Oh, Macy's ... Nicely Done!

It was just one employee (click here)!!!!

KPMG audits Macy's ... so are we to believe that Macy's Finance Team / CFO didn't see errors totaling more than a hundred million dollars over multiple years and KPMG didn't see it either? Sure, they may have missed it ... at which point (if true) you should change your line of questioning to be "what value does KPMG actually provide?"

The Reddit accounting message boards find it implausible that this was the act of a lone gunman. It seems unfathomable that Management didn't know about this. Side Story:  In the early 1990s at Lands' End, our owner held a Management Meeting to communicate quarterly results, then promptly (and very publicly) scolded the Finance Team for exchange rate issues regarding our business in Japan. Management knows, folks. Management knows.

In July 2015 Macy's stock traded for $72 as they celebrated their status as "America's Omnichannel Store". It trades for around $16 today.

Retail trade journalists adore Macy's ... they almost act as an affiliate-PR department for the brand. They're promoting the "one-employee" thesis today. "Mistakes were made!!"

They sure were.

There's just a lot of slippery, corrupt behavior out there. Be on the good side of the financial ledger, ok?

I Don't Believe You

All consultants hear this sentence. There are a thousand reasons why the sentence is issued, no time to go into them here,

When you hear this sentence, think carefully whether the person saying it has a point or not.

Facts represent a classic instance where the person saying "I Don't Believe You" loses credibility. For instance, you execute an email A/B test. Your email list has 1,000,000 addresses. You split the list 500,000 for "A", and 500,000 for "B". You learn that "A" performs 12% better. It's going to be hard for the employee to say "I Don't Believe You". If you had 20,000 customers in each group, sure, there's a lot of variability, the employee isn't necessarily wrong. But at 500,000 / 500,000? The employee isn't saying "I Don't Believe You" as much as the employee is saying "I Refuse To Change".

I frequently get feedback that is similar to "I Don't Believe You" in catalog marketing ... it's the "The Catalog Has Intangible Value That You Cannot Measure" refrain, which is just pure nonsense. Think about it this way. Here are catalog results for a comp segment in five-year increments.

• 2004:  $/Book = $4.00. Profit = $0.90.
• 2009:  $/Book = $3.40. Profit = $0.62.
• 2014:  $/Book = $2.80. Profit = $0.34.
• 2019:  $/Book = $2.20. Profit = $0.06.
• 2024:  $/Book = $1.60. Profit = ($0.22).

Those are facts. Worse, the facts point to the end of an era. When somebody tells you that "The Catalog Has Intangible Value That You Cannot Measure", the person is saying "I Refuse To Believe Reality" and is willing to make up a seductive sounding sentence to continue to view the world the way the professional wants to view the world.

We go through these cycles in business all the time ... we don't have facts so we derive fables ... then we obtain facts and many don't like the facts because facts shift power ... so we create different fables to disregard facts and give us peace.

Fortunately in business there is always the profit and loss statement ... you can't suggest that efforts that are not profitable will escape accountability. The p&l statement demands accountability. It's cold. It's ruthless. It's controlled by the people who give you money.

You might not believe the messenger. That doesn't mean the messenger is wrong. Does the person delivering the message possess facts?

Upsets

On Saturday night, long after most of you went to bed, New Mexico scored what would become a game-winning touchdown with twenty-one seconds left while playing ranked Washington State. New Mexico struggles to beat teams like Wyoming, they're not supposed to beat the former Pac12 team from Pullman. And yet, they played a gritty game and came from behind in the second half. They're the reason you play the games.

Aside: If you ever get the chance, take US-195 from Pullman to Lewiston/Clarkston. There's a view of the Snake River from high above the cities that is one of the neatest views you'll ever see.

The best way to describe an upset is that it is a "result that was not supposed to happen" or was "unlikely to happen".

Upsets happen in business all the time. You don't test putting socks on the home page, you just do it on May 18 and it "works" and from there it becomes a "best practice". Six months later, you wonder why conversion rates are down? Maybe it is time to fire the marketing team ... they're generating bad traffic.

Even in a testing environment, upsets happen, all the time. They happen for two reasons.

1. Random Variability.
2. Your Sample Size is Too Small

My favorite sample size error happened awhile back. The analyst would take a segment of maybe 8,000 customers, split it into two groups (7,000 mailed, 1,000 not mailed), then measure results (mailed group = $20.00 average, not-mailed group = $18.40 average), run a statistical significance test, realize the results were not statistically significant, then say "we shouldn't mail this segment because the not-mailed group performed the same as the mailed group and therefore we simply wasted $0.60 sending print to this customer.

