Ex-Fingerhut Exec Patroling 'Sector in Turmoil
By Chris Serres
Star Tribune
February 11, 2006
Star Tribune
February 11, 2006
Business Section, Page 1
MINNEAPOLIS, MINN. -- Love Goel hasn't touched his breakfast, a plate of banana
slices and berries, and his coffee is getting cold.
The 34-year-old retail executive and Internet marketeer is too engrossed in his
favorite topic: why some of the nation's largest retailers are in trouble and how they
can be saved.
Goel, the former chief operating officer at Fingerhut, who made millions when the
catalog retailer was sold to Federated Department Stores in 1999, recently launched
an investment firm that will partner with private investors to buy retailers and turn them
around.
Love Goel
Last week, Goel discussed his firm and the challenges facing the retail sector.
Q We talked recently, and you said the retail sector was "in turmoil." Explain.
A Just look at six headlines this month. Albertson's, the No. 2 grocery chain in the
country with $40 billion in revenue, can't sustain itself and sells to avoid bankruptcy.
Sports Authority, the largest sports retailer once upon a time, sells itself to a private
equity firm. Musicland files for bankruptcy. Saks, once one of the toniest department
stores in the nation, is selling off a bunch of businesses as it restructures. Then you
have Netflix crushing Blockbuster, and Wal-Mart, the big daddy of retailers,
outsourced its entire video rental business to Netflix.
Imagine Wal-Mart saying, "We're not going to be in the grocery business anymore.
Supervalu, you can have it."
Q But consumers are spending, and the general perception is that the retail sector is
quite strong.
A If you're shopping at Target or Wal-Mart or Costco, it will appear that way to you. But
there are hundreds of other retailers out there that are struggling to make it.
Q So what are retailers doing wrong?
A The traditional strategy in retail among executives is basically to acquire other
retailers and to take costs out. That was interesting and worked for the past 30 years
reasonably well. But they haven't focused on a fundamental problem: That a dramatic
shift has occurred in the way consumers buy and the way they communicate and the
way they access information. You have to create an offering that is appealing to
customers and that doesn't come from buying another company.
Q So I take it you're not fond of Federated Department Stores Incorporated's
growth-through-acquisition approach?
A I think Federated is probably the best department store retailer in the nation. I have
a lot of respect for [CEO] Terry Lundgren.
But going forward, they're going to have to think very hard about how they can create
an exciting experience for their customer base and how they can appeal to local
markets. I'm not sure I understand their concept of getting rid of the Marshall Field's
brand. It's a very popular brand and a very powerful brand in its markets.
Q What should Federated be doing?
A The real challenge for people in the department store industry that sell these
high-margin products is they really have to combine the feel of the 19th-century
neighborhood retailer -- who knew your name, whether your wife was sick that week
or whether your kids were doing well in school -- and the merchandising and
technology innovation of modern retailers.
Q But aren't some retailers not worth saving?
A Take Musicland. A lot of people think Musicland doesn't deserve to survive. But think
about it: They sold $1 billion worth of stuff last year, and there are still millions of
people who shop at their stores. ... If it could move just 100,000 of those people into
an online trading site, you have a very profitable company with an Internet multiple.
You could literally create a $2-, $3- or $4 billion company out of the assets of
Musicland in the next four to five years.
Q Have you approached any retailers yet that are interested in selling?
A We're talking to three companies right now, and we've probably talked to over 50
private equity investors -- hedge funds, buyout funds -- that invest in the retail space.
Out of those 50, there are probably 15 to 20 that we like a lot, that have similar views
on what's happening in the sector.
Q Why have you decided to do this in Minneapolis?
A For me, it's about my comfort level. Minneapolis is where I've spent most of my time
in the United States. Some of the best retail innovation that's happening today is
happening at Best Buy and Target. To have access to the people who work at those
companies -- and some of the former executives at Fingerhut and Musicland -- is a
very powerful thing.
MINNEAPOLIS, MINN. -- Love Goel hasn't touched his breakfast, a plate of banana
slices and berries, and his coffee is getting cold.
The 34-year-old retail executive and Internet marketeer is too engrossed in his
favorite topic: why some of the nation's largest retailers are in trouble and how they
can be saved.
