The Doing Business in Bentonville Podcast
To create an ecosystem that connects leaders of all kinds – industry, community, student, educational, civic, investment and entrepreneurial – to help overcome Omnichannel Retail barriers through exclusive, insight-rich content.
The Doing Business in Bentonville Podcast
Ep. 96 - Retail Transformation: Five Decades of Industry Insights with Terry Trofholz
Terry Trofholz takes host Deanah Baker on a fascinating journey through five decades of retail evolution, offering rare insights from both sides of the desk—as buyer and seller—during some of the most transformative periods in American commerce.
Beginning in 1973 as a buyer's assistant in Omaha, Terry's career trajectory mirrors the massive shifts that reshaped how Americans shop and how products reach consumers.
He vividly recalls when iconic brands like HealthTex and Levi's manufactured entirely within the United States, witnessing firsthand as globalization gradually decimated domestic production until less than 2% of apparel remained American-made.
As he explains the complex factors behind this shift—from labor costs to government subsidies—Terry offers nuanced perspective on whether reshoring is feasible and what a "Western Hemisphere" approach to manufacturing might look like.
The conversation provides an insider's view of how mass merchants revolutionized retail through everyday low pricing strategies, with Terry recounting candid conversations from the 1980s when suppliers first grappled with Walmart's disruptive business model.
Equally illuminating are his reflections on sustainability innovations at Interdeco, where cutting-edge technologies now transform manufacturing waste into new products through regenerated cotton processes and facilities powered by renewable energy.
Perhaps most valuable is Terry's account of the COVID-19 pandemic's impact on retail, delivering a masterclass in how the industry navigated unprecedented challenges. He details the overnight acceleration of e-commerce adoption, growing approximately 50% between 2019-2021, and the subsequent scramble as companies adapted distribution systems designed for truckload shipments to handle individual orders.
The resulting omnichannel transformation forever changed merchant roles, requiring them to simultaneously manage exponentially more SKUs across multiple platforms.
Want to understand how American retail reached its current state and where it might be heading next? Listen to this conversation with someone who didn't just witness the evolution—he helped shape it.
Well, hi, viewers, welcome to Doing Business in Bentonville. My name is Deanna Baker and I'm thrilled to be here. I am going to be a limited series contributor to Doing Business in Bentonville and I hope to bring topics that I've been having in my circle of friends and colleagues to you all, and I would love feedback. Make sure that we're talking about the things that you find value in and kind of further the discussion around evolving Omnichannel for our mutual customers. So thanks for joining us today.
Speaker 1:I want to introduce you to a friend of mine that I've known Well. He'll date us both, I'm sure, through conversation, but Terry Truffles, and so let me just tell you a little bit about Terry and then I want him to fill in some gaps. But here's the cut and dry of Terry. Terry brings over five decades of experience in both wholesale and retail. Okay, check, check of experience in both wholesale and retail. Okay, check, check brands and private brands, both boxes, and knowledge of working with specialty stores, department stores, discounters, mass and e-com only companies. So he has spread out and surrounded everything in retail. I do believe Terry began his career 1973, he already said it 1973 in Omaha, nebraska, and he was an associate buyer or buyer's assistant not quite sure Terry, but Gopher.
Speaker 1:Gopher bottom of the ladder right For a retailer called Richard Gordman, which you may realize more as Gordman's I think they went on later. That's where they are now To be Gordman, which you may realize more as Gordmans I think they went on later. That's where they are now To be Gordmans. You did transition from retailer side of the desk to supplier side of the desk. You joined HealthTex, which is a brand I remember wearing as a kid. Sure, right, it was very popular. They were the biggest. They were the biggest children's wear manufacturer in the US at that time. A few years later, you went on to join Levi Strauss, right as a district sales manager Five years there, awesome. And then you ventured into private label yes, the private label business with a company called Stone.
Speaker 2:Manufacturing. Yeah, you know, if you're a branded salesperson then you kind of get the line that they give you and you're just kind of told to go out and sell it, and I always wanted to have more input into what was going into the product and I had a friend that was in the private label business and that sounded really interesting to me, so I left.
Speaker 1:You're like me, I like to have control of the reins. Can't help it. It's a control thing, I guess, but okay. So then you sold to Sears and Target there, right, so going into bigger mass retailers. Next you joined Reitz Knitwear and that's where you and I met. You were the sales exec to Walmart and Target at the time, and then, lastly, terry became an associate at Interdeco when Rights was acquired by Interdeco in 2000. And you were there for a wonderful 25 years as EVP of sales and merchandising.
Speaker 1:Yes, I was and you did recently Best thing that ever happened to me Fantastic. And you recently retired yes, I did, which is awesome. So welcome to you to doing business in Bentonville and we're so happy to have you. Well, thanks very much, deanna.
