January 05, 2014

Monday Mailbag

It's our new Monday tradition here ... your questions answered, and where appropriate, some simulated questions to make a point! Email your questions to kevinh@minethatdata.com.

An Anonymous CEO asks this: "What happens if I shut down my catalog, and focus instead on selling on Amazon instead? Can I grow my business faster?"
  • #OhBoy!
  • No right or wrong answer here.
  • Audiences, however, are very different. The catalog audience is 55+, and rural. The Amazon audience (though age 18-80) averages a decade younger. So the merchandise assortment that works with catalogers may or may not work so well with the customer attracted to Amazon.
  • Why not create a separate brand that sells on Amazon, and see what happens? It can be the same merchandise, right?
Seth has a question for us: "You are constantly preaching about profit. Doesn't your stance on Merchandise Forensics contradict profit? You want us to invest in creating more new items, new items that are terribly risky. Wouldn't we be better off riding our winners as much as we possibly can?"
  • Interesting! Have you had a chance to read this article about the movie industry (click here). Fewer and fewer movies ... more and more profit. Every industry has a magical "inflection point". Every company has a magical "inflection point". Go too far, and you're over-assorted, and that's expensive. Cut back too far, and you starve your customer base. We're constantly trying to find that magical inflection point. It's always moving. And it can be found. That's the point of Merchandise Forensics.
Sherri asks, "Why do you think marketing professionals should even bother with understanding merchandising? Don't we have enough to figure out with mobile and social and online marketing?"
  • I worked with an individual. An accountant. This person learned catalog circulation. Then she parlayed circulation knowledge into meetings with the inventory team, which became meetings with the merchants. With marketing data, she told the merchants what worked, and what didn't work, from a customer standpoint. This earned her a job as General Manager of a merchandise category. Several jobs later, this person was in charge of Creative and Merchandising. This person founded a company. A half-decade later, the person sold the company. The pivot from marketing to merchandising launched a career. And most of the upper-level Execs I work with respect merchandising brilliance more than marketing brilliance. Merchandising knowledge is awfully, awfully important. And it has a disproportionate influence on profitability.
And finally, William asks, "I think it's wrong to ask catalogers to shift to a younger audience. First of all, it won't work, younger customers hate catalogs. Second of all, what's wrong with generating profit from Baby Boomers?"
  • Here's what I know. When I analyze the age distribution of catalog shoppers, across time, I see a rapid and frightening aging of the customer base. In 2000, the customer was maybe 50 years old. In 2014, the customer is 61 years old. I repeatedly observe 0.7 years of additional age for every year that passes - and it's been this way for at least a decade.
  • I don't need to be a visionary forecasting wizard to project what the customer file looks like in the year 2028 ... it's probably 72 years old ... the average customer, mind you, would be 72 years old.
  • We need to turn this question around ... what is your solution? How do you prevent your catalog-centric business from becoming Montgomery Wards?
  • Give this article about Marriott a read - they're dealing with the same issue you're dealing with (click here). What would your solution be to their problem? How does that relate to your problem?