who power up to 70% of the economy. How could they not? Retailers make the experience so inviting, exciting and convenient! They provide the right selection, merchandised perfectly, priced appropriately. Retail is an art and for decades, brand name retailers have been built, managed, researched, developed, scaled — led by New York Wharton alumni. Jay Baker, W’56, from a small shop in Flushing, developed the nation’s number two department store, and created a retail center at Wharton. Neil Blumenthal, WG’10 and Dave Gilboa, WG’10, GEN’10, worked after classes each day at Wharton to found the hottest retail concept in New York, Warby Parker. Brendan Hoffman, C’90, WG’97, third generation Wharton alum, led the ‘His and Her’ catalog at Nieman Marcus, and Lord & Taylor, before taking on the Bon-Ton Stores. Roger Farah, W’75, a retailer’s retailer, after leading at Saks Fifth Avenue, Footlocker, and Macy’s, turned around and grew Ralph Lauren calmly and remarkably to new heights. James Cohen, W’80, joined his father right out of school, to develop six hundred Hudson News stores, at train stations and airports, first in New York and then nationwide. The world comes to New York to shop for good reason! These six alumni were all helped by mentors, family, and fellow Wharton alumni. WCNY is here to lend you a hand through four initiatives: Our new Leads Councils focus on bringing alumni together to network and bring each other business. Meet our Leads Council coordinator, Melissa Amaya, W’03. Udayan Chattopadhyay, WG’01, tells what you can do to help him bring club and University closer together. Two ample resources already here in Manhattan are Wharton Career Services and Lifelong Learning. Learn here how their valuable and timely services can work for you! Then you can “Take the Call” and help your fellow alumni. Kenneth Beck, WG’87 Chief Executive Officer, CEO Connection President, Wharton Club of New York T 646.416.6991 | F 646.292.5129 kbeck@ceoconnection.com | www.ceoconnection.com

Wharton Club of New York – Magazine Editor Kent Trabing, WG’01 ktrabing@optonline.net

For inquiries regarding sponsorship, please contact: Kay Trongwongsa WG’ 12 Candace Whye W’11 Melanie Zhao W’13 wcny.sponsorship@gmail.com Rates for quarter page ad start as low as $544!

FRONT COVER:

Neil Blumenthal, WG’10 and Dave Gilboa, WG’10, GEN’10 — Founders and co-CEOs of Warby Parker

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WCNY Leads Councils – Relaunch!

Alumni Helping Alumni Get Leads! W

CNY’S Leads Councils have been a major source of business growth and success for New York region alumni for over 10 years, including the sale of a business and winning a $100,000 contract. Now WCNY is relaunching the Leads Councils, giving them a boost by hiring a Wharton alum, Melissa Amaya, W’03, as the Leads Council Coordinator. Melissa answered questions for potential Leads Council members. What is the purpose of the Leads Councils? To network with fellow alumni who are both successful enough and serious enough to commit to a council as a Silver* supporting member of the Wharton Club of NY. At the fraction of the cost compared to commercial lead generating organizations like LeTip and BNI, our Wharton Leads Councils connect you with the best of the best so you can grow your business. Where do they currently meet? Councils currently meet the 1st and 3rd Tuesday of each month at 6pm on 41st Street between Madison and 5th Avenue and the 2nd and 4th Thursday of each month at 7pm near 40th and Lexington. We are starting a new group in Western Long Island. Can you describe your role? I oversee the groups — and thus act as the point of contact for anyone interested in joining a Leads Council. I coordinate placing members in suitable Leads Councils — and find chairs for new councils. I also speak with and coach each new and current member to help them get as much out of the program as possible.

Who benefits from joining Leads Councils? Those striving to develop new business or seek new clients — whether as an entrepreneur or within a major corporation. Can any Wharton alum join a Leads Council? Leads Council members must be a supporting-level member of WCNY at the Silver Level ($500 annual dues) or above. Members will be placed in councils based on their industry to ensure that each council remains noncompetitive. Once members are in a council, they must commit to the group to hold their exclusive spots. Commitment is demonstrated by regular attendance and actively participating by way of providing introductions and passing along leads. Which industries are the Leads Councils looking for? There are openings for occupations in real estate brokering, accounting, banking, IT consulting, management consulting, advertising, marketing and more! How can Club members find out more information about the Leads Councils? Sign into the Club website at www.whartonny.com. Then choose “Groups” in the top menu, and then choose “Leads Councils.” Inquiries can be directed to leads@ whartonny.com. There are 30,000 Wharton alumni in the New York area how valuable is that network to you? 

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Creating Smart Retailers! Jay Baker, W’56 Founder of the Jay H. Baker Retailing Center Former President and Director of Kohl’s

ETAIL is a New York story, largely because retailers are a New York story.

Jay Baker is part of the fabric of that story. His irrepressible good will, and sharp mind propelled him forward in his career as a leader in American retailing. He continues today working with hundreds of young people in New York City and Philadelphia, introducing them to his wonderful world of retail with insights, with his friends and always with a lighthearted laugh. How did you get started in retail? My mother had a hat store, Jay Baker, W’56 Schissel’s Millinery, on Main Street in Flushing, Queens. My job was to greet people: “Thank you for shopping at Schissel’s,” not an easy to thing to say when you’re just a kid. What was your path from Wharton to Kohl’s? I was drafted into the Army for two years, right out of Wharton, and then when I came out, I took an aptitude tests, and retailing kept coming up as something I had a real interest in. So I joined Macy’s Training Program, and worked at Macy’s for 10 years. Then I went to work for Ohrbach’s department store in Manhattan, where I became assistant to Robert Suslow, the President at Ohrbach’s. Bob became my mentor, which was incredibly helpful for my career. When Bob became Chairman at Famous-Barr owned by May Company (now part of Macy’s), I went with him as General Merchandise Manager. When Bob became head of Saks Fifth Avenue, I was asked to be Director of Stores, a new position for 4 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

the firm. Saks is where I first met Roger Farah, W’75, who was starting out in the men’s department. I then became a General Merchandise Manager at Saks, and then was later asked to join the parent company Batus (formerly British American Tobacco), which also owned Marshall Field’s, Gimbels, Kohl’s, Famous-Barr and other retail chains. Batus developed a new specialty store group, called Thimbles, which I took over. I kept that job, and then took over the corporate buying for all the corporations, which in total did about $2 billion in annual sales at the time. In 1986, Batus was dissolved, and I had a chance to become a partner with Bill Kellogg and John Herma. We bought Kohl’s in a leveraged buyout with financial partners — including the Simons, the mall developers, who were terrific partners. And then, we really built Kohl’s!

Can you talk about your relationship to the customer, as a retailer? How important is it to have good intent toward the customer? As you mature, you learn to recognize that the biggest boss you have out there is the consumer. The consumer votes every day if she likes you or doesn’t like you. And if she doesn’t like you, it doesn’t matter what you do. It’s not going to work, and your competition is going to beat you. So you better listen to the consumer — you better listen to what she wants. If you get high and mighty, and think you can choose the things that she wants, then you’ll find out over a period of time. And when you build a concept with the customer, which the customer comes to expect, and you do it well, then you do not deviate from it. You have to be true to what your mission is, true to what you believe, true to what you do and true to the consumer. What was your management style at Kohl’s? We had a philosophy; set the strategy for the company, and then we gave managers the authority and responsibility to get the job done. We then expected them to execute at a very high level. We had an open-door policy. We would visit stores, and sit down with the store manager to sales associates and ask, “What’s going right, and what’s going wrong? Do we need a stronger advertising presence? How’s the merchandise mix?” Then we would tweak our prototype to make it better. We always listened to our people on the firing line, and we learned a lot from them. You have given generously not only to Wharton, but also to other educational institutions. What’s behind that? My parents both worked very hard to make sure that I and my sister could attend college. We were not wealthy people. They wanted us to have a better chance to do more in our lives. Even though they didn’t have money, they always gave their time to people, and gave what they had to charitable causes. That was a lesson that I learned, and luckily, my wife, Patty and I have had a chance