Speaker 2:You know I'm honored to be your first guest and you're taking a big chance here. I mean, this is my first podcast and really the first thing that since I've retired. It's the first time that I set my alarm this morning.
Speaker 1:Thank you, I appreciate being worthy, that's right.
Speaker 2:And it's the first time I've had a chance to really kind of prepare for something, which was fun. And in preparing for this podcast it kind of gave me a chance to really reflect on my career. And I did my first job was in 1973, and I was 22 years old, so didn't know anything about anything. And I spent four years at this retailer and then decided that it looked like everybody that was coming in to call on me was making more money, having more fun and just enjoying life. And I was lucky enough that I had some really good relationships with my suppliers and I went to work for health techs and it's the first time that I'd ever moved out of Omaha Nebraska or not out of Omaha, but I'd lived in Nebraska all my life. So my wife and I we moved to Indianapolis. We didn't know a soul and I spent time there. And then I spent time at those other jobs and I think about that and what's remarkable about that is that those other manufacturers all of the clothing was made in the USA and I can remember visiting the factories and the distribution centers and, yeah, health techs all made in the USA. Same thing with even Levi Strauss back then Wow, and my last job before being acquired by Intradeco was at Wrights Knitwear and we had facilities in throughout Pennsylvania. We had a dye house in Allentown and a knitting house in Orwigsburg in Allentown and a knitting house in Orwigsburg.
Speaker 2:And you know what kind of struck me was how all things seem to kind of go full circle in the apparel world. You know I mean trends obviously, but now by full circle I mean now we're looking at that US manufacturing stuck around till about the late 1990s and then imports from China kind of started pouring in and you know that had to do with World Trade Organization, the entrance by China into that, and all of a sudden that are the largest exporters to the world and the largest importers for the USA in terms of apparel and that's, you know, with the hopes and wishes. I think that maybe some of that manufacturing can be restored in the USA and that's a significant challenge, as everyone knows, and Walmart is certainly making strides to try to return manufacturing in all industries, I think, to the USA. Apparel is definitely challenging because just the labor differences in labor charges between the USA and China or Bangladesh or Vietnam or any of those countries is significant. Now the administration does make a point, which I think is well taken, that it's not just the tariffs, it's the unfair trade practices as well.
Speaker 2:And you know, we used to look at a garment when we were getting beat. The US facilities were getting beat in pricing by garments coming in from Asia. We would look at the garment or we would look at a yarn price and the inputs that went into that garment or that yarn price were more than what they were charging for it. Meaning the fabric? Yeah. Meaning the cotton, the price for cotton, the fabric, any kind of labor, yeah. So we go.
Speaker 2:What they can't and what we finally figured out was is that the Chinese government was subsidizing the apparel industry over there and so obviously the US makers were really put a significant disadvantage, and that happened for a long, long time until almost all of them went out of business. I think there's less than 2% of the apparel that is made in the USA today. Anyway, we can debate whether it really makes sense to return apparel manufacturing to the USA or not, but certainly it would make sense. You know, I think it would make a lot of sense to maybe have a Western hemisphere that would have a greater influence and ability to produce just from an onshoring standpoint.
Speaker 1:If you can't get it in the US, at least get it closer If everything that goes with that.
Speaker 2:So certainly Mexico, canada and Central America could be a huge could help replace some of that. You won't be able to replace all of it just simply because of the workforce, the number of workers that's required. When you look at the population of China, india, these other places, there's just not enough population, not enough people to put to work, to sew garments.
Speaker 1:Well, and if people aren't in the apparel industry, you know you also have to think about all the components that go in. It's not just a facility to sew the garments. Where does the fabric come from? No, you're right, right. So you've got to think about it from the very beginning. All the way through that process, supply chains, through everything it has to be thought through it's fabrics, it's buttons, it's zippers, it's everything. It's all of it yes, and technology is going to have to step up right, at least for this category.
Speaker 2:Yeah, without a doubt. And robotics would have to step up significantly, and automation. So not sure how many real apparel jobs that you would return, but anyway. So that kind of struck me. You know the. The other thing that I got to witness through the time span that I worked was the incredible rise of mass merchants in the USA. You know, walmart was in the in the the 70s and the 80s. Walmart was building stores in the 90s like crazy, and so was Target, and how that changed the retail landscape.
Speaker 2:I can remember working for a supplier and we were having a sales meeting and this was probably in the early 1980s, and one of the salesmen in the meeting said are you sure we should really be devoting that much production to Walmart stores? You know it's upsetting my other customers and they're selling it for less. And the salesman that was selling Walmart said well, why wouldn't we? I mean what? What? They're not doing anything wrong, they're not doing anything illegal. They're simply buying the product from us at the same price. We sell it to everybody else and they're selling it for less. So you know, long ago the EDLP, edlc strategy of Walmart was starting to pay off and I got to see that.
