September 30, 2013

New Item Failure

Folks, this story repeats more often than old episodes of M*A*S*H.

Take a look at this table. This is the outcome of a comp segment analysis on an e-commerce business. The comp segment analysis evaluates customers who, for instance, purchased two times in the year ending September 30, 2012. We then measure how much these customers spent in the year ending September 30, 2013. I've found that this style of analysis is the most reliable way to determine if a business is generating improved merchandise productivity or if merchandising issues are hurting the business.

Guess what? This business is being hurt by merchandising issues.

Comp segment demand was -3.9% last year, and was -2.8% in the past twelve months. This business is suffering from two consecutive years of merchandise failure.

Now look down the Existing Comp column. This column represents comp performance for existing items. For each of the past five years, existing items have remained flat, or have marginally improved in value.

Now look down the New Comp column. Oh boy. Ohhhhhh Boy.

The entire reason that the business is struggling is because new item comps were -26.5% last year, and are -25.2% in the past twelve months. In fact, new item performance is down more than 44% over a two year period of time. 

That's a catastrophe, folks.

Look at the 2007/2008 timeframe. Both new and existing items were down, suggesting that the economy may have been to blame for poor performance.

But in 2012/2013? It's new items.

And guess what new items in 2012/2013 become in 2014/2015? Yup. Existing items. We can confidently project that, without an infusion of highly productive new items, existing item performance is about to go in the tank as well.

That's what we do with a Merchandise Forensics project. We identify what the core issue is with a business. And in most cases, the core issue is merchandise productivity, not a failure to employ a proper omnichannel marketing strategy.

When you are at today, ask anybody if they are measuring new item and existing item productivity. When you learn that few folks do this, you will realize that you are on the cusp of getting a head start on the competition.

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