Jay Baker, W’56, received his undergraduate degree in management and marketing, from the Wharton School of the University of Pennsylvania in 1956. From 1956 to 1958 he served in the U.S. Army, becoming a sharpshooter. In 1959, he completed the Macy’s Training Program, working in buying and management positions through 1971. He then worked at Ohrbach’s as a Divisional Merchandising Manager and Assistant to the President until 1975, when he went to work at Famous-Barr. From 1977 to 1986, Jay worked for Batus Retail, as General Merchandise Manager and Director of Stores for Saks Fifth Avenue. He was appointed President and Chairman of Thimbles and later became the Chairman for the corporate buying office for Batus Retail. In 1986, Jay became the President of Kohl’s, working with CEO William Kellogg and Executive Vice President John Herma. Along with outside investors, Jay and his partners led a management buyout of Kohl’s from Batus. Under their leadership, the company grew from 40 to 350 stores, with revenue growing from $280 million to over $6 billion. Today, Kohl’s operates 1,158 stores in 49 states and generates $19.3 billion in sales annually. Jay strongly believes in education and in the future of the retail industry. Soon after his retirement, he became very involved with the Fashion Institute of Technology (FIT) in New York City, where he and his wife Patty donated $10 million to build new buildings, renovate existing spaces and provide 40 scholarships a year to deserving students. At the Wharton School, Jay started the Jay H. Baker Retailing Center, where undergraduate students can study retail management to become future leaders in the retail industry.

Jay Baker, W’56

Many midmarket department store chains no longer exist, or made serious missteps. What did Kohl’s do differently? I have a T-shirt from 1987 after we purchased the company that says “164th Largest Department Store.” Today, amazingly, we’re No. 2 behind Macy’s. That’s how much the world has changed. There wasn’t any one person that made it happen — we worked as a team. My responsibility was to handle merchandise and marketing. Kohl’s had been a discount store; we made it a value department store. The only other store with this concept was Mervyn’s out in California. It is an interesting story: Mervyn’s was $4 billion in sales, and we were $285 million. We used to claim that we were the Mervyn’s of the Midwest. Today, Mervyn’s is out of business, and we are over $19 billion in revenue. The key to our success was great brands at great prices, convenient shopping and ease of shopping. We offered better prices than our competition, because we had a different cost structure, and I think we do the same thing today. In the 1990s, we were the hottest retailer in America, picking up 20% per year. Those 14 years Bill, John and I were together, we never had a down year. Kohl’s has continued to grow since we departed. We were very fortunate. All three partners had really good people who worked under us, and all three left within a year of each other. We focused on building a great organization because a great concept by itself isn’t enough — you have to execute it. It’s all about the people.

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In addition to this program, the “Baker’s Dozen” is a yearly scholarship program funded by Patty and Jay for 13 deserving undergraduate students to study at the University of Pennsylvania. Jay sits on several other boards, including FIT’s Board of Trustees, the Wharton Overseers Board, and as a trustee and is Chairman of the Cal Ripken, Sr. Foundation Board. In Naples, Florida, where he and Patty reside, he is the Chairman of The Baker Museum of Naples, and is a Trustee of the Naples Philharmonic. Jay is also one of the owners of the Port Charlotte Stone Crabs, a Single A, Tampa Bay baseball team.

to carry that on. We are very involved with young people at the Wharton School and at the Fashion Institute of Technology, and Patty also does work at Hunter College. We want to be involved in the giving, to give the money while we’re alive. We think that’s important, because we want to see where the money is going to make sure it’s doing good. What advice do you give to students? Students often ask about their careers and what they should do. I always say, “Have a passion for what you do, because you’re going to spend an awful lot of time at work.” If you are doing something that you don’t have a feel for, it will be difficult to be successful, and you won’t be a happy camper. You’re going to be the person at 5:00 p.m. on Friday who says, “Thank God, it’s 5:00 on Friday!” and that’s sad. I had a lot of tough days in retail, but I never had a day that I didn’t want to get up and go to work.

Second, you have to be someone who can make mistakes. If you don’t step out of the box, then you won’t enjoy out-of-the-box success. And again, you really don’t have a choice but to listen to the customer. You need to be their first, second and third choice. If you’re their tenth choice, then you’re going to be in the graveyard with a lot of other names that were once great retailers. Why did you create the Jay H. Baker Retailing Center? Around the time I retired, a large retailer, that will remain nameless, couldn’t find anyone to succeed its CEO, so it hired someone outside the industry, and it was a total failure. So I thought, “We are not getting enough bright young people into this industry. We retailers had a reputation of working long hours and not making much money. Well, today, you can be financially successful, and at a very young age, you can be running a business! So I wanted to get bright young people into the industry. I was fortunate to go to the Wharton School, and I do think it’s the best business school. Patty and I had already given a pretty sizable donation. We were providing scholarships to 13 people and had given a section of Huntsman Hall. As a result, they put me on the undergraduate board. It’s amazing — you give money, and your personality improves! One day, they called me and asked how I liked it. I said, “Well, it’s nice, but I don’t really do anything. I’m used to running things.” I had been thinking of this retail industry problem and how retailers did not recruit at Wharton because there was only one class related to retail.

So I called them back and said, “Tell you what. I’d be interested in doing something in retailing.” They asked me to come down and meet the Dean, the Vice Dean and others. We had lunch in this big room. Their idea, though, was different from my idea, a lot different. So I called them back and said, “Thank you for the lovely lunch, but we’re not on the same wavelength, so I’ll need to think about it.” They came back, and we had three or four more discussions, and finally President Judith Rodin wrote “We really want to do something with you,” and the Baker Retailing Initiative began. We set up a board of industry leaders. Roger Farah came on from the beginning, and Brendan Hoffman, C’90, WG’97, a little later. Both have been a tremendous help to the Center. The purpose of the board was to speak to the students, let them see what retail leaders are like, give them internships and get them started. Patty and I gave another donation, Daniel Schwarzwalder, WG’72, Jay Baker, W’56, Roger Farah, W’75, at the Jay H Baker Center Continued on page 21 6 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

Helping Nonprofits Excel in NewYork! T

HOUSANDS of nonprofits in New York touch the lives of almost all who live here. Our own Diana Davenport, WG’87, Vice President of Volunteer Services for the Wharton Club of New York works to help improve their performance! Recently, Diana was named Chair of the selection committee for the 2014 New York Community Trust Nonprofit Excellence Awards. Can you tell us about the ‘Excellence Awards’? Thank you. I am really excited about these awards. Now in its eighth year, the Awards Program teaches, recognizes and encourages outstanding management practices among New York’s large and diverse nonprofit community. We encourage all nonprofits to apply! Winning organizations receive $60,000 in cash awards, special mentions and tuition scholarships. Since the first Nonprofit Excellence Awards in 2007, over 550 nonprofit organizations have applied, and 23 have been recognized! What do nonprofits gain, (besides the $60,000)? Participating nonprofit leaders can get the tools and management practices they need across eight key performance areas: Overall management, governance, financial management, cultural competence, human resources, IT practices, communications, and resource development. If a nonprofit applies, it can participate in five clinics that we offer. We offer Pathways to Excellence programs on each of the eight areas so nonprofits can find out what their winning peers are doing. And detailed feedback is

available to all participants, based on the deep reviews that our team conducts. How does the selection committee evaluate the applying organizations? We meet multiple times with experts in those eight areas. We divvy up 70 applications, each of which is 80 to 100 pages long. We discuss the merits of each organization to narrow the pool to 10 semifinalists and, finally, to six finalists. Then, we do half-day site visits to each. What does a winning organization look like? It is very strong in one or two of the eight areas. It broadens the number of clients served, while deepening the attention toward each client. Its board is engaged; the management team is deep; and it works hard to develop and retain its employees. Its financial procedures are clear and monitored. Responsibility is pushed into the organization so that everyone has a stake in the outcome. I hope my fellow Wharton alums will visit http://npccny. org/info/awards.htm and tell their favorite nonprofit to apply!  You may reach Diana at: Diana Davenport Vice President, Administration The Commonwealth Fund One East 75th Street New York, NY 10021

