Working With A Great Partner

When I worked at Eddie Bauer, I was part of what was called the "Catalog Business Team" ... CBT. It was our job to execute the catalog and ecommerce marketing, merchandising, inventory, creative, and operational team plans. Not being Lemonheads, we took our mandate further. We acted like we owned the catalog/ecommerce division, for good reason of course, because if we messed up, we were fired. Best to be fired setting the tone rather than following marching orders.

I was responsible for catalog marketing and analytics. My inventory partner was the best. We made the company a ton of money by working together, partnering on what our business / sales plan would be long before anybody else paid attention. By doing that, we had a solid plan when the Executives chose to pay attention. They nibbled around the edges of the plan, but the plan was truly our plan.

The most profit the catalog/ecommerce channel ever generated happened on our watch.

We partnered on dictating the merchandise assortment we'd feature in catalog and online. Back then the catalog drove everything, today it would be quite a different story. Let's pretend that last year's October catalog had the following composition.

• 24 pages of mens existing merch.
• 24 pages of mens new merch.
• 36 pages of womens existing merch.
• 36 pages of womens new merch.
• 8 pages of home.
• 8 pages of womens tailored merch.
• 136 pages total.

I would determine how many pages we could profitably mail next year, based on last year's productivity. Let's say I could only author 120 pages. My partner would go back and optimize performance of each category above based on last year's productivity, yielding a plan that might look like this.

• 16 pages of mens existing merch.
• 20 pages of mens new merch.
• 40 pages of womens existing merch.
• 36 pages of womens new merch.
• 4 pages of home.
• 4 pages of womens tailored merch.
• 120 pages total.

From here, I'd calculate the expected productivity of the pages. Fewer pages means less sales but better productivity. I'd calculate "merchandise productivity" ... showing that my partner's optimization resulted in each page being 10% more productive. Sales would decrease, but each page was more profitable. This allowed me to circulate deeper, converting more customers.

• Last Year:  3,000,000 catalogs at 136 pages, sales = $20,000,000. Demand per Thousand Pages Circulated = $49.02.
• Next Year:  3,500,000 catalogs at 120 pages, sales = $22,320,000. Demand per Thousand Pages Circulated = $53.14.
• Demand/Sales would be +12%, ad costs would be +3%, profit would increase by $700,000.

We replicated this for every catalog we'd mail, we'd adjust merchandise productivity and give direction to the nascent ecommerce team, our plan would fold into plans for the call center, the distribution center, for inventory buys, and it would give direction to our merchants and creative team.

There were two teams that generally argued with the plan.

1. The merchandising team.
2. The creative team.

The merchandising team did not like constraints ... constraints like "16 pages of mens existing merchandise". They wanted 32 pages. My partner and I would run the scenarios for everybody, showing how much sales/profit we'd give up adhering to their direction. To some extent this happens at every company, but disciplined companies push back when the merchants want "more".

The creative team did not like constraints. They wanted eight pages for "branding". No selling. We'd explain that was like flushing $80,000 of profit down the toilet. We'd ask the creative folks if they wanted to explain their ideas to the CEO. They didn't want to explain their ideas to the CEO.

There's nothing that destroys the profitability of an old-school catalog division like a creative director who wants to explore "branding".

But when you have a great business partner ... and the two of you work in lock-step ... you can achieve record profit.

Within a year I'd leave to work in the dot-com world (what ultimately became the 'retargeting' industry), watched my stock options go from 78 13/16 to 1, then accepted a job at Nordstrom, where I again had great partners (the merchant/creative person and the inventory person were both very good).

There are few things in business more enjoyable than working with great partners who have facts and work in lock-step with you to achieve great things ... and then great things happen.

Life of an Item

In case you are wondering why I'm talking about items / merchandise more often, this is a process that happens every 3-5 years. Business doesn't go the way we want it to, we focus on merchandise for awhile (which often fixes the problem), then we get away from merch and focus on marketing channels until marketing channels don't work great (usually caused by merchandise problems) ... and we repeat the cycle.

We're always repeating the cycle.

Sometimes our merchandise assortment gets stale. It happens to every company. It's during the "stale periods" when we dig a bit deeper.

Let's pretend you measure how much items sell by year ... let's pretend you've analyzed the dynamic for items you've offered for at least four years. You see the following.

• Intro Stub Year = $50,000 per item.
• First Full Year = $75,000.
• Second Full Year = $38,000.
• Third Full Year = $19,000.
• Fourth Full Year = $9,500.