Speaker 1:Yeah, I was thinking about as you were saying that. You know, I joined 1990 and we, Walmart, had under 2000 stores.
Speaker 2:Yeah.
Speaker 1:And then, you know, when I retired from Walmart, it was over 4,500. Yeah, so just incredible growth. You know, and I can't say that, I thought about that every day, you know doing the job, but it did, it happened. And we would say to suppliers all the time give us your best cost, Let me worry about the retail Right. And so we were able to deliver that to your point and growth happened.
Speaker 2:Yeah, you know, and then you know, and then I saw the onset of e-com start and well, I mean Amazon. It was only 2004 when they actually started business and they didn't really start disrupting apparel initially, and then they got, as with Amazon and just about any business they got into, they started to have a significant effect. And so that you know, to have a front row seat to see all of that was really amazing. Some of the things that I'm most proud of, I guess of in my career we were Intradeco was the supplier of the year at Walmart in. It was either 2012 or 2013. And that was for the entire store. That wasn't just You're on the big stage.
Speaker 1:That's what you're saying.
Speaker 2:Yes, we were on the big stage and to be the supplier of the year for the entire store and we were competing for that award with people like Johnson Johnson Coca-Cola. To win that award from the largest retailer in the world was humbling and extremely satisfying. I mean that was wonderful. I mean we fed off that for quite a while.
Speaker 1:Well, and you should, because as a merchant team we didn't take those decisions lightly. Oh.
Speaker 2:I know.
Speaker 1:And I mean almost. I won't say we got into any fistfights or anything like that or hair pulling, but there was a considerable amount of review.
Speaker 2:Oh, I'm sure I'm sure everybody had another well-deserved supplier that we could have lost that to. So we also won a number of sustainability awards and we were a really early adapter of and believer in the sustainable effort. Our founder was a believer in the sustainability that we should bring to our products and I'm sure your viewers probably know that. You know landfills get hundreds of thousands of pounds of apparel every year and you know there's apparel actually has gone through deflation for about two or three decades. I can tell you that the things that I sold in 1990 are cheaper today than they were, than they were in 1990. I mean it's just because of everything obviously, production moving to the cheapest country and efficiencies really in the apparel process. So a T-shirt now.
Speaker 2:You know, with fast fashion, you know we all buy probably a lot more clothes than we ever need because we can. It takes a smaller percentage of the consumer's wallet than it did years and years and years ago. But Interdeco has invested in machinery in Central America where you take the cutting room scraps. You know when you're going to make a garment, you've got a marker that sits out there and you cut around that and if you're lucky you get 85% efficiency. It could be less. So that means you've got 15% of that fabric that is just waste and we can now take that fabric as well as other finished products. We've also bought a sorting machine to bring in old garments from people and we put them into the machine and it turns them into yarn which can be then turned into products again. So it's a regenerated cotton process and I'm sure they will continue to make efforts in that range.
Speaker 1:So I was so, in my mind, Interdeco is always at the forefront of really challenging themselves on. You know what's the next step, what's the next thing? In fact, I can't remember the year we went, but there was one tour in Central America that we went and we saw some of your factories at Interdeco and the fact that they were run off king grass.
Speaker 2:Yes, yeah, that's exactly right. That's in our, that was in our biofuels. Yes, yeah, that's right.
Speaker 1:Yeah, so so you know the efficiency of the factory and now what you're talking about is, you know, efficiency and regeneration of products that have served their time. So you know I look forward and in fact, on LinkedIn, every post I make about some new development, you know, catches my attention because I would say you all challenge yourself harder than we, as partners, challenge you.
Speaker 2:Well, if you saw our factories today, or if you took a tour of our factories in El Salvador and Honduras, you would see the roofs filled with solar panels and you would actually see a solar farm. Just because that was the right thing to do. And, you know, I mean quite honestly, all of these investments in sustainability also had a business side to them. That made sense, but we were really happy to be able to join the two together. Yeah, very cool. Uh, lastly, you know, I think maybe the thing that I'm most proud of in my career is, um, what Interdeco was able to contribute during the COVID crisis. You know, all of a sudden, uh, in late 2019 in China, you just heard some things and then, in March of and I know that it was March in 2020, because I can remember, coming home from a trip from New York, that we weren't really sure that we wanted to go on, but this trip was really triggered by, quite honestly, a meeting that we had had with you and Andy. Anyway, on the way home, we're glad to get out of there and my son is on the trip with me.
