When it comes to creating a successful business, Ben Fischman’s first rule: Find something that works and make it better.
“A good business idea isn’t one no one ever thought of before. Those ideas have no track record; they scare me,” says Fischman, CEO of Retail Convergence Inc. (RCI), the Boston-based company that operates off-price e-commerce sites SmartBargains.com and RueLaLa.com. “Instead, take an existing business and figure out how to do it better. How can you take what people are passionate about and do it uniquely?”
Fischman blasted onto the business scene in 1993 as a college junior and owner of Lids Corp., an exclusive retailer of baseball caps. The business started as a Boston mall kiosk and soon grew to more than 350 stores—with a cult following. The New Hampshire native got the idea while attending classes at Boston University, where he noticed the cascading rows of baseball hats worn by most of the male students in the lecture halls. “It was part of the uniform, but we all had a very similar struggle,” he says. “We all owned 30 to 40 hats but only wore one or two because those were the only ones that fit properly. There was a complete misunderstanding from the industry about what the customer wanted.”
While sporting goods stores long carried baseball caps adorned with logos and decoration, Fischman knew customers craved a simple hat that fit well. “I knew these things because I was the customer. And I had a focus group, which was all my buddies in school,” Fischman says. This understanding led to another lesson in business: Communicate with the consumer. “I was in constant dialogue with the customer,” he says. “I stopped everyone on the street and in the dorms, asking them about their caps. I was constantly doing research.”
He also listened to the very simple message of supply and demand, noticing that kids from as far away as New York City were patronizing the Boston kiosk to find headwear not available anywhere else. He hit on something obvious, yet powerful: “Hats were always a small section of big stores. We said, ‘Hey, hats are an important enough product that we can be experts in it and make it big. There is a good chance that is the way customers feel about hats.’ So we made the shopping experience match the passion for hats.”
Later, as the organization expanded, he noticed his target audience of males 14 to 23 would flock to the store Thursday afternoons when shipments arrived. “They were addicted; they couldn’t get enough,” Fischman says.
As the business grew, he figured out something else: He had no idea what he was doing. So instead of faking it, he hired industry pros, like Reebok executive Nancy Babine Kucinski, who served as Lids’ CEO for seven years, to fill in the knowledge and experience gaps. “I have a huge ego for my brands, but not myself,” Fischman says. “I had a brilliant idea for a business, but I knew that if I tried to do it myself, it would never work.”
Building a team of seasoned experts helped the college kid when he waltzed into a Boston venture capital firm and walked out with $1 million seed money to grow Lids. “That lesson carries through to today: Great teams grow great businesses,” he says.
Lids thrived and grew to almost 400 stores. The corporation filed for Chapter 11 in 2001, and was sold the next year to Indianapolis-based competitor Hat World Inc. for $16 million. Fischman attributes the bankruptcy to a CEO who destroyed the company culture of teamwork with tricks like ordering officer furniture based on seniority—the higher up the company ladder, the better the desk and chair.
Fischman’s latest venture, RueLaLa.com, was launched in 2008 as an invitation-only fashion retail site that offers limited-time sales on high-end apparel and accessories. The site’s 2.6 million members are notified of private sale events and flock to the daily 11 a.m. “boutique” openings, which host products for two or three days. Once they’re gone, they’re gone, much like a traditional boutique sale. “You have to show up at a certain time and act quickly,” Fischman explains.
The business builds on many of the lessons Fischman learned at Lids. For one, he built the new business on a model successful for other online retailers, but he made it better.
Online retailers had long contemplated a remedy for “shopping cart abandonment.” Customers load their online carts, but with no compelling reason to act, they fail to complete the transaction. RueLaLa’s limited-time-only model eliminates such lost sales.
Borrowing from the excitement of Thursday afternoons at Lids stores, where young men eagerly awaited new shipments, RueLaLa’s model inherently creates “theater and drama” around shopping, much like successful bricks-and-mortar stores have for centuries, Fischman says.
Further zigging while competition zags, RueLaLa’s merchandise is not accessible by search engines, heightening the lure to become a member and access exclusive product. “While most retailers spend millions and millions of dollars for search engine optimization, we built walls so the Internet cannot scrape our site,” Fischman says.
In October 2009, the parent of SmartBargains and RueLaLa, RCI, was sold to Pennsylvania-based e-commerce market firm GSI for $350 million. Fischman continues to head both sites.
Like with Lids, Fischman checks his personal ego while investing in the success of RueLaLa. “That way, I probably approach opportunity with more reason; it’s more of a challenge for people whose egos drive them to be successful,” he says. “I have an enormous ego for business and success, for seeing people get promoted and seeing the team get big and be successful. One of my crowning achievements at RueLaLa is the number of people promoted from within.”
Recalling the importance of building an effective team at Lids, Fischman has staffed his new business with experts who are passionate about the products and the business. And he works hard to maintain a sense of teamwork, making sure all employees are carefully vetted to ensure they jibe with the organization. “We call it organ rejection, when someone’s DNA is not in line with ours,” he says. Further, there are no symbolic gestures of hierarchy. “Whether you’re in the mailroom or the president, you’re not entitled to better creature comforts,” Fischman says.
His ability to overcome self-importance means Fischman is open to constantly learning and improving his approach. Recently, a business partner resigned to pursue a new direction, and Fischman’s immediate reaction was one of “surprise and disappointment,” he says. The firm’s head of human resources challenged this reaction, and a few days later, Fischman announced the partner’s move and publicly wished him well. Later that day, he took the summer interns to lunch and listened to them express appreciation for such an open show of support for a departing colleague. “It was a stunning two-day turn of events,” Fischman says. “We’ve created an environment in which we are all asked, ‘How can we do better? How can we be better?’ ”