The item essentially generates $191,000 over the stub year and first four years. You don't have unlimited warehousing space, so when an item dips below, say, $15,000, you discontinue the item and find something new. This means the life of the item is the stub year plus three full years.

Once you have a framework, you can identify the items in your assortment that are at the end of their life. You can communicate with your merchants that your customers need newness.

This is the point in the discussion where somebody will raise their hand and offer me advice:

• "I work in marketing, and I shouldn't have to deal with merchandise performance, that's why we have merchants. I should be allowed to focus on marketing."

Oh my little grasshopper.

Have you ever noticed that when business is off by 5% the Finance Team and the Merchant Team start asking questions about marketing? I notice it. It happens. All the time. It's happened for the thirty-six years I've been in this business. Marketers are constantly being fired for merchandising sins.

Checks and balances are important. You do not want to be held accountable because your merchandising partners held on to old products too long. Measure the life of an item, and focus on communication when you notice that products are aging, potentially harming customer response.

Assortment Age

If you want to understand if your customers are being impacted by your merchandise assortment, you can run my comp segment metrics (obviously) - you can run my Class Of Reporting (duh).

You can also measure what I call "Assortment Age".

Take every item a customer purchased in September, and for those items calculate the number of months that item has been available to be sold. If it were introduced fifteen months ago, the age of that item is 15 months. Perform this for every item you sell.

Compare September 2026 to September 2025, to September 2024. What is the average age of the assortment the customer purchased?

You might see something like this:

• 2026 = 13.2 Months.
• 2025 = 18.1 Month.
• 2024 = 13.6 Months.

The 2025 metric should set off all sorts of alarm bells.

There are a thousand reasons why an assortment ages or is immature. It's nearly impossible to balance the metric perfectly, teeter-totter style. Sometimes your assortment needs to be rebuilt and the assortment will be artificially "young".

If you have a month where results aren't ideal, go look at your merchandise assortment, calculate Assortment Age, and see what it tells you.

Email Messaging to Non-Fans

One of the challenges of ecommerce-in-a-box is that you work so hard to piece together a credible vendor solution (i.e. Shopify) that you don't stop to ask yourself how the customer sees the experience.

Example?

Friday Pickleball.

I was on the ground floor, watching their funny videos years ago.

I've spoken with the guys at a pickleball tournament. If you've never been to a PPA Tournament in Mesa (or elsewhere), by all means, open up your wallet and enjoy. You might see the guys there.

My wife paid $ to be coached by Kyle Koszuta. I've forwarded his videos to my audience at Pickleball Mathlete. We've watched him battle the pros in early rounds on Pickleball.TV. We've enjoyed watching Rachel Rohrabacher battle the best in the business, using their paddles as their first signed pro.

We took their Pickleball Personality Test.

We watched those guys as they changed their lives, moving to Phoenix to grow their careers.

Last week, I needed a new paddle ... I bought the Friday Aura to help protect my arm from tennis elbow.

You'd likely say I'm a "fan".

Their ecommerce-in-a-box solution doesn't know that. They've sent me two ecommerce-related messages since.

1. Please Become An Affiliate Marketer For Them.
2. The Message Below.

I just bought a paddle, and NOW you're going to tell me you'll help me find the right paddle?

Mind you, this doesn't change anything because I'm a fan. I'm with them.

The message is for you, it's illustrative for your business. The vast majority of your customers are not fans. Nope. Those who aren't fans don't want a "customer relationship". They want you to fulfill a want/need they have at a point-in-time. Telling them you can solve a problem hours after they purchase thinking they've already solved the problem is counter-productive. It's especially counter-productive because you are a small/scrappy brand using Shopify / Klaviyo so you can compete/beat somebody like Macy's ... only to have ecommerce-in-a-box fail you.

Again, I love what the Friday Pickleball folks are doing overall - I'm a fan, so I'm not going anywhere. Most of your customers are not fans, so the rules for those customers are different. Your messaging should reflect that fact, it needs to be more "on point" if you will.

Rocktober

Growing up, we had a Classic Rock station (it wasn't really "classic" yet, but you get the drift) that adored the month of October. They called October "Rocktober". Combine that with "Two for Tuesday" and you really had something ... the dulcet tones of the band Rainbow singing "Stone Cold" and "All Night Long".

I thought about stopping the post right there, but that wouldn't be fair to you, the loyal reader.

