Lessons Learned from the Founder: Q&A with Rakesh Tondon of Le Tote

When Le Tote was founded in 2013, Rakesh Tondon and Le Tote co-founder Brett Northart identified a new way to disrupt what seemed to be a stagnant industry: retail. Le Tote, capitalizing on the increasingly popular Internet subscription model, was created to rent high-end apparel to users for a flat monthly fee.

In the seven years since Le Tote’s founding, Rakesh and his team have made huge strides in every aspect of the business, from the cultural dynamic to recruitment. Its recent acquisition of Lord & Taylor, the country’s first department store that dates back to 1826, is further evidence of a business leader intent on turning an industry on its head. As Rakesh and the Le Tote team combine two very different business cultures – the West Coast-based Le Tote with the iconic New York City-based Lord & Taylor – they’ve realized that the process is a delicate balancing act, and one in which they must establish a “third culture” of sorts in order to enact change.

I recently sat down with Rakesh Tondon, the co-founder and CEO of Le Tote, to discuss the ins and outs of the company, its recent acquisition of Lord & Taylor, and how he plans to transform a market that has been historically reluctant to change.

Rakesh, a serial entrepreneur, brings more than a decade of experience in technology investment banking to his work with Le Tote.

Q:When it comes to recruiting and interviewing, what are the most critical components of your process?

A: Writing the right job description is the most critical piece when interviewing a candidate. It needs to be detailed and you need to outline the areas you’re optimizing for in a candidate. You have to look at that candidate through that lens. If you’re saying, “I want a front-end engineer with the following skill sets,” we want to ask what level of candidate are you really looking for? Are you looking for someone with three to four years of experience or seven to ten years of experience? What does that mean objectively?

We created tests for certain roles, such as engineering, design, and product. We’ve even created tests for marketing, where we’re looking for quantitative marketing folks like acquisition marketers. So, when you start with a really detailed job description, your recruiters bring in high-quality people that fit the job profile from the start.

Then, in those interviews, be really objective in how you’re evaluating. And post-interview, we try to get everyone’s feedback within 24 hours. We like to respond to the candidate within 36 to 48 hours at the very latest, including weekends.

Q:How do you maintain a company culture after the hiring process?

A:What we learned as the company grew is that information was just not quite that seamlessly available to everyone. People had certain pockets of data or information that they kept to themselves. So, as you get the right people in, we created a process.

We really make the effort to show new people the ropes and assign a buddy, someone to educate them on how things get done at the company. Someone who they can reach out to from time to time and ask, ‘Hey, where would I find this?’ Or, ‘How do you guys do that?’ Or, ‘Who do I need to talk to for x, y, and z?’” That helps guide people early on, so they don’t feel they’re completely lost when they start.

The second thing is we actually talk them through our strategy of how we want them to manage themselves and how we want them to be working with us. I’d say a lot of it is we like to give people autonomy and create accountability. We use the RASI Method as an internal project management strategy, which creates clarity and defined roles within a project. I’d say we say we like collective and collaborative effort from everyone.

But really going from there we like to go to the core body of really dedicated people that believe in the mission and are working towards that mission.

Q:Right now, you’re going to have to manage a headquarters team as well as a retail team – a much different scale company in terms of revenue. How do you need to do things differently as you transition Le Tote and Lord & Taylor into one company?

 A:We’re not trying to push one culture onto the other. We’re really trying to establish a third culture. Le Tote in San Francisco has a certain culture and Lord & Taylor in New York has a certain culture. What we’re now trying to say is, “Let’s meet in the middle and do x, y, and z.” We must ask ourselves how we should accomplish things with two different cultures.

In doing so, it helps us understand how people work in different areas and what motivates people differently in these different organizations. We found that certain people at Lord & Taylor are very similar to the people and the motivations here at Le Tote. Some are people that have been there 15, 20, 25 years, and have a very different way of working and very different motivations in getting things done.

We’re really trying to find that balance. We’re showing them best practices in terms of things that work well for Le Tote. Getting buy-in from people is really important to getting anything done in either of the two orgs.

Q:What made you think you could successfully take on the trillion-dollar-a-year global apparel markets industry? What did you see at that time that you don’t think other people saw?

 A:If you looked at different categories; transportation, housing, whatnot, those industries were evolving. Retail as an industry just wasn’t evolving. We felt like there was a massive opportunity in disrupting retail because that industry, from the very beginning, has been really slow to adapting to changes.

If you look at retail over the last hundred years, the real change has come in the last ten years. Before that, the model was if you want to increase sales, you needed to open more doors, launch new markets, and then you’d start selling and growing your business. However, with the Internet and proliferation of smartphones, that changed dramatically. People were consuming or window shopping in a very different way.

Second, I’d say people were focusing on selling more products to customers at lower prices rather than looking at different usage patterns for behaviors they were exhibiting in the offline world. A lot of it was, “let’s just do what’s been doing for a long time,” or, “let’s just start selling online as that segment continues to grow,” versus, “Let’s really revaluate the customer experience and what this means for the long term.”

Q:What mistakes did you make as you were building the company? 

A:We honestly thought that with all these new technologies, retailers would be much more open to change. Even today, I’d say this is an industry that hates change and hasn’t taken to it very well. Part of the reason we were able to acquire Lord & Taylor is because they just hadn’t evolved with changing customer needs and changing technologies – they’re still running on old systems and servers. And while I thought Lord & Taylor was one of the few, when I started talking to other industry leaders, I learned that they have the same exact problem in that they haven’t upgraded or changed anything in the business in 15, 20, 25 years.

We had assumed that as this business started to grow, we were going to get a lot more attention from retailers and brands that would want to do business differently. We thought we could potentially sell them on certain pieces of software that we were building for our business. But there was a lot of hesitation and resistance.

Secondly, because margins in this business have continued to sort of contract, a lot of these guys just don’t have the money to invest or re-invest in their businesses. The brands getting to scale today are consumers of new and upcoming technologies.

It’s not going to be the retailers of yesteryear. It’s not going to be the Macy’s or the Kohl’s of the world that will be on the cutting edge of adapting to new ways or new technologies. It’s going to be new brands and new retailers that are really getting up to that scale.

Q:As you look out over the next seven years, what does Le Tote look like? What do you want the company to be? 

A:What I really want to see going forward is Le Tote continuing to be the technology company that’s powering the next-generation retailers. We’ve built a treasure trove of data that we think this industry can really benefit from.

I want to start looking at Lord & Taylor as a customer of Le Tote technology. I want to look at facts and other players that are trying to be relevant for this customer. Because none of these older businesses are going away right away, but they’re going to need to re-invent themselves so that they can stay relevant.

I want Le Tote to be at the center of it all, showing the world how and what the next generation of retail experience is going to be. We’re really starting to think about how to create an offline experience similar to how you have a personalized online experience. If you look at the market, 65 to 70 percent of sales in the apparel and cosmetics space still happen in stores.

No one has really focused on that market at all. No one has said, “How do I make that type of retail experience better?” I’m working with my team internally to build up these algorithms that we use online – the recommendation tools, the fit algorithms, the typing engine. How can we apply that to the customer experience in stores?

So, when a customer walks into the store, they could either walk up to a store associate or up to a screen that will automatically know June Smith walked into the store. We’d have her purchase history, her details, her return patterns, all the site data. And why don’t we just recommend these 12 or 20 pieces to her? So, we’re looking at creating a holistic customer experience that’s never been done before, which is really how I think our company will change the overall industry.

For some more helpful tips on interview questions and approach, please check out the following worksheet.

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