Post-COVID New Item Failure

Last week I reintroduced the concept of Winners/Contenders/Others.

One sign of a brilliant merchandising team is their ability to find new products that customers love. For the company I analyzed last week, here are the number of new items that became Winners that year.

• 18 three years ago, 19 two years ago, 13 one year ago, 7 in the past year.

Yup, that's not a successful Merchandising Team, now it is?

An awful lot of you are going to dig into your data and realize that your product/merchandising teams missed some of the fundamentals they acquired prior to the COVID-bump. They stopped tracking success of new items, heck, they had a hard time even FINDING new items so they just plain struggled and now here we are, with constant stories of new product issues.

If new merchandise is < 20% of your annual sales total, you probably don't need to be as thorough on this topic as I'm encouraging readers to be.

But if new merchandise is > 20% of your annual sales total and you have results like we see above, you didn't get the job done. It's time to re-emphasize new merchandise.

Winners

Nearly a decade ago I wrote extensively about the concept of Winners / Contenders / Others. Through the years, the concept evolved a bit ... then during COVID none of it mattered because sales were up 50% and nobody cared about merchandise. Last year that began to change as some items sat on ships outside of Long Beach. This year, all of a sudden people care about what they sell ... again. 

Time is a flat circle.

Allow me to show you the number of items that were Winners for a company, items that were also Winners the prior year.

• 289 three years ago, then 252 two years ago, then 232 one year ago, then 232 as of today.

And here are total Winners for each of the past four years.

• 375 three years ago, then 315 two years ago, then 331 one year ago, then 282 as of today.

Subtract the difference, and we can see how well the company did at Developing Winners.

• 86 three years ago, then 63 two years ago, then 99 one year ago, then 50 as of today.

Yeah, there it is ... a real product development issue in the past year ... the lowest total of the past four years.

This is happening for two reasons.

1. Some of you had product availability issues.
2. Many of you didn't care about merchandise during/after the COVID-bump.

Merchandise ... and new merchandise ... is about to become a big deal again, just like it was in 2012-2013 when I wrote extensively about Merchandise Forensics. As I mentioned earlier in the post, time is a flat circle.

P.S.:  Yeah, I know - here come the unsubs ... people grumbling that I'm not giving them tips to be successful with TikTok advertising. What you sell matters, folks. And if your merchandising/product team messes that up, you get blamed for it. So if you want to unsub because of that, go ahead. But just think for a few moments about how your business thrives ... and think for a moment that maybe your efforts are being stifled because of external factors related to merchandise/product.

Player Development

It should not surprise you in the least bit that I'm in charge of Player Development in my local Pickleball Club, now should it?

We have a program in place to teach players serves, returns of serve, ground strokes, dinking, drop shots, lobs, and overheads. The coursework is similar, but is modified for players who are at a 2.5 level vs. players who are 3.5 or above.

The goal, of course, is to accelerate the development of players. If we can accelerate the development of players, then we have more good players and more good competition and happier club members. Everybody wins!

The concept of Player Development directly ties to two issues that we talk about.

• Customer Development.
• Merchandise Development.

If you can speed up the time between a first purchase and a second purchase, you improve the Development of the Customer and ultimately generate more downstream profit. Yeah, Welcome Programs.

If you can speed up the sales launch of a new item, you improve the Development of the Product and ultimately generate more downstream profit. Yeah, New Product Programs are important ... not just offering 'em but finding creative ways to expose customers to the newness you already have. No, an email with a subject like of "NEW ITEMS" doesn't count.

Take Player Development tactics and apply them to Customers and to Merchandise.

Different Winners

Another challenge some of you are communicating to me is the "different winners" conundrum.

In other words, the type of items that became winners in 2019 changed (for obvious reasons) in 2020.

As inflation hit, some of the items that used to sell well stopped selling as well ... because they became too expensive. So here we are in 2022 and there are now "different winners" populating your business.

Pay attention to "different winners" ... if the items that are now selling best lead to lower repurchase rates, well, you have one additional challenge to consider. But again, you'd prefer that I warn you about this sooner than later, correct?

New Product Nightmare

One of our readers forwarded information regarding new item performance replicated via their "Class Of" report from the 2013 work I performed in Merchandise Forensics. Here's the table (all numbers in millions):

Can you see the problem? The problem is outlined via the colored numbers in the table above. New items did $3.1 million in 2018, $2.8 million in 2019, $4.4 million in the COVID-year of 2020, then an awful $1.9 million last year due to product availability issues, and another awful projection of $1.5 million this year as new products are just hard to source.

When you fail at finding new items, you not only fail this year, you fail for subsequent years as well. In other words, the problem so many of you are telling me about (hard to find new products in our post-COVID supply chain environment) will result in downstream challenges as well.

I know you don't want to hear this message ... but you likely also want to have enough time to do something about it, right?

It's Time Again!!

Four months go by just like a snap of a finger!

It's time again for the next run of the MineThatData Elite Program. This time, in addition to the usual array of analytical masterpieces you enjoy perusing, you'll learn how each of your merchandise categories generate sales ... do sales come from prior category buyers, from cross-over buyers, or from new/reactivated buyers? In 2022 projects it is becoming clear that we don't understand what drives category success - we measure what Google Analytics tells us to measure and as a result we're not understanding how to capitalize on the categories that truly drive business success.

Cost?

• $1,000 for existing Elite Program members.
• $1,800 for first-time Elite Program members.

Data?

• Five years of item-level purchase history, delivered in .csv format.
• June 1, 2017 to May 31, 2022.

Timing?

• Agree to participate by June 10.
• Data delivered to me no later than June 15.
• Results delivered to you no later than June 30.

Inflation and Price Bands

I run regressions based on future spend, dependent upon the price bands the customer previously purchased from in the past year.

The analysis looks something like this.

When prices increase, customer response changes. Customers who buy from Very Low price bands tend to spend less in the future per dollar spent the prior year. Notice the coefficients ... from $0.33 per dollar three years ago to $0.24 two years ago to $0.19 one year ago to $0.16 as of today. Basically, customers buying from Very Low price points are worth half as much as they used to be.

But wait - there's a good story here! Look at Very High price points ... the coefficients were $0.07 per dollar three years ago to $0.08 two years ago to $0.14 one year ago to $0.15 last year.

Let's pretend that customers spent $1,000,000 on Very Low price point items in the past year and $3,000,000 on Very High price point items in the past year.

• Very Low Price Points = (0.16-0.33)*$1,000,000 = ($170,000).
• Very High Price Points = (0.15-0.07)*$3,000,000 = $240,000.

In this simple example, you gained $70,000 of future spend as customers vacated Very Low price points and migrated to Very High Price Points during an inflationary timeframe.

You'd continue the math for Low/Average/High price point bands, and then you know what impact pricing shifts by pricing band are having on customer behavior.