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The New Face of Entrepreneurship Neil Blumenthal, WG’10 Dave Gilboa, WG’10, GEN’10 Founders and co-CEOs of

EIL Blumenthal, WG’10, Dave Gilboa, WG’10, Andy Hunt, WG’10, and Jeff Raider, WG’10, sought out Wharton to do something entrepreneurial and to create a positive impact on the world. At school, they quickly discovered each other, and conceived Warby Parker. You’ve probably heard of, and even purchased their designed prescription eyewear online or at one of their three Manhattan stores. You may not know the story how they set out to transform the optical industry, do good, and have fun. Through Warby Parker’s Buy a Pair Give a Pair program, 500,000 pairs of glasses have been distributed through low-income entrepreneurs. Co-CEOs Neil and Dave, explain in this interview how they methodically planned (almost) every aspect of their company prelaunch and hit the ground running. DAVE GILBOA What’s your background, Dave? I grew up thinking I would be a doctor. Both my parents were doctors. I attended UC Berkeley as a bioengineering major, took the MCAT and was set to attend med school. Then managed care began taking over the healthcare industry, and it did not look rewarding to be a practicing physician. I thought that leading an organization that did something good in the world would be another way to help people, even on a larger scale. I joined Bain & Company and became a management consultant for three years. Then I moved to New York City and worked in finance at a small firm called Allen & Company. After a couple of years, with the thought of either joining an early-stage company, or helping to create something — I decided to attend graduate school at Wharton.

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Neil Blumenthal, WG’10

Dave Gilboa, WG’10, GEN’10

How did you four come together to create Warby Parker? Before I entered school, I was backpacking around Southeast Asia and lost my glasses. They were Prada glasses that cost me $700. Being a full-time student, I could not justify buying a new pair, and went without them during my first semester at school, complaining to my friends about how expensive glasses were. At the same time, my friend Andy, who was on my learning team, experienced the same frustration — he and his girlfriend bought everything online, and wondered why nobody sold glasses there. Jeff became interested in the conversation. And Neil had spent five years running an eyewear nonprofit called VisionSpring. He had visited manufacturers all over the world, and he knew that there was no reason that glasses had to be as expensive as they were. We started talking about this idea at the computer lab at school, and over a few drinks at our favorite bar Roosevelt’s, we started hashing out the foundation of what became Warby Parker. We entered the Wharton Business Plan Competition.

Did you win the competition? We didn’t even make it to the finals, which frustrated us at the time, but it also allowed us to focus on the launch rather than optimizing the plan for the next stage of the competition. The more we learned about the industry, the opportunity and consumers’ frustration of overpaying for glasses, the more excited we were to start. So, Warby Parker had an online launch? Exactly. We launched in February 2010, our last semester at school. We invested our life savings as starting capital on three things — not on our salary, not on employees and not on an office. We invested, first, in getting a website up, because none of us were technical. Second, we invested in our initial set of inventory since we had to pay for it before we knew we could sell it. And third, we hired in a fashion public relations firm. We recognized that we were trying to be disruptive — to sell eyewear online, when no one was doing that effectively, and to sell at a fraction of the price by innovating on the supply chain — but those things were replicable. Creating a brand that was credible in the fashion world, that resonated with consumers, would be defensible. We needed a stamp of approval deep in the fashion industry, so we placed features in GQ and Vogue, hoping they would benefit the brand. We didn’t expect them to drive a lot of sales, so we were blown away by the website traffic they generated. During the first 24 hours of our launch, orders surpassed inventory. We did not have a sold-out function built into the website, so we held an emergency meeting to decide, “Do we take down the website, or do we take orders and apologize?” In those 10 minutes, we received another 12 orders. We frantically called our developer, and he built waitlist

functionality onto the website. We signed up thousands of customers, reaching our sales target for the first year in the first three weeks. Our brothers, sisters, wives, girlfriends, anyone who had a free hour, helped us to pack boxes and receive orders. We stayed up all night, and customer service calls were routed directly to our mobile phones — it was a crazy and exhilarating few weeks. No matter how painful things were for us internally — we wanted to make sure to prioritize the customer experience, and make sure that those initial customers came away with a good impression of the brand. Many firms use public relations and are featured in premier fashion magazines. What was the difference here? If you talk to people in the startup world today, they’ll talk about the lean startup methodology of getting a minimal viable product out there, learning what customers want and iterating. We took the opposite approach, where we wanted to have a very polished thought-out story, design and brand from the day we launched. I think that’s important in the fashion industry, where you can’t put out a half-baked idea, wait to get customer feedback and then iterate on that. We wanted to have a point of view on style, design, what our brand stood for — from the fashion elements to the design of the website — to the social mission behind our brand, to how we communicated with our customers. We spent 18 months putting a ton of thought into every aspect of the business. These details in combination gave a

Neil Blumenthal is a cofounder and co-CEO of Warby Parker, a transformative lifestyle brand that offers designer eyewear at a revolutionary price, while leading the way for socially conscious businesses. Prior to launching Warby Parker in 2010, Neil served as Director of VisionSpring, a nonprofit social enterprise that trains low-income women to start their own businesses selling affordable eyeglasses to individuals living on less than $4 per day in developing countries. He was responsible for developing VisionSpring’s award-winning strategy (Fast Company’s Social Capitalist Award in 2008, 2007 and 2005) and expanding VisionSpring’s global presence from one to 10 countries. In 2005, Neil was named a Fellow for Emerging Leaders in Public Service at NYU’s Robert F. Wagner School for Public Service.

Neil Blumenthal, WG’10

WE DID NOT HAVE A SOLD-OUT FUNCTION BUILT INTO THE WEBSITE … WE HELD AN EMERGENCY MEETING TO DECIDE, “DO WE TAKE DOWN THE WEBSITE, OR DO WE TAKE ORDERS AND APOLOGIZE?” IN THOSE 10 MINUTES, WE RECEIVED ANOTHER 12 ORDERS.

In 2012, he was named a Young Global Leader by the World Economic Forum and one of the 100 Most Creative People in Business by Fast Company. In 2013, he received an EY Entrepreneur of the Year Award and was recognized as part of the Next Establishment by Vanity Fair and one of Crain’s New York Business 40 Under Forty. Neil serves on the board of RxArt and on the United Nations Foundation Global Entrepreneurs Council. A native of New York City, Neil received his B.A. from Tufts University and his MBA from The Wharton School of the University of Pennsylvania. Neil lives in Greenwich Village with his wife Rachel, the founder of Cricket’s Circle.

cohesive brand story that resonated with people. We wanted our Warby Parker brand to lead with the fashion element. We felt that it didn’t matter how affordable our glasses were, that we had free try-ons, or how good people felt about their purchase because of the social mission. If our glasses didn’t look good, and READ ARTICLES ONLINE AT WWW.READWNY.COM | 9

if people didn’t think it was a great fashion brand, then they wouldn’t wear our glasses.

IF YOU TALK TO PEOPLE IN THE STARTUP WORLD TODAY, THEY’LL TALK ABOUT THE LEAN STARTUP METHODOLOGY OF GETTING A MINIMAL VIABLE PRODUCT OUT THERE, LEARNING WHAT CUSTOMERS WANT AND ITERATING. WE TOOK AN OPPOSITE APPROACH.

Was there a debate among you about starting sooner versus taking the time to perfect Warby Parker? No. We each recognized that we wanted to be very polished. As an example, we took six months to decide on a name. We still have a spreadsheet that shows over 2,000 names that we texted back and forth. We focused on every detail to make sure we felt great about the name of each individual frame and the logo. We just didn’t want to have to put a product out there that we weren’t proud of. That same attitude continues to be built into the DNA of the company. For example, we started publishing the Warby Parker annual report. It was just a way for us to share some insights about the company with our customers. We weren’t expecting it to go viral. Some of our highest sales dates ever surrounded the release of those annual reports. We found that, the more we shared, the more customers wanted to share about our company — it ends up being an interesting viral loop.