Every one of you has a marketing channel that is dying. Sort of like FM Radio is dying. My favorite station in the Pacific Northwest was KRXY ("Roxy") 94.5 from Shelton. You'd hear Rainbow's "Stone Cold" followed by "Cherish" by Madonna followed by "Loser" by Beck and then they'd wrap it up with something from Arianna Grande. Just random Rock/Pop nonsense.

There was nothing like it.

And then?

Spotify playlists.

On June 30, KRXY didn't sell to some soulless entity and become part of the "iHeart Radio Family". They just shut down. Over. Fin. Bankrupt. Their scraps were ultimately acquired by another local station.

Every one of you has a marketing channel that is dying. For some of you, you don't have the metrics to realize that the marketing channel is dying. You keep paying Facebook and they keep sending you customers eight years older than your average customer and you think things are fine. They're not fine. One of the signs of a dying marketing channel is that the customers delivered by the marketing channel are disproportionately older than the age of customers from other marketing channels. Catalogers know this all too well ... they ran their businesses into the ground trusting co-op marketing channels who delivered 74 year old customers instead of the 47 year old customers they needed.

Identify the average age of all customers acquired in the past year by marketing channel. Yeah yeah, I know, marketing attribution double-counting blah blah blah. Do the work anyway. If the nascent new customer from ChatGPT is 33 years old, the Google Search customer is 43 years old, and the paid social customer from Facebook is 58 years old, you have a pretty good idea which marketing channel is going to become KRXY.

Warning Sign: Prices Up, Customers Correspondingly Down

When you increase prices (typically by discontinuing a product line and introducing a new/comparable line at a higher price), there are several things that can happen.

1. Nothing. This is the hope. You essentially increase prices and customers don't care. It's the kind of thing Apple gets away with.
2. Fewer Items per Order. This is the most common outcome. Prices increase from $20 to $25, customers in-kind decrease items per order from 2.5 to 2.0. Nothing has been accomplished with the notable exception of fewer items going through your distribution center. 
3. Fewer Orders per Buyer:  Happens less frequently than (2) above but it still happens. Some of your existing customers just say "no". AOV hawks will quickly point out that there's nothing wrong with AOV, and they're right, AOV often increases in these circumstances. And yet? Business is just "off" a few percentage points ... because customers are not buying as often.
4. Lower Repurchase Rate:  Sort of a byproduct of Fewer Orders per Buyer, but more significant because some customers just say "no mas" and go find something cheaper on Amazon. Once you start trading in the dark arts of lower repurchase rates, all sorts of lousy outcomes transpire. Your buyer file decreases, you have to "make budget" so you acquire more new customers at ever-more-expensive rates to make up the difference harming the p&l in the process. This is a common scenario.
5. Fewer New/Reactivated Buyers: The counterpart to (4) above. (4) is a measure of what your existing customers think, (5) is a measure of what "the market" thinks about your pricing. It is common to see a disconnect here ... stable repurchase rates among existing buyers but a 20% drop in new/reactivated buyers. If your annual rebuy rate is 30%, the market dictates what you do. If your annual rebuy rate is 70%, you dictate what you do.

(4) and (5) result in declining customer counts. Review your prices post-COVID and correlate average price per item purchased with rebuy rates and with new/reactivated buyers.

Does the analysis reflect any warning signs?

Signaling The Warning Signs

Here's lawyer-esque boilerplate commentary from Gap's 10K report for 2025, page 38.

A credit rating of BB+ isn't great.

For you and I, interest rates are going up.

And if you really want to terrify yourself, listen to this podcast (click here) and learn what happens when the AI bubble pops. Assuming the hosts are correct, which is an assumption.

You can slide on down to page 45 in the 10K document. Sales up two percent. Store sales +1%, Ecommerce sales +4%. A +2 comp in an inflationary environment isn't really a +2 comp, as you all know. Gross margin was down from 41.3% to 40.8%. Inventory was +7% (oh oh).

If this phrase for fixing the business doesn't signal a warning sign, I don't know what does. Again, from page 45.

• "... optimizing our platform to drive scale by advancing capabilities that amplify and enable our brands."

3% of stores have been closed over the past two years.

Free cash flow is down nearly 20% vs. a year prior.

Now, you're probably saying to yourself, "Kevin, that's the 2025 annual report. They're halfway or more into 2026". You are correct.

Q2 2026:

Net Sales -2%.

Gross Profit +$390 million due to a recovery of $417 million in tariffs, otherwise down $27 million.

You're probably paying attention to your metrics as well. Get your business as healthy as you can. It's possible you'll experience chaos after the election, followed by the unwinding of the AI bubble over the next two years. Or not. I'd want to be prepared.