January 30, 2008

E-Commerce And Catalog Management Case Study: A Failing Business

Please click on the image to enlarge it.

When we read about improving the performance of a catalog / e-commerce brand, we frequently read about "extremes".

On one hand, we focus extensively on the "tactics" that improve the performance of marketing campaigns. E-Mail subject lines, call-to-action, catalog page counts, branded vs. non-branded keywords, prospect mailings, there's a veritable plethora of tactics that folks can improve upon. Better yet, there's no shortage of folks who can help drive tactical solutions.

On the other hand, we focus on "brand management". Boy, do we love to focus on brand management. Everybody is an expert at what Starbucks should do to grow same-store sales. Folks have no problem telling brands that they have to become "multichannel", or that implementing a transparent, authentic blog will cause a brand to grow in a "viral" manner.

Unfortunately, neither end of the spectrum meets the needs of the newly appointed CEO of a multichannel e-commerce/catalog brand that experienced several years of sour performance. More often than not, the newly appointed CEO needs to implement a "meat and potatoes" approach to fixing the profit and loss statement.

The brand we'll study in this series (click on the image please) achieved "best" performance five years ago. Since then, the brand wobbled between mediocre and awful performance, resulting in the firing of the management team.

Let's review net sales and earnings before taxes performance.

Net Sales Performance (Year 5 = most recent year)
  • Year 1 = $12,600,000.
  • Year 2 = $12,400,000.
  • Year 3 = $10,700,000.
  • Year 4 = $11,200,000.
  • Year 5 = $13,500,000.
Earnings Before Taxes Performance
  • Year 1 = $661,000 (5.2% of Net Sales).
  • Year 2 = ($315,000) (-2.5% of Net Sales).
  • Year 3 = $63,000 (0.6% of Net Sales).
  • Year 4 = $550,000 (4.9% of Net Sales).
  • Year 5 = ($258,000) (-1.9% of Net Sales).
Clearly, this business is in need of fixing.

Over the course of the next several posts, we'll talk about the ways that a newly appointed CEO uses "meat and potatoes" and "multichannel forensics" to address the performance of a floundering brand.

Your homework assignment: Study the image at the top of this post. What areas of the profit and loss statement suggest mismanagement of this brand?

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