How did your brick-and-mortar stores start? People called and asked, “We saw on your website that you’re sold out — can we come to your office and try them on?” We said, “OK, but our office is our apartment!” We just invited people over and laid out the glasses on the dining room table. Customers loved the experience, the feeling that they were discovering something before anyone else. Every person who came to our apartment ended up buying at least one pair. So when we moved to New York City, we dedicated part of our office as a showroom. Later, we replicated that showroom experience in 15 boutiques around the country. We’ve also done pop-up shops over the holidays. And then there is the Warby Parker Class Trip, a refurbished old yellow school bus that tours the country. We find a part of town where we think our customers shop and set up a mobile shop there for a few weeks. More recently, we’ve opened three retail stores in Manhattan at 121 Greene Street, 819 Washington Street, and 1209 Lexington Avenue. None of these things were built into our business plan, but they have worked well. The majority of sales are still done online, but we find that having a physical presence enhances our brand. Customers buy their first pair in a store, and future pairs online. What was it like having four founders? People advised us to not start a company with four founders. It is way too many people — you’re splitting your equity four ways. Also, they suggested not starting a company with friends. We took their advice and 10 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

ignored it! We just tried to be very thoughtful and not let issues develop between us. For example, we set up monthly 360-degree feedback sessions — where we would not talk about business — purely interpersonal feedback. “When you send me a multi-paragraph email at 4 in the morning, giving me advice on things I’m working on, that I had no chance to update you on, it is frustrating that you’re not trusting that I’m already thinking about these things.” It helped prevent issues building up below the surface, to give feedback to each other in a way that everyone felt comfortable with. Having four of us early on slowed us down, but it forced us to be thoughtful about every aspect of the business. We all trusted each other in that we were all hardworking, had great thoughts about the direction of the brand, were smart and valued each other. If it had been two or three of us, we would have missed out on certain elements that created magic early on. NEIL BLUMENTHAL What made the Warby Parker team so effective through those initial stages? When we had this initial conversation at the computer lab, Dave had just lost a pair of glasses in Thailand. Jeff had also lost his glasses but was hesitant to replace them now that he was a student. Andy had a great idea to sell glasses online. I knew there was a big disconnect between the cost of manufacturing and the price they sold for. The light bulb went off for the four of us. We went home that night, and the next day, we all sought each other out — none of us could sleep. That evening, we went to a bar and looked each other in the eye to say, “Hey, are we going to do this?” We promised two things. First, we would bust our butts and work harder than ever before — not that we hadn’t worked 20 hours a day at some previous job, but we knew that this would be different. Second, we would remain friends throughout the process. This was no small task, because people far smarter than we are have made the

ways. We surveyed them. They joined our focus groups. If we had a question about search engine optimization (SEO), we spoke to someone who had done SEO work the past five years. If we had marketing questions, we could ask someone who worked at CocaCola.

How was it starting a company at Wharton? The support we received at Wharton was essential to our success. Professor Raju, the head of the marketing department, and a pricing expert, met with us. We had made this beautiful PowerPoint presentation, and prefaced it by explaining that we were building a company that would to sell $500 pairs of glasses for $45.00. He didn’t even look at our deck. He told us, “It’s outside the realm of believability.” He helped us to figure out how to price the glasses, which was critical.

What kind of collaborations has Warby Parker taken on? Warby Parker created a sunglasses collaboration with the designer Suno, among others. We also collaborate with leaders in the hospitality industry. We established 1950s-inspired newsstands in Standard Hotel lobbies, called The Readery, where you can buy our glasses and sunglasses, plus reading material. Also, if you take the StndAIR seaplane, which flies from the Hudson River to Shelter Island, you can choose a pair of Warby Parker sunglasses with a copy of CliffsNotes of great American novels.

Professor David Bell became one of our investors. He helped us put together different conjoint surveys that allowed us to test different elements of our offering — from branding, to marketing message, to price points — before we launched. So we could get a lot of feedback without exposing the brand. Our classmates helped us in multiple

Where does Warby Parker go from here? We want to build the next great lifestyle brand, and to continue doing good while being profitable. To do that we need to scale. Right now, we want as many people to know about us as humanly possible.  – KT

What else did Warby Parker have going for it? Goodwill. The four of us, through the first 20 or so years of our lives, had become surrounded with people who were so supportive and so willing to help. Parents, aunts and uncles, friends from high school — it was remarkable. The fact that we were building an organization designed to be transformative — to demonstrate that companies can be profitable and can do good in the world, without charging a premium for it — that is a powerful idea, and a lot of people supported that notion, and had goodwill toward us. There was serendipity in that our networks were exactly aligned with our customers. The best businesses solve real problems. The best way to identify those problems is usually when they affect you.

Dave Gilboa is the Co-Founder and CoCEO of Warby Parker, a transformative lifestyle brand offering designer eyewear at a revolutionary price while leading the way for socially-conscious businesses. Prior to Warby Parker, Dave was an Associate at merchant bank Allen & Company and, earlier, worked at Bain & Company. He also served as Special Assistant to the Founder and CEO of the TriZetto Group, and has held strategy and business development roles at Genomic Health and Crescendo Bioscience. Dave has worked extensively with non-profit organizations, and serves as a founding member of the Entrepreneur Board of Venture for America, an organization dedicated to mobilizing graduates as entrepreneurs.

Dave Gilboa, WG’10, GEN’10

same promise, but quickly became enemies. We implemented systems that did allow us to remain friends. First, we decided that we would be equal partners — we each put the same amount of money into the business, so we all had equal equity. We then created a vesting schedule from when we started until graduation, with monthly vesting, so anyone could leave the company without feeling guilty and without anyone else feeling resentful. As it turned out, we were so excited about the opportunity that nobody did leave before graduation, but having that escape valve helped. To some extent, we were living parallel lives — going to school, enjoying the advantages of attending Wharton and then applying every single lesson we learned that day to the business later that evening.

Born in Sweden and raised in San Diego, Dave graduated with a BS in Bioengineering with Honors from UC Berkeley and holds an MBA from Wharton Business School.

READ ARTICLES ONLINE AT WWW.READWNY.COM | 11

CEO as Lifelong Learner Brendan Hoffman, C’90, WG’97 President and CEO – The Bon-Ton Stores

TUDYING at Penn is a tradition in the family of Brendan Hoffman, C’90, and WG’97. Beginning with his grandfather, Charles Hoffman, W’37, then his father Bruce Hoffman, W’66, then followed by his brother, David Hoffman, C’98. With a penchant to keep learning, Brendan leveraged an early affinity for retail into roles of greater scope and responsibility. When did you decide to make retail a career? As a Penn undergrad, I had considered law, but ended up as a history major. In my senior year, my father said, “With a history degree, you’re going to make $12,000 a year and live at home.” I had to find a path to prevent that. That was the only time I could remember my father not being completely supportive of me, so those words were motivating. I decided to try retail as a career path because it offered terrific training programs and a solid foundation in business. It would allow me to get some good experience, and then go back and get my MBA. At my first job out of school, with Lord & Taylor, I realized that retail offered exactly what I was looking for: the balance of analytics from the business side, fashion, and a tangible product that was ever-changing. In 1996, I returned to Wharton to attend the Wharton Executive MBA program, which allowed me to keep working while I attended classes. I gained new tools to use and made relationships with other students to bring back to my retail career.

What was that like — bringing an established catalog online? It was like the Wild, Wild West. Every year, it was like starting over because things were changing so much. When I think of what it was like in 2002, particularly the luxury side of the business, when customers were apprehensive about shopping online, for Neiman Marcus to come out selling Manolo Blahnik, Prada and Gucci online, it was unheard of.

How did Wharton affect your career? I was very fortunate. I joined Neiman Marcus out of graduate school in 1998. In 2002, they promoted me to CEO of Neiman Marcus Direct, the catalog arm of Neiman Marcus, doing $600 million in annual sales at the time. This division had been a catalog business since 1939. With the explosion of e-commerce, they wanted someone who was young, had the right skill set and was not weighed down by baggage of the past. So like lots of things, timing is everything. The board was also very clear that having that Wharton MBA was important to them and helped validate their decision to promote me.

