May 02, 2013

Merchandise Forensics: Styles And Demand

Let's look at my business for a moment.

Three years ago, I offered two products ... Multichannel Forensics and Ad-Hoc Projects.  My income was "x".

Today, I offer eight products ... Online Marketing Simulations, Catalog PhD, Omnichannel Forensics, Merchandise Forensics, Email Forensics, Price Elasticity, Sales Forecasting, and Ad-Hoc Projects.  My income is "2x" what it was three years ago.

In other words, I offer 4x as many styles/skus ... and I get 2x as much, in sales.

Does that relationship make sense to you?

Similarly, if I cut back from 8 project types to 4, I would not expect sales to be cut in half ... they might be cut by 25% or 30%.

The same thing happens in your business.

Here's what I have observed.  The explosion in channels over the past decade distracted us from being able to understand how merchandise strategy impacts our businesses.

When I offered the Catalog PhD project late in 2010, business exploded.  Without product innovation, my salary would have stalled.  Last year, without a breakthrough new product, sales didn't explode.  This year, with Merchandise Forensics becoming more and more popular, sales are moving along nicely.

The same thing happens in your business.

Look at Apple.  You watched the product line grow from iPod to iPhone to iPad, and the business exploded.  With no new products (realistically) for the past two years, we're seeing the business plateau.  Granted, any of us would like to sit on $155,000,000,000 in cash, but regardless, without new product innovation, we're seeing a change in the trajectory of the business.

Our obsession with channels blinded us to what really matters.

What really matters is how we manage merchandise.  New products.  Existing products.  Growing skus profitably.  Managing inventory appropriately.  This is where business success largely happens.  For the most part, we've ignored this dynamic.

In the next five years, retailers and e-commerce brands are going to obsess about mobile ... they're going to throw a disproportionate amount of resources at the digitization of the business.  This is your opportunity to take advantage of a focus on omnichannel, by focusing on merchandise strategy.