WAYZATA, MN / Growing a business by $35 million in a single year is no small feat. Yet that’s what Tory Schalkle was able to accomplish, which he shares in our recently released interview.
The story began when Tory Schalkle was just 25 years old and one of the youngest merchandising buyers at a major U.S. retailer. Mr. Schalkle was responsible for running the retailer’s $300 million pet business and a large team – a business that needed a bit of a turnaround. We sat down with Tory Schalkle as part of our ongoing interview series to understand how business executives like Mr. Schalkle drive real results:
Interviewer: What was the state of the pet business when you took over?
Tory Schalkle: The category was actually growing, but we were caught in the murky middle – losing share to both lower-cost online providers and higher-end specialty stores that were able to get exclusive products.
Interviewer: So what did you do?
Tory Schalkle: I tried to first understand the customer better – what she needs, why she goes, what she’s looking for. I learned there were three types of “trips” to my aisles, and I crafted a strategy around each.
Interviewer: Interesting. What were those?
Tory Schalkle:
Interviewer: So sales went up?
Tory Schalkle: Yes, but costs also went down. I felt our margins could be much higher, so based on deep research, I found which subcategories brands didn’t matter and either introduced owned brands and/or opened negotiations to more vendors to drive down costs. I also ran A/B pricing tests to optimize our pricing.
Interviewer: And didn’t you partner with Dan Ariely? The famed behavioral scientist?
Tory Schalkle: I did! I cold contacted him, actually. I loved his work. It felt like his central thesis is that how a decision is framed significantly determines what is decided. I thought, “that’s what I do!” He was nice enough to partner with me on an experiment.
Interviewer: Go on…
Tory Schalkle: Haha. So, he proposed creating a false third choice. For instance, you have a $9 item, a $19 item, and a $50 item. Nobody buys the $50 item. It’s there simply to shift attractiveness from the $9 item to the $19 item.
Interviewer: And how’d it work?
Tory Schalkle: Well I’m obligated to not disclose in case he wants to write about it. But, I will say it was highly unusual for retailers, since most buyers view things on a “per item profitability” basis. In this case, of course, the $50 item’s sales would warrant it’s removal, creating the unforeseen downstream effect of hurting the $19 item’s sales, resulting in a net loss.
Interviewer: All of this sounds like a dramatic shift, and $35 million is a lot of money. Was it tough to pull off?
Tory Schalkle: It was a lot, but luckily I had a great support structure in my cross-functional team. Specifically, the product design team developed great “impulse” items, the negotiation team helped me monetize a lot of assets, and the pricing team ran A/B pricing experiments. It took some convincing, but they certainly put in the hours.
Interviewer: And what was the result?
Tory Schalkle: I can’t go into all the detail, but we grew the category $35 million in just one year. More excitingly (at least for me) was the partnerships we started with really strong brands. I greatly appreciated their trust and willingness to partner. It’s exceeded both parties’ expectations, and I hope we continue to be good stewards of their trust.
That’s all truly impressive! Thanks for your time!
Tory Schalkle: Thanks so much for yours!