Did those e-commerce skills help your current work? Absolutely, in today’s retail world, you’re going to be multichannel. For department stores like the Bon Ton, which are over 100 years old, e-commerce is the fastest-growing part of our business. It is not just giving customers the ability to shop online, but also gives us the ability to reach out and touch customers through email, apps, tweets and social media. Every year, the game continues to change. Those six years running a major e-commerce platform were invaluable to me, in that I understand how meaningful the Web and digital are for any business.

12 | WHARTON CLUB OF NEW YORK

The trend to act local, eat local and buy local only grows. How does this play out with BonTon’s local brands? The Bon-Ton operates almost 300 stores in different regions, under different brand names: Carson Pirie Scott in Chicago, Younkers in Nebraska and Bon-Ton Stores on the Eastern seaboard. We serve big cities like Chicago, as well as more rural areas, so we serve a wide range of customers. We spend a lot of time trying to understand our different customer profiles, and to understand the merchandise assortment and a marketing cadence that touches all these different customers. In each of these environments, we also spend time understanding our customer as she ages, as the world continues to change, and

as new customers find the BonTon. What’s your sense of consumers and their confidence today? Retailers are a bit unsure of where the consumer is going, and what’s going on in Washington adds to that. Specific to the Bon-Ton, we focus on what we can control, and there’s enough there to improve the way the business has been run and provide a better experience for customers in the store and online — improve the products they’re considering and the pricing we are able to offer — to make sure this business keeps growing. How is Bon-Ton responding to online retailers? Positively. I think Amazon is doing things that other companies can learn from. They’re going to continue to grow and continue to be aggressive, and we just have to focus on what we can do to appeal to our customers. We have plenty of opportunities at the Bon-Ton, which has a thriving e-commerce business. Boards have made you the CEO of large retail organizations, and it was reported that you were considered to head up J.C. Penney. What are your strengths? One of the things that being at Penn and Wharton did for me was that it humbled me because I realized how many smart people surrounded me. That kept me grounded throughout my career. As a leader, you set the directions for the business. You

I’VE DEVOURED THESE BOOKS AND OTHERS BECAUSE THERE ARE GREAT NUGGETS. I DO FIND THAT WHAT’S HAPPENED IN THE PAST TENDS TO REPEAT ITSELF, AND SO, I TRY TO MAKE SURE I HAVE AS MUCH KNOWLEDGE OF THE PAST IN MY INDUSTRY AS I CAN.

Brendan Hoffman, C’90, WG’97, became President and CEO of The Bon-Ton Stores on February 7, 2012 and was concurrently elected to the Board of Directors. Mr. Hoffman has spent his entire career as a retail executive. From October 2008 up to his appointment at Bon-Ton, he served as CEO and President of Lord & Taylor. Prior to this, he had served for six years as President and CEO of Neiman Marcus Direct, a subsidiary of The Neiman Marcus Group, where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com. Mr. Hoffman also served as Vice President of The Last Call Clearance Division at Neiman Marcus, and as a Divisional Merchandise Manager of Bergdorf Goodman. He started his career with Lord & Taylor. Mr. Hoffman has served as a Director of Pier 1 Imports since January 2011.

Brendan Hoffman, C’90, WG’97

You are on the board of the Jay H. Baker Retailing Center? Yes, it allows me personally to connect with two things I like most: Penn and retail. With the Jay H. Baker Program in its ninth year, today’s retailoriented student has such a head start. We see them graduating into retail and starting on an executive path. When I went to Wharton, there was no classwork touching on retail, at all. In fact, I remember being in a class, while I was a dress shirt buyer at Lord & Taylor. One of the professors called on me and asked, “What does the dress shirt buyer want?” Through the Baker Program, we have hundreds of students who are exposed not only to a Wharton-based curriculum, but also to extracurricular activities that allow them to really understand a career in retail.

He has been honored by numerous charities throughout his career. He has received the Commit to Win Award, given annually by Win, New York City’s largest homeless shelter for families. In 2013, he was honored by Kids in Distressed Situations (K.I.D.S.) and Fashion Delivers Charitable Foundation, one of the fashion industry’s most prestigious organizations. In 2011, he was named “Father of the Year” and received the Milton Margolis Humanitarian Award from the National Father’s Day Council. Additionally, he has served on the Board of Directors of Phoenix House and the Board of Directors of the American Red Cross of Greater New York. He currently serves on the Advisory Board of the Jay H. Baker Retailing Initiative at the Wharton School of the University of Pennsylvania. Mr. Hoffman has a BA and MBA from the University of Pennsylvania. He lives in New York’s Westchester County with his wife, son and daughter. READ ARTICLES ONLINE AT WWW.READWNY.COM | 13

have to be able to figure out what your goals are and what your strategy is going to be. You communicate that internally to your team, so you get everyone to buy in, and then externally to your stakeholders. Don’t let your ego interfere. I try to prepare my people to do their jobs so that I can be the least important person in the room. I need a head of marketing who understands marketing better than I do, a head merchant who understands merchandising better than I do and certainly a CFO who understands balance sheets better than I do. My job is to set the strategy and direction for the company, and get out of the way. You were honored at the 70 annual Father of the Year Awards. Also, Bon-Ton Stores recently gave $426,000 to the Boy & Girls Clubs of America. Do you promote work life balance at your company? I try to promote an appropriate work-life balance. When I was at Neiman Marcus, my CEO, Burt Tansky, was always very clear that our priorities were at home. Certain companies make you feel guilty for not being at the office. Achieving a work-life balance was a great lesson I learned at Neiman Marcus, and that’s what I tried to do at Lord & Taylor as well as here. Hopefully, that gives the people within my organization the opportunity to be good fathers, sons, mothers, daughters, wives and husbands. th

Do you have any favorite books on the retail consumer goods industry? I certainly have read a few over the years. My favorite was something called the “His and Her Book” by Stanley Marcus. It was about the fantasy world of the Neiman Marcus catalog. When I was named CEO of Neiman Marcus Direct, unfortunately, Mr. Marcus was in failing health, and I wasn’t able to spend time with him, but I liked knowing the history of retail, so I was able to get my hands on this book, along with his other books. As I was now in charge of this Christmas catalog, it was a great resource for me to go back through the archives and read his comments. In the ‘60s, he talked about something he called “sonavision,” which basically predicted the Internet — that someday we’d be able to sit at home and, through our televisions, be able to buy products. That was something that I saw, literally, my first week on the job there, and it gave me a framework for what I was doing and the responsibility I had with this brand. Another author was Marvin Traub, the legendary retailer at Bloomingdale’s, who wrote Like No Other Store … and Like No Other Career. I’ve devoured these books and others because there are great nuggets. I do find that what’s happened in the past tends to repeat itself, and so, I try to make sure I have as much knowledge of the past in my industry as I can.  – KT 14 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

Connecting Club & School

Udayan Chattopadhyay, WG’01 Vice President of University Relations

DAYAN Chattopadhyay, WG’01, (Udi), grew up in London, and came to the US to perform his studies at Wharton. Udi has since lived in New York, applying his talents to strategic consulting and business development at startups, nonprofits and midsize companies. Udi is currently Chief Operating Officer at Four Rivers, an investment company focused on Myanmar, launched by Ergo, a leading emergingmarkets advisory and intelligence firm. He has been involved actively with WCNY since 2007, when he was asked to manage sponsorships primarily for the annual Joseph Wharton Dinner. What are your hopes as the new VP of University Relations? University relations is about connecting the club and local alumni to Penn and Wharton. We want to help the school leverage the immense power of its largest regional alumni community, the New York metro area! I work with those on campus heading up strategic initiatives, and with the heads of affinity groups and divisions within WCNY. Together, we identify areas where WCNY can add value and give back. What would you most like readers to know or do? Reach out to me to participate in this initiative. You can get involved in areas that you want to gain experience and knowledge. There could be an initiative — say, in government, marketing, media, finance, strategy and so on — that you may be passionate about, are looking to find out more about, or are seeking to strengthen relationships with professors, departments, or school organizations. It’s going to be fun! You may contact Udi at udayan@ alumni.upenn.edu. 