Had the analyst split the segment 4,000 mailed and 4,000 not-mailed, the same difference would have been statistically significant, and the analyst would have recommended mailing the audience. The analyst made a mistake, then an apparent "upset" happens, and the analyst costs the brand money because the analyst acts on an upset (no statistical significance) instead of crafting a credible experiment. 

Worse, the analyst made a mistake that had "cascading consequences". Random outcomes would constantly happen because control groups had too few customers, meaning that each of a couple-hundred mailing segments were constantly being flagged as "not profitable", and therefore were not being considered anymore. Had the analyst been given another three years to pursue this approach, the analyst would have gotten the entire department fired - because nobody would have been deemed "mailable" anymore.

Upsets yield all sorts of unusual decision making in the future, in response to the "upset".

How many unusual decisions have you made, or your Management Team made, in response to an "upset" ... a business result that wasn't supposed to happen?

Story Time - About Analysts

Let me tell you a story.

This one is from Lands' End, nearly thirty (30) years ago. I'm 29 years ago and dumb as a box of hammers. Oh, I have the data on my side. The data tells us that if I send 80 pages of Men's Tailored merchandise in a standalone catalog I am heavily cannibalizing the same product (and other products) in my core monthly catalog. If the catalog is forecast to generate $5,000,000 in sales and $750,000 in profit, the reality is that 70% of the $5,000,000 would happen anyway if the catalog was not mailed - it would happen in the core monthly catalog instead. So the $5,000,000 catalog with $750,000 in profit is, in reality, a $1,500,000 catalog that is losing $250,000 of profit.

As a young analytics manager, I hold the moral high ground here (at least that's what I believe). I've tested the results. I have #facts on my side. Any other form of analysis is inferior to the repeated A/B test results which consistently tell the same story, over and over and over again. I'm brilliant, everybody else is an idiot. I'm ready to die on this hill.

One problem. The company moved on. The folks who manage these individual catalogs "won". The CEO who supported integrating the business units was fired, replaced by a person loyal to the individual catalogs. No amount of shoving facts in people's faces is going to matter. None. The issue has been decided.

In the meantime, my Marketing Director hires a Manager from Fingerhut. A very talented woman. Kind. At the end of a meeting we're idly chatting about various topics and I decided to go into a rage about how right I am regarding circulation strategy. I can tell this new hire feels uncomfortable. Hint - if you are a male in a meeting and you are causing a woman to feel uncomfortable, you're doing something wrong.

The new marketing manager looks at me and says "I realize you might be right, but the company moved on, and I simply don't understand why you keep trying to fight a battle you already lost. Worse, the way you argue reflects poorly on you. Why would anybody listen to somebody as angry as you are?"

The fact that I'm sharing this with you twenty-nine years later tells you how much of an impact this woman had on my career. She was right, I was wrong.

If you are an analyst you likely feel as if you are "right". For good reason! You have facts on your side, everybody else has gut feel. You have solid methodology on your side, everybody else leverages faulty methodologies. If somebody else comes to you with "a way" of analyzing something, you're probably quick to point out the flaws in that style of analysis. After all, you are "right" and they are "wrong".

This is where you have to be really careful.

Putting somebody on blast mode because they don't analyze things the way you'd analyze them might feel good, but it doesn't do anything for your credibility. If anything, it just causes the person receiving your feedback to think you are a jerk. You want the opposite to happen - you want the recipient of your message to think you are a genius.

Just because you are "right" doesn't mean you are "Right".

There's a reason I was required to attend Dale Carnegie training around this time in my career. I had to learn how to become a salesperson. I had to convince somebody who wasn't on my side to execute my tactics.

It is difficult to be an analyst, to convince people to do things that work against their instincts. It's hard to be smarter at something than somebody else, only to have "somebody else" question you or recommend tepid ideas that won't work. It's also hard to understand your blind spots. All of us have weaknesses that we simply cannot see, but are obvious to anybody working with us. Learning what we're good at ... that is an important skill ... and then not straying outside of what we're good at ... that's valuable to the companies we work for.

What Reactivation Looks Like by Visit Segment

If you looked at, for instance, 13-18 month 1x buyers (one purchase, last purchase 13-18 months ago), you might find that in the next month this cohort has a 1.1% chance of buying again. That's a percentage that is generally too low to impact your business, consequently, you don't pay much attention here ... other than offering this segment 40% off or 50% off or 60% off ... then you'll tell me that you are being "strategic" by offering discounts.

If you break the data down based on "what" a customer did in the past month, you see a different story.

Turns out that, in this example, thirteen (13) percent of this lapsed segment wasn't actually lapsed at all ... they're interacting with your brand.