Goel, the former chief operating officer at Fingerhut, who made millions when the
catalog retailer was sold to Federated Department Stores in 1999, recently launched
an investment firm that will partner with private investors to buy retailers and turn them
around.
Love Goel
Last week, Goel discussed his firm and the challenges facing the retail sector.
Q We talked recently, and you said the retail sector was "in turmoil." Explain.
A Just look at six headlines this month. Albertson's, the No. 2 grocery chain in the
country with $40 billion in revenue, can't sustain itself and sells to avoid bankruptcy.
Sports Authority, the largest sports retailer once upon a time, sells itself to a private
equity firm. Musicland files for bankruptcy. Saks, once one of the toniest department
stores in the nation, is selling off a bunch of businesses as it restructures. Then you
have Netflix crushing Blockbuster, and Wal-Mart, the big daddy of retailers,
outsourced its entire video rental business to Netflix.
Imagine Wal-Mart saying, "We're not going to be in the grocery business anymore.
Supervalu, you can have it."
Q But consumers are spending, and the general perception is that the retail sector is
quite strong.
A If you're shopping at Target or Wal-Mart or Costco, it will appear that way to you. But
there are hundreds of other retailers out there that are struggling to make it.
Q So what are retailers doing wrong?
A The traditional strategy in retail among executives is basically to acquire other
retailers and to take costs out. That was interesting and worked for the past 30 years
reasonably well. But they haven't focused on a fundamental problem: That a dramatic
shift has occurred in the way consumers buy and the way they communicate and the
way they access information. You have to create an offering that is appealing to
customers and that doesn't come from buying another company.
Q So I take it you're not fond of Federated Department Stores Incorporated's
growth-through-acquisition approach?
A I think Federated is probably the best department store retailer in the nation. I have
a lot of respect for [CEO] Terry Lundgren.
But going forward, they're going to have to think very hard about how they can create
an exciting experience for their customer base and how they can appeal to local
markets. I'm not sure I understand their concept of getting rid of the Marshall Field's
brand. It's a very popular brand and a very powerful brand in its markets.
Q What should Federated be doing?
A The real challenge for people in the department store industry that sell these
high-margin products is they really have to combine the feel of the 19th-century
neighborhood retailer -- who knew your name, whether your wife was sick that week
or whether your kids were doing well in school -- and the merchandising and
technology innovation of modern retailers.
Q But aren't some retailers not worth saving?
A Take Musicland. A lot of people think Musicland doesn't deserve to survive. But think
about it: They sold $1 billion worth of stuff last year, and there are still millions of
people who shop at their stores. ... If it could move just 100,000 of those people into
an online trading site, you have a very profitable company with an Internet multiple.
You could literally create a $2-, $3- or $4 billion company out of the assets of
Musicland in the next four to five years.
Q Have you approached any retailers yet that are interested in selling?
A We're talking to three companies right now, and we've probably talked to over 50
private equity investors -- hedge funds, buyout funds -- that invest in the retail space.
Out of those 50, there are probably 15 to 20 that we like a lot, that have similar views
on what's happening in the sector.
Q Why have you decided to do this in Minneapolis?
A For me, it's about my comfort level. Minneapolis is where I've spent most of my time
in the United States. Some of the best retail innovation that's happening today is
happening at Best Buy and Target. To have access to the people who work at those
companies -- and some of the former executives at Fingerhut and Musicland -- is a
very powerful thing.
| Title: Chairman and CEO of Growth Ventures Group Born: Oct. 8, 1971, in Poona, India Education: Bachelor's degree in computer science and finance, University of Minnesota Career path: Marketing and sales, Apple Computer, 1991-95; management consultant, EDS and Deloitte & Touche, 1995-97; chief operating officer at Fingerhut, 1998-99; chief operating officer at Federated Department Stores Incorporated, 1999-2000; chief executive officer of Personify Inc., 2000-01; active investor and board member at Silicon Valley startups, 2001-2005. Hobbies: Tennis, Bordeaux wines, cooking, travel Favorite books: "The Da Vinci Code" and "Freakonomics" |