A Classic Retailer Roger Farah, W’75 Executive Vice Chairman of Ralph Lauren Corporation

What is the essence of retail that you find exciting? What’s wonderful to me about retailing is that it’s constantly changing. Whatever your strategies or products are, you’re getting daily feedback. Every day, you’re getting a report card from the customer. Your ability to strategize, execute and then course-correct is never-endingly tested. As an executive, your day is very diverse: you’re talking about product … you’re talking about manufacturing, supply chain and marketing … you’re talking about technology or finance. Every day is different and rich with experience. Did you choose retail right out of Wharton? My father was a small manufacturer in New York City, and growing up, I had worked for him in different capacities during my summers. When I graduated from Wharton, I thought I might go back into the family business, but we talked about it, and he said, “You’ve got this great business education. Why don’t you get a couple of years of retail to make you well-rounded?” When I started at the Saks Fifth Avenue training program, I found that I liked being in a bigger company, with the opportunity to advance, and I never went back to the family business. As I progressed pretty quickly

Roger Farah, W’75

OGER Farah has studied iconic retailers and led iconic retail companies. The last 13 years, Roger safeguarded the iconic brand, Ralph Lauren, and accelerated the growth of its sales, market share, employee base, and global footprint. In doing so, Roger has become an icon himself, respected in the industry for his insights, leadership and the ability to articulate complex issues into actionable plans.

Roger Farah, W’75, was President and Chief Operating Officer of Ralph Lauren Corporation and a member of the company’s Board of Directors from 2000 to 2013. In this role, Mr. Farah oversaw the development and execution of Ralph Lauren’s strategic growth and operating initiatives on a global scale. During the past 13 years, the company’s global sales have grown from $1.5 billion to over $7.0 billion. The company’s market value has grown from $1.2 billion to $18 billion. Ralph Lauren is a global leader in the design, marketing and distribution of premium lifestyle products, including men’s, women’s and children’s apparel, accessories, fragrances, and home furnishings. The company is represented in over 82 countries and employs more than 30,000 individuals worldwide.

From 1994 to 2000, Mr. Farah was Chairman of the Board and CEO of Foot Locker. Prior to that, Mr. Farah served as President and COO of Macy’s, Chairman and CEO of Federated Merchandising Services, and Chairman and CEO of Rich’s department stores. From 1975 to 1987, Mr. Farah held several executive positions at Saks Fifth Avenue, including Senior Vice President and General Merchandise Manager. READ ARTICLES ONLINE AT WWW.READWNY.COM | 15

through the ranks, I found the pace, the people and the diversity of the day that much more interesting. Any thoughts on what you learned from your father? My father was the classic story of an immigrant. He could not complete his education because he had to drop out of school to support his family. His parents both died when he was in the ninth grade. He had to, through sheer tenacity and ingenuity, build a business and build a life for his extended family. So I learned from my father hard work and family values — that kind of determination was an important key to my success. I never expected anyone to give me anything. I outworked, and committed myself to success. That came from watching him. I had a chance to go to Wharton, which he was so proud of — he never could. That work ethic, being a self-made man, is a very important part of what he imparted to me. What is the interdependency of retail within Ralph Lauren? Everything we do as a company is geared toward the consumer. The starting point is Ralph and his team designing products for the end consumer. Then it’s a question of, what’s the distribution channel? Is it e-commerce, is it brick-and-mortar, is it wholesale, or working with licensed partners? All of those are part of our distribution strategy. Then it is just a question of getting it in front of the consumers. How did you know what to do to dramatically grow the revenues, control costs and increase the value of Ralph Lauren? What gave you the confidence to act boldly? Post Wharton, I grew up in the retail business. I worked at Saks Fifth Avenue for many years, worked at department stores for much of my career, and had a chance to run a global specialty business in Foot Locker. By the time I arrived at Ralph Lauren in 2000, certainly, I was very familiar and a big fan of the brand — the thing we had to do was figure out how to successfully run a designer brand in a public company, because most designer brands were not public companies.This was a challenge, but well within my experience, having worked in all these specialized areas, both domestically and internationally. When you looked at this great brand, it was not succeeding on Wall Street — the stock price was $11 to $12 at the time. What we had to do and what was the sequence and the timing were pretty clear to me. I think Ralph and I created a good partnership over the 13 years I ran the business for him. It wasn’t because I parachuted in from another industry with a lot of ideas that were not grounded in experience or reality. We built a terrific team 16 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

Ralph Lauren with Roger Farah, W’75 and executed the heck out of it. Where do Ralph Lauren stores exist today? Are you expanding? Sixty-five percent of our sales are in the U.S. but we have distribution today in 82 countries, including Asia Pacific, Europe and South America. Our employee population has grown from 2,000 when I started, to 30,000 now. We see the customer as a global customer. Someone who lives in London can shop in Shanghai. Our Chinese customer can shop in France. It’s less about geography and more about the quality of your brand and the appetite for your product around the world. As we develop internationally, there has been a subtle shift in the merchandise to emphasize aspirational, lifestyle products. People want to be that customer in the ad, living the good life. They want iconic, great-looking products. How important is it for the founding family to stay involved in a retail company? It’s terrific if there is continuity with the founding family, assuming that the next generation, or third or fourth

EVERYTHING WE DO AS A COMPANY IS GEARED TOWARD THE CONSUMER. THE STARTING POINT IS RALPH AND HIS TEAM DESIGNING PRODUCTS FOR THE END CONSUMER. THEN IT’S A QUESTION OF, WHAT’S THE DISTRIBUTION CHANNEL? IS IT E-COMMERCE, IS IT BRICK-AND-MORTAR, IS IT WHOLESALE, OR WORKING WITH LICENSED PARTNERS? ALL OF THOSE ARE PART OF OUR DISTRIBUTION STRATEGY. THEN IT IS JUST A QUESTION OF GETTING IT IN FRONT OF THE CONSUMERS.

Mr. Farah is on the Board of Directors of Aetna and Progressive Corp. He is also a member of the Executive Committee for the National Retail Federation. In the past, he has served as a member of the Board of Directors of the Wharton School of Business. Mr. Farah received a B.S. in economics from the Wharton School of the University of Pennsylvania.

generation, stays active and current. There are plenty of examples like Estée Lauder. I know you interviewed Leonard Lauder — where his mother started the business, Leonard ran it for many years, and his son and nieces and nephews are in the business. There are plenty of examples like Dillard’s or Belk, where the next generation is running them very well. If, on the other hand, the next generation chooses to pursue other interests, then you need to bring in professional management to keep the company, public or private, going. What is it like working with Ralph Lauren? He’s a real genius in that his vision — the movie that is playing in his head of the customer — is so unique. It has been a privilege and an honor to partner with him and trying to extend it around the world, to build a corporation with talented people who buy into his dream, in a most unusual and passionate way. We have people today working all over the world, working so hard, with such personal commitments, because they believe in Ralph’s vision. I count myself as one of those. How do you select and grow people? As you probably have heard from others, it is all about the team. It’s all about identifying a strategy that you

think is right, and then matching talented people and their skills with the strategy that you have embarked on. Different retail strategies have different talent needs, and the ability to grow, mentor, train and develop is the wellspring of all successful companies. Some of that is building the right culture for people to thrive, some of it is how you train and develop people. Time, energy and money are required to build a committed, loyal, hardworking group of people who buy into your strategy and then execute the hell out of it. If you peel back the covers of most successful companies, you will find that. Leaders have different ways of doing it. Some have personal charm, while others have dogged determination. At the end of the day, if you don’t have everyone buying in and pulling his or her own weight, then you’re not going to have a successful business. What books do you read on retail or more broadly? I’m a big reader. I have a pretty extensive library at home that covers most of the retail books. They start with books by and about the deans of the industry: Stanley Marcus, John Wanamaker, and Marshall Field. I’ve read most of the books on Tiffany or Gucci, up until current designers. I also read about innovative retail leaders like Steve Jobs. I like reading historical biographies and understanding how people operate, like Teddy Roosevelt and Winston Churchill, those iconic people who have helped shape the world that we live in, are interesting to me. They faced challenges and difficult decisions and stuck to their guns — and for the most part, history has proven them right! What are your thoughts about Wharton? It’s an extraordinary school, and it’s what you make of it. It gives you a world-class education, and has everything available both in general and specialized terms. An undergrad and graduate education can open doors, but it is really what you put into it. It laid a foundation for me — how I think about business, how I analyze problems — that I find myself still going back to.  – KT Ralph Lauren Store Window READ ARTICLES ONLINE AT WWW.READWNY.COM | 17