Your web analytics package already captures the non-Community  information above ... if you hosted a community forum on your platform, you'd see the 2,026 people who also interacted with your brand. If you have an email address for these customers (which you'd likely have because you'd require these customers to log into your platform with an email address), you'd look at "what" the customer did last month and then send email marketing content that is relevant to the products the customer likely wants to purchase based on community interaction.

It's not hard to do, it's stuff that retailers were doing in the mid-2000s.

So go do something with this information ... right? Get busy!

Why Are You Generally Against Reactivation Via Community?

Maybe you aren't against it, but my metrics suggest you are.

Last week I wrote about Wool& (click here). As you might surmise, when I talk about various topics I put links into the post, and then (unsurprisingly) I measure how often you click on links. For instance, here the Velocity Sellers spend fifty-four minutes telling you how to "crush it on Cyber Monday". Several hundred of you will click on that link, and then a small piece of my soul will turn to omnichannel dust. Thank you.

A total of fourteen (14) of you (quite possibly seven people clicking twice each) clicked on the community links in the Wool& post above.

Knowing that a customer who hasn't purchased from you in anywhere between 3 months and 48 months is suddenly interacting with your brand is ... really, really important. When I measure this stuff via logistic regression response models, an interaction with your brand can vary between a 1.5x increase in reactivation (community) to a 3.5x increase in reactivation (email click through) to a 5x+ increase in reactivation (shopping cart). All you have to do is record this stuff as an attribute in your database - that's it. And then act upon it.

And yet, when I speak of using community as a reactivation tool, you could care less.

Is it the hard work required to perform this work at a functional level?

Is it because your technology team could care less about it and therefore you have no chance to do anything innovative and fun?

Is it because you think I'm just plain wrong?

Send me an email and tell me why you don't do this stuff? (kevinh@minethatdata.com)

eBay

When I worked at Nordstrom, there was an eager and bright professional who worked for one of the catalog co-ops. In modern terms, she'd be called a "Thought Leader". She always had ideas, and she always insinuated that my team and I were ... not smart ... let's leave it at that.

After an hour where she continued to suggest that she was smart and we were just dumb retail employees, I asked her a question.

Kevin:  "Have you ever worked in retail? Brick 'n Mortar?"

Co-Op Professional:  "No"

Kevin:  "Then how could you possibly know how to navigate more than ten thousand employees to get your ideas implemented, and how could you possibly know the intricacies of retail to know if your ideas will actually work or not?"

Yes, there was silence.

From there, I'd use the query often with angry thought leaders who had all the ideas but none of the experience to know if their ideas mattered.

This brings me to eBay.

You already know I enjoy headphones, both open-backed headphones and iems. I've maintained a limit ... six in my collection. When I get to seven, one has to go. I sell the seventh pair on eBay.

eBay is a fabulous place to learn about copywriting, imagery, pricing, and customer service. On eBay, I have a competitor ... as best I can tell when somebody returns a Truthear Nova to Amazon or another brand, that brand sends the returned unit to this guy, who then sells it as an "open box" item on eBay. I've bought a couple of headphones from this guy.

So this guy "sets the market". Maybe the Truthear Nova sells new for $159. If he's selling an open-box version for $95, that's it, that's the ceiling of the market. I've tested selling above his price ... crickets. I've tested selling below his price, and it has to be 20% below ... you list 10% below to 20% below. If you price 20% below you charge shipping. If you price 10% below you absolutely need to offer free shipping.

I take pictures of the headphone or iem, of all of the tips, the box it came in, possibly the new headphone cable that I put on the iem that the buyer will get for free (to set the item apart from other units with stock cables). Pictures matter. They matter more than keywords matter, that's what I've learned.

Good reviews matter. How do I get a good review?

• I put a handwritten note in most outgoing packages.
• I sometimes offer headphone amp recommendations so the user knows what to buy next.
• In the case of the iPad I recently sold, I put a series of connectors (and an Apple Pen) in the box that didn't need to be sent to the buyer. I later learned that a woman bought the iPad for her Dad, and he liked having the bonus items to get started.

The handwritten notes ... that little touch, that matters. I'll tell a story of how I used the item and what I liked about it.

My stuff sells, quickly, usually within a day, normally in 3-5 days. I don't have to pay to have my items promoted.

If you are a service provider (and up to a third of you reading this are) and you want a taste of what your clients go through, and you don't have any direct e-commerce and/or retail experience, sell things on eBay (or Facebook Marketplace). You've got things lying around the house, unloved things ... sell them and test your ideas about pricing, creative, copy, and customer service. You are guaranteed to learn something new and interesting!