Speaker 2:He works at Interdeco and he's sitting in his seat and he pulls out latex gloves to put on and wipes down his tray. I mean, this was, you know, covid. It was only five years ago, but it seems like it's been forever. We didn't know how the disease was spread, we didn't have a cure for it and it was killing people, and so business fell off the charts for about three weeks and then it came back instantly when the essential retailers like Walmart, target, could open up again, because obviously you start to run out of things and you needed to have a retail place to be able to go get them. I mean, we needed groceries, we needed food, we needed toilet paper Remember the toilet?
Speaker 1:paper crisis. Yes, I think we may have finished the last roll at our house. I'm not sure. Yes, we all stocked have finished the last roll at our house.
Speaker 2:So I'm not sure. Yes, we all stopped for a long time. Anyway, I'm going to. Then a technology rescued us from a meeting standpoint, because we were frantically trying to get things up and running again in retail and on the supplier side. So Zoom meetings, teams we could start to meet again and I think we were all pretty happy with that because it also meant we didn't have to travel and meet in person. So the other thing we figured out was OK, well, you know, we don't really want to go to the store.
Speaker 2:I can remember for a while being afraid to even go outside because you just didn't know how it was spread. So we started to order things online. And we had been we'd all probably had been ordering some things from Amazon prior to that, but now all of a sudden, retailers like Walmart, target all retailers that had a website found their website flooded with orders. I think I saw. You know the numbers vary from a couple of different sites that I looked at, but I know that e-com in total grew about 50% from 2019 to 2021. So it was a huge leap.
Speaker 2:Up to that point, ecom had been growing at about a 12% to 15% rate a year, starting back in 2012 or 2013. And we knew that it was important, but it was not something that we were focusing on, because, even though it was growing at 12% to 15%, it was still a small percentage of what everybody was doing, right? And now, all of a sudden, it demanded your attention and you didn't have a choice. You needed to figure out retail. You know, all of the retailers needed to figure out how to fill these orders and suppliers needed to figure out how.
Speaker 2:All of a sudden, we went from okay, well, we're used to shipping a five to 10,000 unit uh order, or a whole truckload of something Uh, but now how do you ship 48 units of something in the same distribution center that you're doing this in? So investments were made, but beyond investments, you had to find personnel that knew how to make this happen, because you were, you know, from our standpoint, we said, okay, we know how to manage a business where we're filling a round rack and we're keeping that in stock, but how do you sell something that shows up as a and I know it sounds stupid now, but back then how do you sell something that shows up as a picture on a website and how much of it, do you make you know, and so?
Speaker 1:It was a whole new formula. Yeah, that you had to really start from the foundation. Yes, of how to build it. You know what's the demand going to be, which is what you're articulating and, literally, how do you sell it in this medium versus what, up to your career, at this point, had been a physical responsibility.
Speaker 2:Yeah, no, that's exactly right. So I know that both the suppliers and retailers were going out and hiring experts or people that had a lot more experience in e-com, fulfillment and digital marketing. Then you're putting these two teams together. So now you have competing interests in one business where you know some of the visionary leaders. I would say like Doug McMillan and like the founder of our company, felix Amon, saw that. You know e-com is definitely the future.
Speaker 2:I know we're losing money on everything we ship and I know it's a small portion of the business and I know it's easier to do the brick and mortar business, but we have to address this. So that caused suppliers to look for innovative ways in their supply chain and their distribution networks. We went to robotics and some other thing in fulfillment and we hired people and Walmart did the same thing. But for these people to work together took a little while because they were competing interests for the resources of the company. Where we're at today in Omnichannel, now you've got people that are managing two to three times the SKUs that they used to manage, and that gives everybody less time and not as much time to maybe spend on some of what used to be the softer skills of retail.
Speaker 1:Well, it's true, and from a merchant's chair they were very busy just managing a brick and mortar.
Speaker 2:Oh, it's not like that.
Speaker 1:If you were e-comm only, you were very busy managing many SKUs, right, yeah. And suddenly, congratulations, you're now an Omni merchant. Okay, you get both. Well, thank you.
Speaker 1:What takes priority, you know, and, and depending on which side you came from, right, you had to learn the whole other discipline and what it took to make it successful, cause what you just articulated was that they're very different things, right, and so you have to be of two mindsets you want to nurture and grow this, you want to keep the volume going with this, and how do you devote enough time, which is the limited resource, right, to make it all come together?
Speaker 1:Well, and omni-channel, and it's not just Walmart that's doing that, right, it's every retailer out there that's trying to find their way and learn those same things in real time as during COVID. It's ramping up, right, so no pressure or anything else to add to it. It's not like you didn't have a full-time job, exactly exactly. So it's just. It's amazing, and I hope you viewers, you might want to just rewatch the first part of this podcast, because he just dropped a lot of knowledge on all of us and you know what a front row seat you have had to be able to say you've been there and done it and maybe you should write a book.
Speaker 2:Well, I just feel very fortunate that I had that opportunity.