Raising Retail

STANDARDS James S. Cohen, W’80 President and CEO of Hudson Media

AMES Cohen, W’80, with his father and the company, found a niche in undervalued retail locations in urban train stations and cavernous airport wings, leveraging their skills in merchandising and management. They did so based on a deep understanding of their longheld magazine distribution business and their customers — with the help of a Wharton education. What were the origins of Hudson News? In 1947, my father graduated college and went to work for his father. He took my grandfather’s relatively small newspaper distributorship and, over the next 30 years, grew the magazine side exponentially, so that, by the 1970s, Hudson County News Company was the largest of 300 magazine distribution companies in the country. He James S. Cohen, W’80 delivered across the New York City metropolitan area to street stands, delis, grocery stores, drug chains, bookstores, supermarkets — and to airports and train stations. So you see where this is going. When did you begin working at Hudson News, and what did you do there? As a teenager, I worked summers for my father. My first job was counting returns — which are the unsold magazines that come back for credit. In those days, almost one out of every two copies came back. Every 18 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

magazine had a five-digit bipad number. I would open up a box of returns at my station, enter the issue code and the quantity. Then I would throw it on a conveyer belt to be saved, returned or shredded. That went to a computer affidavit, and we would get credit. The next summer, I joined our merchandising staff; we still have 1,000 people throughout the Northeast who put up the new magazines at the supermarkets, fix the racks, take the unsolds down and box them for return. I continued to work in other departments, and by the late 1970s, I knew I would work for my father. Why was that? I got along great with my father; it was a great business; and it was a lot of fun. Sales were growing. We were just starting to venture out to supermarkets from independents — it had great potential. How did retail begin at the Hudson County News Company? When I came out of Wharton undergrad in 1980, I began taking management positions. By the mid-1980s, I was the magazine distribution manager. That job coordinates the allocation of magazines from the publishers to the retailers. I noticed that some of our biggest accounts — like Penn Station or Grand Central, even though they had

WE BOUGHT IT WITH 100% DEBT — $40 MILLION BORROWED AND A $25 MILLION SELLER’S NOTE, PUTTING UP THE ASSETS OF THE WHOLESALE AND THE RETAIL COMPANY. AS GOOD AS ITS PROPERTIES WERE, LESS THAN TWO YEARS REMAINED ON ITS LEASES. huge sales for each title — they did not have that many titles authorized, maybe only 120 titles. It may sound like a lot — it’s not. These stores preferred to carry candy or gifts because magazines had relatively low margins and high handling costs. I said to my father that if we could control these busy outlets, the turns that magazines create could more than offset the low margins. Weeklies turned 52 times per year, and monthlies turned 12 times. Plus, magazines had no inventory risk because they were 100% returnable. Understand, my dream at 25 years old was not to build a retail empire, only to increase our wholesale business. At the same time, my father hired someone from the retail industry, Mario DiDomizio, to increase business at some of Hudson’s biggest independent accounts. Mario also wanted to build a retail company, because that was the world he came from. Together, we prevailed upon my father. Our first store was a street store on 66th Street and Second Avenue in the Solow Building. It was the first Hudson News. Sales were great, and everyone loved it. It was a boon to our wholesale business, but it did not make money because the rent was $150,000 per year. It did show us that, under the right circumstances, it could be done, but midtown Manhattan was not the right spot. In 1987, LaGuardia Airport’s main terminal came up for bid, and we decided to put our theory to the test. We were successful with our bid, our design and product mix. We almost doubled the sales of our predecessor. They had carried dozens of titles, while we carried a thousand. In addition to carrying Car and Driver, we’d have the Car and Driver’s Buyer’s Guide and the Truck Buyer’s Guide. Customers, instead of buying one magazine, would buy three. Publishers gave a bigger rebate in airport terminals, and instead of giving you a 10% retail allowance, you got 20%. We also received a share of the publisher’s promotional advertising budgets for checkouts and space advertising. Based on these factors, we were successful. Didn’t other distributors try retail? Every magazine distributor dreamed of owning retail stores, but most were happy with having a couple of smoke shops, then they would run into the issue we had — high rents! Some got tired of retailing. Retail demands that you know what you’re doing. Even for us, expansion came slowly. You see, my father

had actually started a retail business in the 1960s, a small chain called Garden State News Stores. He quickly realized that this was not the wholesale business and sold them to owner operators. That’s why he was hesitant to get back in. We had this running joke. My father would say, “I hate retail. I hate retail,” But we prevailed on him and opened a successful airport store. Then an even more challenging opportunity came — if you remember what the Port Authority Station was like in the early 1990s — and he’d groan, “I hate retail!” But Mario would say, “Let’s take a chance here,” and it worked out. After that, he kept saying, “I hate retail,” but would have a smile on his face. What could be more iconic New York retail? The hustle and bustle, the grittiness of LaGuardia, the Port Authority ... Yes, but we degritted it! If you remember Grand Central Terminal was like a cave and those stores were like holes! You could not walk into them. First of all, the papers were piled up 10 feet in front of the store, and the display was limited. Even before the 1999 Grand Central renovation, we retrofitted them and opened stores that people could walk into, displaying dozens more titles. We made it a showcase. We have a photo of a ribbon cutting in Grand Central with John F. Kennedy, Jr. who was publishing George at the time. His mother was very instrumental in keeping Grand Central from being destroyed. Today, we call our largest store in Grand Central “America’s Newsstand.” Everyone goes by it. Can you talk about working with your father, Robert Cohen? You have to be lucky. You have to be willing to give. My father and I found that right mix. We agreed most of the time on how the business should be run. He was one tough guy and a major success, but on the other hand, for many years, he didn’t have someone like me to be his guy to seek out new opportunities with him. So I was happy to do that. I loved being the detail guy, going out to research the information he needed. Even in my early 20s, I would give him all the ammunition for a tough negotiation with a publisher. I loved being able to help him be smarter, and he loved it, too. Eventually, I went out to make my own presentations, and he was happy to let me do that. Some fathers can’t share the spotlight — he was thrilled for me to share the spotlight. You can have a big ego and still be proud of your children. Do you recall a project you worked on with your father? In the 1980s, I told him that a lot of publisher reps were not exactly Wharton grads, that they didn’t work the titles well. So, with his guidance, I created a new sales READ ARTICLES ONLINE AT WWW.READWNY.COM | 19

America’s Newsstand - In Grand Central Station and distribution program for the publishers in return for an added percentage of sales. We made sure retail chains had them authorized, and paid our merchandisers extra money to do a special checkup halfway through the on-sale period, and give us that information. Then we would redistribute to the stores all the unsolds that came back early, and put them back out in the field. My first customer was a little magazine called Venture put out by Arthur Lipper. He sold only 700 copies in New York because he was in the wrong locations. If you don’t remove them from the places that don’t sell and put them in the places that do sell, then you’re going to have a lousy sell-through. We increased his sales 350%! This new program was tremendously profitable, lasted for decades and established my reputation in the business. How did having the wholesale business mitigate your retail business risk? Our successful experience and financial strength in the wholesale magazine business allowed us a strong segue into retail. We had been growing retail organically since the 1980s. Owning a successful wholesale business, we never had to take money out of retail, which is a capital-intensive business. The more successful our stores were, the more money airports wanted us to spend on subsequent bids. Airport build-outs with their restrictions and regulations are extremely expensive. From 1987 to 2003, retail grew virtually debt-free until we saturated the New York area market with travel retail stores. We began bidding in airports outside New York; the first one was at Love Field in Dallas. Then, in 2003, we had a once-in-a-lifetime opportunity. We purchased our competitor, the U.S. branch of WHSmith. It is still in the U.K., of course. It had bought 20 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

