May 09, 2012

Time To Sell: Merchandise Productivity

Yesterday, we invested a little bit of energy on fundamentals.  Without a dramatic improvement in fundamentals, the value of the business essentially tripled.

Now, the business is more profitable, but it still isn't terribly healthy.  We haven't addressed top-line demand increases, yet.

Almost nobody talks about merchandise productivity.

And, yet, merchandise productivity is more important than anything else.

Merchandise productivity can be increased by having great product (easier said than done).

Merchandise productivity can be increased by improving the performance of landing pages, by improving the performance of the home page, by merchandising email campaigns better, by having a raw desire to assort a catalog in the best possible way.

Merchandise productivity increases of 10% are achievable.  It just takes a team of business leaders with an unbridled passion for the business, a discipline for selling, to drive increases.

I know, you won't find anybody re-tweeting an article about merchandise productivity.

But look at what happens to the profit and loss statement when there is a 10% increase in merchandise productivity.

Are you kidding me?

This business is bordering on being healthy.  Suddenly, we have a $106,000,000 business (demand) that is generating $9,500,000 profit.  A business that might have been valued at $10,000,000 is suddenly a business that might fetch in the neighborhood of $50,000,000.

If you're an owner, what number would you prefer ... $10,000,000 ... or $50,000,000?

You accomplished this by improving the Net Sales percentage by three measly points, by improving the Gross Margin percentage by three measly points, and by improving catalog and website productivity by ten percent (now that's not easy, but it is very achievable).

Page Counts When Bifurcation Helps Best Customers

Yes, your catalog customer file bifurcated ... with a minority of best customers needing more catalogs and a majority of your total file ...