January 19, 2014

Monday Mailbag

Remember, each Monday in 2014 I answer your questions, both real and imagined. If you have a question, please send it to me (kevinh@minethatdata.com).

Our first question is from Tracy: "What do you think about the Target and Neiman Marcus credit card theft situations?"
  • First, that stuff is going to happen. But it should happen less often.
  • Second, and much more importantly, we've completely lost focus on what matters. We'll happily spend hundreds of millions of dollars on #omnichannel solutions that will be implemented over a half-decade (click here), but we don't invest the same organizational zeal protecting credit information? We have everything backwards. If we can't protect credit card information, we don't have a business. Instead, we're focusing on how to make up for inventory errors in one story by wiring systems so we can ship items from other stores. Protect customer information first!
  • Third, we have information technology folks who are frequently paid more within the same job grades than garden variety employees - these folks need to do a better job of protecting information, and they need to say NO when marketing folks or consultants want them to prioritize big data nonsense over customer protection. And my goodness, try being an IT professional at a major "brand". Not enough resources, not enough respect, and everybody telling you what you must do. Not easy to protect customer information. We'll need to re-allocate resources to do a better job.
Our second question comes from Jessica: "What impact does company culture play in merchandising success?"
  • It means pretty much everything!
  • When I worked at Lands' End, more than twenty years ago, marketing folks were invited to inventory/merchandise/creative reviews. All data was shared. Here, in 2014, I seldom attend a meeting where a marketing person can clearly articulate merchandising success.
  • At Eddie Bauer, sixteen years ago, the culture adored process. Process! Few cared how merchandise performed. Everybody cared that the inventory team would get the marketing forecast on Friday, January 10, for the fall season. Not surprisingly, the business lost 20% of merchandise productivity during my time there, ending in early 2000. Also, not surprisingly, the business had a lust for discounts / promotions to move merchandise. You've never seen marketers so passionate about getting the right offer to the right customer at the right time. This logic, of course, is backwards, but that's what happens when the focus strays from merchandise, as it did fifteen years ago at Eddie Bauer.
  • Nordstrom was all about customer service, which, interestingly, results in a lot of merchandise knowledge. The organization didn't have the merchandising passion that Lands' End had, but customer service passion required employees to please customers, and you please customers by selling them something they want, and customers want merchandise.
  • In other words, if the company culture cares about customers or merchandise, then you tend to see better-than-average merchandise productivity.
The final question comes from Roger: "Why are you so against omnichannel? It's the painfully obvious future. Would you rather see retail businesses close their doors?"
  • Give this a read, Roger (click here). Nook sales were down 60%, year-over-year, in Q4-2013. Barnes and Noble did everything the omnichannel advocates demanded. They invested in the online channel, they have the stores that omnichannel advocates demand, and they had the Nook to protect their digital future. Shouldn't all of that, then, lead to riches? Wouldn't stores, online, and digital tablets trump Amazon?
  • It turns out that Amazon has a merchandise plus pricing plus assortment advantage that trumps an obvious omnichannel solution.
  • Here's another question - if omnichannel is destined for greatness, then wouldn't Microsoft, with in-store / e-commerce / mobile / tablets / integrated operating system across devices easily trump any other alternative?

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