an American company in 1990 but never assimilated well to the U.S. After 9/11, it didn’t recover, although our sales came back within three months. What it did have was some of America’s best locations. It had O’Hare. It had LAX. It had Terminal 4 at JFK. It had Atlanta. We bought WHSmith with 100% debt — $40 million borrowed and a $25 million seller’s note — putting up the assets of both the wholesale business and the retail company. As good as its properties were, less than two years remained on its leases. If we didn’t perform well enough to wow the local authorities, we could have seen that investment evaporate. It was a huge risk, but it was a calculated risk, because we had the best management team in the business. What happened post-acquisition? Its overhead had been $20 million, much of it spent on exorbitant IT systems. We figured we could bring them in for an additional $3 million over our current overhead level, which we did. We couldn’t spend big money on build-outs with one year left on the leases, but we thought we could increase sales by getting the merchandise mix right, and we did by 20%. It was a big risk, because these properties can be a dream or a nightmare. In the end, WHSmith made us a national company. What are you doing now? I sold the controlling interest of Hudson News’ retail business in March 2008 to a private equity firm called Advent International. Advent does a lot of retail, for example, Lululemon. It is the biggest private equity firm that nobody has heard of, a great company. The managing director, David Mussafer, WG’90, became a good friend of mine. In November 2008, Advent merged Hudson News into another company that Advent already

controlled called Dufry, a publicly traded company on the Swiss stock exchange. Hudson is bringing Dufry’s duty-free concept to American venues, using Hudson’s relationships with the airport authorities — and Dufry is taking Hudson’s ‘duty-paid’ concept globally. I’m the largest independent shareholder of Dufry, and about eight of us run its board. We’re pretty entrepreneurial for a public company, and it keeps me closely attuned to retail. Dufry doubled in size during the past five years to a $5 billion market cap, mostly through acquisitions. We’re in only a half-dozen airports in the U.S., but we are growing rapidly and are today, the largest duty-free retail operator worldwide. We purchased all the duty-free operations in Greece last year, which has been a great success. Beyond retail, I’m the President and CEO of Hudson Media, a holding company that owns publishing ventures, the stock in

Dufry and the original wholesale distribution company. What kind of publishing venture? I’m a partner in a joint venture to publish a luxury lifestyle magazine called DuJour. We’re using the Gilt Groupe audience, and the reception has been very satisfying. What would you say to Wharton students or young alumni? Find something you love doing! After interning at an investment banking firm, my son, a Wharton alum, changed to a small private equity firm, a more entrepreneurial environment. He was able to articulate well what he wanted, not just what he didn’t want. It may not happen at your first job, or even your second, but don’t give up.  – KT

Continued from page 6 and it became the Jay H. Baker Retailing Center. Today, you can get a concentration in retail at Wharton. We are a research center — sponsoring curriculum development, industry outreach and cutting-edge programs accessible to both undergraduate and MBA students. When we started, we had only two students in the program. We now place over 100 students each year into full-time retail jobs or internships. What’s a story that you like to tell, about retail? You might talk about everything being great at this big company, Kohl’s. Well, two years after we bought Kohl’s, we had paid off all of our debt. So we bought a company called MainStreet, which came from Federated when it went into bankruptcy. It was a similar company to ours, with these great locations right where we wanted to be. We didn’t close any stores because we needed the cash to keep coming in. To introduce ourselves to customers, we decided to launch these stores with the greatest sale that we ever put together. All three partners — Bill, John and I — attended the biggest opening in Chicago, and we were excited. People lined up to get in the store. There were mobs of people filling their carts with merchandise. Then, all the systems go down. We had no point of sale. It wasn’t only this store — it was the entire chain. Cashiers needed to look up the prices. Customers are throwing merchandise on the floor, and seeing us, wearing white flowers on our lapels, began yelling at us! It was probably the worst day of our lives. I remember calling the fellow at headquarters who was in charge of the data center, and he was telling me, “Oh, don’t worry! Everything looks much better now!” I told him, “If you were here, I’d probably kill you, or the customers would kill you. It’s not working!” And then, on top of that, this little boy pulls the fire alarm,

Jay Baker, W’56, Bill Kellogg, and John Herma so the fire department came. It was the first and last store opening my wife attended. She thought it was very exciting. Normally, you’d have a pizza party after a store opening, but we stayed there until 6 a.m. the next morning when the system finally got back up. Well, we had these customer cards asking “How do we rate?” and you can imagine what people wrote. They thought we were the worst bums in the world. Between Bill, John and I, we answered every letter from every one of those people, sent them a gift certificate and asked them to give us another chance. I think it paid off. Naturally, we got those stores working, and Chicago was soon our hottest market. So out of a disaster can come something good! Sometimes I tell that story because people think everything is so smooth, so successful. Well, that’s not true! That’s when I got my first gray hairs.  – KT READ ARTICLES ONLINE AT WWW.READWNY.COM | 21

MBA CAREER MANAGEMENT and LIFELONG LEARNING in New York City

Sign up for the Wharton MBA Career Advising Day - June 12th! You have mentors, you have friends, you have Wharton Career Management, and yes, you have the Career Development Division of the WCNY. •

The New York City MBA Alumni Career Advising Day returns to New York on Thursday, June 12! Register at http://www.whartonny.com/events.html. On November 19, three Wharton alumni advisors conducted three full schedules of alumni career appointments with 50 follow-up appointments.

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All MBA alumni may sign up for complimentary career advising (over the phone, via Skype or in person) at the MBA Career Management Alumni website: https:// mbacareers.wharton.upenn.edu/alumni/brief.cfm

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Participate in the alumni resume book and new board of directors’ book.

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Contact Cara Costello, Director of Alumni Career Services at the Wharton School, at: tcara@wharton. upenn.edu.

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Contact Chuck Forgang, Wharton Club of New York VP of Career Development, at: cforgang@forganglaw.com

Cara Costello, Director of Alumni Career Services at the Wharton School

How do you keep moving your mind forward? “WHARTON LIFELONG LEARNING!” •

The school has held several recent Lifelong Learning events in New York City. In February 2014, 168 alumni participated in a Lifelong Learning event with Professor G. Richard Shell, author of Springboard: Launching Your Personal Search for Success. They discussed definitions of success, shared their personal stories, and set learning goals.

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Find courses, webinars, and resources at: http://lifelonglearning.wharton.upenn.edu.

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Contact Carl Rosen, our Wharton Club of New York VP of Continuing Education, at: carlerosen@gmail.com.

22 | WHARTON CLUB OF NEW YORK | WWW.WHARTONNY.COM | SPRING 2014

Take the Call! T

HE Wharton alumni community is one of the most exclusive and powerful networks in the world. A key element to our success is the willingness of alumni to help other alumni. Take the Call is a simple concept: Wharton alumni should buy from, hire and help Wharton alumni. And if a fellow Wharton alum calls us for any reason, we Take the Call. The Take the Call Forum allows you to directly reach 30,000 Wharton alumni in the New York metro area. Promote yourself! Find opportunities offered by your fellow Wharton alumni! Help alumni get answers! Gain ideas and useful information! Submit your announcement at: www. whartonny.com/forum.html. Here are some excerpts from the latest Take the Call Forum: EXPERIENCED SALES/MARKETER Looking for that person with a strong, demonstrated track record of success raising assets in the institutional market place. We are a boutique firm with a history of success for the past twenty years and are expanding to meet the growing demand for our services. We concentrate primarily

on raising assets in alternative space-hedge funds. If interested, please contact hcohen@alternative-assets.com. NEED A CAREER COACH? I am a professional career coach and former Director of Wharton MBA Career Management, MBA Recruiter and Bain consultant with 15 years of coaching and recruiting experience. Schedule a complimentary introductory conversation with Michelle A. Antoni, W’91 at: http://www.michelleantonio.com LOOKING FOR A MENTOR! Successful consulting services executive with 20+ years in IT consulting, seeks a mentor to share their expertise and act as a sounding board, and provide guidance. If you’re interested, please contact whartonmentor@gmail.com. VOLUNTEER FOR THE WHARTON CLUB OF NY Exciting new initiatives serve New York metro area Wharton alumni. Volunteer to serve on committees and to take leadership positions. See http://www.whartonny.com/article.html?aid=348

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