January 13, 2016

Putting The Pieces Together

Ok, we've spent nearly three weeks talking about what a modern catalog marketer needs to do in 2016 and beyond.

If I were working at Eddie Bauer or Lands' End or Nordstrom, way back in the day, I'd create the classic Powerpoint Deck, and I'd prepare a series of presentation modules to discuss each aspect of the overall strategy.

Merchandise Productivity:  For most of us, Merchandise Productivity is flat. And that's a problem, because without merchandise productivity, it it terribly hard to grow. It becomes harder to acquire new customers. It becomes necessary to discount even more, or to offer free shipping all the time ... and both tactics hurt the profit and loss statement. I'd start my presentation by demonstrating what Merchandise Productivity looked like over time. If it isn't growing, then the rest of what I am about to say is magnified.

Tolls: When Merchandise Productivity is flat or in decline, tolls crush the profit and loss statement. Facebook wants you to pay tolls. Google wants you to pay tolls. The co-ops want you to pay tolls. Your paper rep wants you to pay tolls. Your printer wants you to pay tolls. The USPS wants you to pay tolls. Your remarketing vendor wants you to pay tolls. Your affiliate partner wants you to pay tolls. Get the picture? Look at the tolls you've paid over the past five years, and plot the tolls against merchandise productivity. If tolls are going up, and productivity is going down, your business is going down!!

Teamwork (Chemistry):  A big deal. Take a look at this picture.

What is your employee development strategy for this team? Do you share profit and loss data with this team? You should! Do you share company goals and objectives with the team? You should! Do you give a 15% annual salary bonus to this team if you achieve your profit and loss objectives? You should! Do you give actual, true business responsibility to your younger employees, or do you tell your younger employees to earn their stripes over the course of 10-20 years before they are given responsibility? Often, team chemistry is awful when merchandise productivity is awful. They go hand-in-hand. Find ways to celebrate wins. Trust your younger employees. Mentor them. Give them something meaningful to do.

Customer Acquisition: The biggest of deals. Most companies struggle to grow merchandise productivity, putting a tremendous amount of pressure on customer acquisition to fuel growth. And with tolls constantly rising, your number one objective as a company should be to be the best in the industry at acquiring new customers at the lowest possible cost. You should have a program in place to constantly diversify your customer acquisition portfolio. Do you have a program in place find new customers at the lowest possible cost (or for free)? Again, this should be your number one priority. Number one.

Ok, you've assessed your Merchandise Productivity. You know what path Tolls are on. You know whether you have a good work environment for your younger employees or not. And you know if your customer acquisition program is lacking or if you are actively finding sources of low cost (or free) new customers. This information should influence the path you, the catalog brand, plan to take.

Here are the four paths catalogers 

Golden Gate Bridge:  This is the catalog brand with a customer base < 50 years old who is actively crossing the bridge to e-commerce. This business sees the writing on the wall ... they know that the co-op customer acquisition model is unsustainable and they are crafting low-cost Customer Acquisition strategies that find 35-50 year old customers online or via mobile. More than half of their demand comes in via online marketing strategies.

Catalog Cul-de-sac: For the cataloger who wants to keep doing everything the same way, while capitalizing on a 50-70 year old customer audience, there is only one proven path to success ... Merchandise Productivity. There will be winners, no doubt about it. The losers, and there will be many are going to be a surely, ornery bunch! The winners will sell great merchandise that causes a customer to exit the information superhighway and drive into the Catalog Cul-de-sac.

Ranch-Style Remodel: The shift from catalogs to online is long over. What's left is the "Magic 8,000,000" catalog buyers. Among this audience, the life of a catalog is shrinking, and that "shrinkage" is causing catalogs to be less productive among the co-op audience catalogers crave. The only way to fight this is to "remodel" the catalog business ... catalogs will get smaller, populated by only the best products that appeal to customers. The smaller catalogs will have greatly increase productivity, which means they can be mailed deeper to co-op names, obviously pleasing the co-ops (greatly). But eventually, a shortened life of a catalog will catch up to smaller catalogs, too, forcing catalogers to mail even smaller catalogs with a personalized merchandise assortment. The catalog vendor community will adore this trend, offering myriad solutions to help the cataloger remodel the business.

Abandoned Warehouse: This is the end game for those who fail to grow merchandise productivity within the Catalog Cul-de-sac or Ranch-Style Remodel. Eventually, failing catalogers will sell to Catalog Holding Companies (CHCs) ... large brands (think Potpourri Group without a soul) that gobble up distressed catalogers in an effort to maintain population of the "Magic 8,000,000". Catalog brands become glorified product categories designed to encourage customers to cross-shop other product categories. When an individual catalog brand is unable to generate profit, or is unable to sufficiently populate the "Magic 8,000,000", the catalog is shut down, and a newly distressed catalog brand is purchased. The CHC (there could be +/- 12 CHCs in time) will centralize all fixed cost centers in an effort to greatly reduce cost, and will bypass the co-ops via access to the "Magic 8,000,000".

That's the story. That's how the pieces all fit together. Now it is up to all of us to do something. If we choose to not do anything, then we pin ourselves in the Catalog Cul-de-sac, a place where we must drive significant increases in merchandise productivity if we want to thrive.

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