June 24, 2009

Gliebers Dresses: Merchandising

Meredith Thompson, the Chief Merchandising Officer at Gliebers Dresses, showed me a catalog spread.

"Look at this dinner dress, Kevin. We tested it online, we drove the introduction of the item via paid search. Customers liked it! The item quickly became a good seller, and once it qualified for our cross-shopping algorithm, it took off! I got the item in the catalog as fast as I could. It took us five months to get enough product to feature it in one of the opening spreads of the catalog."

I wondered how the item performed in print?

"In the catalog, the item was a disaster. It missed sales projections by 40%. The customer hated it."

Ouch.

"These experts, they tell us that we have to be 'multichannel'. We have to have the same look and feel in all channels. We have to feature the same product in all channels, at the same price, with the same promotional offers They tell us this is the only way to communicate with our best customers. They tell us our best customers demand this style of merchandising. But here I am, working in the trenches, dealing with real world situations like this. The customer loved it when we advertised via paid search, but she hated it when it was in the catalog."

I asked Ms. Thompson who told her that she had to feature the same item in all channels?

"Chip Cayman. We bring him in here about once a month. Glenn and Chip go way back."

Chip Cayman is maybe the most famous marketing consultant out there. He's recognized across the industry as an expert in one-to-one marketing, multichannel marketing, and recently, social media.

"Chip Cayman told us we were not profitable because we failed to fully integrate all of our marketing channels. He told us we had to provide the best possible customer experience. It all sounded so good. But here we are. We advertised the dinner dress via paid search, and it worked. We advertised the dinner dress in a catalog, and we took a financial bath."

I asked Ms. Thompson if it is possible that the paid search customer is a 'different' customer than the catalog customer?

"That's your job, Kevin. Here's what I need to know. Who's actually running my business? Do I let Google decide? Do I let Chip Cayman decide? Or do I let the catalog customer decide? In any case, I don't have control over my business. If Google decides, then I'm at the whim of the comparison shopper at that very moment --- how would I ever predict what somebody wants? If I let the catalog shopper decide, then I'm destined to follow a 55 year old customer into retirement. If I let Chip Cayman decide, I'll always be average, because I'll never maximize trends in any one channel, and I'll always have inventory issues. And then you have e-mail. You advertise certain items in an e-mail campaign, then the customer goes online and buys whatever she wants --- she doesn't always buy what you advertise. Honestly, I don't have control over anything anymore."

It's a good thing Gliebers Dresses doesn't have a retail channel!

I explained that cataloging was a lot like Top 40 radio, everybody listened to the same songs, everybody was on the same page. Multichannel marketing is a lot like the iTunes store. Customers come from a limitless array of sources, and pick and choose what they like.

"You're not going to give me a lecture about that long tail garbage that we read about --- selling ten million dollars worth of merchandise across twenty-thousand skus?", asked Ms. Thompson. "I don't have the resources to manage twenty-thousand skus. Long tail theory breaks down in practice, unless you're maintaining a zillion skus that have no cost of goods sold. Here in the real world, we have to accurately forecast the sales of each of twenty-thousand skus."

Obviously, that's not what I'm talking about. Our businesses have relationships with a diverse set of customers. In the past, we told them what to buy. Today, the customer is telling us what she wants to buy. This creates uncertainty and inaccuracy. Uncertainty and inaccuracy are fatal to a direct channel profit and loss statement.

"I think the multichannel experts are missing this fact. They're trying to bundle the modern world in to a package that they understood back in 2001." quipped Ms. Thompson.

I don't know if that is true or not. What is true is that Ms. Thompson has to take a stand. As Chief Merchandising Officer, she has to lead the customer, whoever the customer is, into the future.

And I realized that I'm going to have to have a talk with Chip Cayman.

3 comments:

  1. I appreciate the labour you have put in developing this blog. Nice and informative.

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  2. The Gliebers Dresses series is up to 27,000 words ... about a third of a book, if you can believe that.

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  3. Wow -- you really got some frank feedback from her!

    I have learned from our clients that multichannel customers are usually the most profitable, but that they certainly are not the ONLY customers out there. Channel specific customers still dominate in numbers. These customers do not follow the same purchase patterns as multichannel customers.

    It is important to keep pricing and promotional activity constant -- that is true. But the products you select and feature must balance between appealing to the channel-specific customer and the multichannel one.

    Merchants must "lead" their target customer segments regardless of channel.

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