October 16, 2013

In Music - Blockbusters Are Growing In Importance - And In Your Business - It May Be Happening, Too

Read this ... go ahead, click on the link, I'll wait ... see, when you click on the link, you prove to me that you're paying attention.

Ok, we're back.

Have you analyzed your merchandise assortment? I've done a ton of these projects, and guess what? It's happening, across the board. I talked about it here (again, please click, it demonstrates that you are paying attention).

This is what "digital" and "mobile" are likely to bring us - you can't display 22,000 skus on a mobile device like you can in a catalog. As a result, 21,800 skus get minimal attention, while a couple hundred favorites capture all the demand.

Or if you're in e-commerce - be honest - on old-school home pages, you displayed hundreds of links - then we evolved to this:

Think about how many skus Nordstrom has, more than a hundred thousand, right? But this is the established best practice.

We do this, of course, so that when the user visits on a mobile device, they see the same integrated imagery and messaging. Omnichannel!

Except for one little problem. By limiting the assortment, we limit just how much we tease the customer. This results in a select number of wildly successful winners, and a whole bunch of marginally productive items that must be forecasted perfectly, or you've got a liquidations situation that results in 40% off plus free shipping, devaluing the rest of the assortment.

Pay attention, folks, because this trend is coming to a business near you.

There are two things you're going to have to do.

  1. You're probably going to have to set up a "tournament bracket", whereby newly introduced items are given every possible opportunity to migrate to the championship game, where only a few highly coveted items are generating the majority of the volume in your business. Hint - it will be really, really important to fill the pipeline with future winners.
  2. You're going to have to have some monster winning items, items that generate a healthy gross margin.
I know, I know, you think you already do all of these things. Not true. Not like you're going to have to do it in the future. And it's going to require a 50/50 partnership with marketing - marketing cannot be about discounts and promotions, marketing is going to have to advertise in a way that promotes the tournament bracket as opposed to advertising in a way that benefits the marketing team.

Ok, time for your thoughts. Email me (kevinh@minethatdata.com) or leave a comment. What do you think will happen? How do you plan on responding to this challenge?