Brookstone spends $$$ to send a catalog. Brookstone creates demand with their catalog - demand for a Fitbit. So, the customer visits Brookstone's website. Here's what the customer sees:
Ok, $99.95, and free shipping on orders over $50. So far, I like that. And the item is likely the same price in-store as online.
But is $99.95 the best price? I don't know. Let's consult Google.
Clearly, Amazon is squatting on the item, and at least Brookstone appears in the pricing list, but Brookstone isn't the cheapest price. Oh oh. So let's assume that the customer clicks on the list of available retailers.
Look at that ... L.L. Bean has free shipping and no sales tax, whereas Brookstone is required to charge sales tax. Now, it doesn't matter that Google calculates sales tax incorrectly, the signal has been processed in my brain - I save close to $10 buying the item from L.L. Bean than by buying the item from Brookstone.
Finally, before buying the item from L.L. Bean, I really should check Amazon, shouldn't I?
Oh, look, I'm an Amazon Prime customer, so I pay $96, free shipping, and if I am in a state where Amazon doesn't have a presence, I don't pay sales tax, do I?
My best bet, if Amazon does not have a presence in my state, is to buy the item from Amazon ... $96, and the item will be here in two days.
My best bet, if Amazon does have a presence in my state, is to buy the item from L.L. Bean, assuming they don't have a presence in my state (they don't) ... $99.95, and the item will probably be here in five-ish days.
Brookstone, the company that spent the marketing dollars on a catalog and email marketing and retargeting and search and shopping comparison engines and spent capital on physical stores ... well, Brookstone spent all that money to drive my order to either L.L. Bean or Amazon.
If you are Brookstone, what do you do to obtain this order, an order that Brookstone created? Because it is clear that no amount of omnichannel strategy, whatsoever, will drive Brookstone down to the lowest price on this item.
Thoughts?
How would you, if you worked at Brookstone, combat this issue? What kind of omnichannel strategy can you craft to defeat this problem.
I wanted to type a longer comment but your comments section doesnt work on ios if i try to correct a spelling mistake. I click on the textarea and then my keyboard stops working.
ReplyDeleteBrookstine needs exclusive products and then if they are a destingation then there is a fighting chance people will buy a few non esclusive items at the same time.
Selling the same stuff is a losing battle.
Joel
Kevin,
ReplyDeleteGreat post that underlines the challenges faced by catalog companies. Catalogs used to be the place where you went for the unusual or hard-to-find (I grew up in big and tall). It's hard to believe how different the business was back then.
Ultimately it's all about products, as you mention. You need unique products that have value. If you can crack that nut, the channel doesn't matter as much. To take this in another direction, I'll point at the recent 16 Things post from Andreezen (http://a16z.com/2015/01/22/the-full-stack-startup/). The whole post is interesting, but specifically read about the "Full stack startup". Basically they are talking about the digitization of product, but it gets to the heart of the problem: you need unique goods. Anything else ends up being a race to the lowest price. And in the environment we're in, the customer can *always* find the lowest price fast and easy. The catalogs/retailers/etc (these are just channels) that perform well are the ones developing new product that can't be found elsewhere. Period. And it affects digital companies as much as it affects catalogers.
Software may be eating the world, but you still can't rehash the same thing as everyone else and capture profits. We're past that point now.
Perhaps Brookstone could promote package deals that include the fitbit. That way they will have something unique to offer (the package) without having to find new merchandise to offer exclusively.
ReplyDelete