June 05, 2013

Knockoffs

This is Miller Park, in Milwaukee, home of the Milwaukee Brewers.

It's also home of the sausage race.

The races are popular among fans.  The races sometimes make Sportscenter on ESPN.

Then the races were copied.

In Pittsburgh, they race Pierogies (click here please).

In Washington, they race Presidents - heck, you can even have a meet and greet before the ballgame, like the one enjoyed by this youngster.



In other words, when you hit on something interesting, others quickly copy what you are doing.  They "knock off" your product.

Do you sell products that are easily copied (or are branded), and are sold by those whom you compete with?

This is where you need a "decay" analysis, part of a typical Merchandise Forensics project.

It's common to observe a "decay rate" among products.  This is the relationship you'll see:
  • Year 1 = $18,000.
  • Year 2 = $56,000.
  • Year 3 = $45,000.
  • Year 4 = $36,000.
  • Year 5 = $29,000.
  • Year 6 = $23,000.
  • Year 7 = $18,000.
  • Year 8 = Discontinued.
As you can see, this item has an approximate 20% "decay rate".  Each year, you lose 20% of the volume, as the item ages into obscurity.

When the competition "knocks off" your product, you'll observe an aberration in the relationship.
  • Year 1 = $18,000.
  • Year 2 = $56,000.
  • Year 3 = $31,000.
  • Year 4 = $21,000.
  • Year 5 = $14,000.
  • Year 6 = Discontinued.
Do you see what happened in Year 3?  The item dropped off much faster than the normal decay rate (by more then 40%).

It's really important to know what your average "decay rate" is.  By knowing the average "decay rate", you can identify items that are potentially being "knocked off" by the competition.