Yes, this is part two of this episode. And if you don't like business fiction, then read this article about how Macy's spent a decade destroying their business (click here).
Setting: The Gliebers Dresses Executive Conference Room. Meredith Thompson is conspicuously absent.
Glenn Glieber (Chief Executive Officer): Well, Meredith isn't here, but we should get started. The document hanging on the wall tells us we have to start meetings on time.
Pepper Morgan Pressley (Chief Marketing Officer): We're meeting because of the fit Meredith threw yesterday. She should be here.
Lois Gladstone (Chief Financial Officer): She'll be here. I saw her meeting somebody at the security entrance.
Roger Morgan (Chief Operations Officer): Is she meeting somebody from Woodside Research? How come I wasn't told?
Lois Gladstone: Meredith was really hot yesterday.
Pepper Morgan Pressley: It's like Roger punched her in the solar plexus.
Lois Gladstone: Well, it's like the customer punched us in the solar plexus. You can't keep printing eight hundred dollars of profit a year and think everything is just fine. It is ok for Roger to recommend changes.
Roger Morgan: It is?
Pepper Morgan Pressley: It would be nice if the ideas were your own ideas.
Roger Morgan: Nobody listens if the ideas are my own. That's why I promote the reputation of a talented research brand. A real Leader leverages the ideas of a Thought Leader. Then you have somebody to blame if things don't work out.
Meredith Thompson walks into the room with an unidentified man wearing a three-piece suit. The man carries an old-school / worn leather briefcase. Meredith and the man sit down.
Roger Morgan: This dude doesn't work at Woodside Research.
Meredith Thompson: I thought I'd bring an old friend into the room.
Pepper Morgan Pressley: Why is Winston Jennings here?
Meredith Thompson: For those of you who don't know him, this is Winston Jennings, long-time catalog branding expert. He consulted with us back in 1988. And 1991. 1994. 1998. 2002. 2003. 2006
Winston Jennings (Catalog Branding Consultant): 2005.
Meredith Thompson: 2005. 2008. Then we stopped bringing Winston in.
Pepper Morgan Pressley: That's about the time Roger started trusting Woodside Research.
Roger Morgan: Bingo!
Winston Jennings: Anyway, I told my daughter Haylee to have fun at her sixteenth birthday party and I got on the first plane I could get on when Meredith told me that you were thinking of selling on Amazon. I guess my first question is, "what is wrong with you"?
Lois Gladstone: We made eight-hundred-and-twenty-four dollars of pre-tax profit last year.
Winston Jennings: That's better than most of my client base. If I were grading you on a curve, I'd give you a B-.
Glenn Glieber: Why thank you!
Lois Gladstone: No, no, no. That's not good enough. We need to generate ten percent pre-tax profit if we ever want to accomplish our goals.
Winston Jennings: Those are lofty goals!
Lois Gladstone: No they're not.
Roger Morgan: So you don't like the idea of selling on Amazon?
Winston Jennings: Of course not. It's not a best practice.
Roger Morgan: It's simple. We ship products to Amazon. They do all the hard work, and they collect about 35% of the sale price. On a $60 dress with a $25 cost of goods, we're looking at giving Amazon $21, we get $14, and then it will cost about $5 to ship the item to Amazon. We generate $9 variable profit on $60 sales. Tell me what the downside is?
Lois Gladstone: I like it!
Winston Jennings: Well, you've given Amazon control over your business for one. It's their customer, not your customer.
Meredith Thompson: Go Winston, Go Winston, Go Winston!!
Roger Morgan: We get name and address. That's not bad. And profit. That's important, too.
Winston Jennings: Are you going to sell the same items on Amazon and in your catalog?
Roger Morgan: No. Well, unless Meredith blocks me. Then I may have to sell the same stuff.
Winston Jennings: See, folks. See? Here goes the death spiral. You pull those items out of the catalog and next thing you know, you lose all of your postage and printing discounts. You lose out on cross-shopping. You sell a portion of your assortment. All of this brings your circulation levels down. Your vendor partners aren't going to like any of that.
Lois Gladstone: Who cares what our vendor partners think? We run our business for our purposes. Last year, marketing vendors earned thirteen million dollars off of the execution of our business. We earned eight-hundred-and-twenty-four dollars. Shouldn't we prioritize our return on investment over the thirteen million we pay marketing vendors?
Meredith Thompson: The way you word that makes it sound really bad.
Lois Gladstone: It is really bad. Why do marketing vendors get to make thirteen million from operations and we make nothing?
Winston Jennings: It's not the fault of vendors that you aren't profitable. It is your fault. Be accountable.
Pepper Morgan Pressley: You might want to show us a bit more respect.
Winston Jennings: I call 'em like I see 'em. That's the job of a consultant.
Pepper Morgan Pressley: What should we be doing better?
Winston Jennings: Follow best practices. Do what your vendor partners tell you to do.
Pepper Morgan Pressley: Mother of God.
Winston Jennings: You need to protect your brand. This is YOUR customer. Why would you ever outsource customer management to Amazon?
Roger Morgan: Because they are better at managing customers than we are.
Winston Jennings: Nonsense.
Roger Morgan: They sell a hundred billion dollars of stuff a year. We generate eight hundred dollars of profit.
Meredith Thompson: I'm not selling them my merchandise.
Roger Morgan: Then don't. Sell me your merchandise.
Meredith Thompson: What?
Roger Morgan: If we sell a dress for $60 and it costs us $25, then let me buy the dress from you for $28. You make $3 by selling the dress to me. I subtract the $21 I pay to Amazon and the $5 I pay to ship merchandise to Amazon and the $28 I pay you, and I get to keep $6.
Lois Gladstone: We get to keep $6.
Roger Morgan: No, I get to keep it.
Meredith Thompson: Why?
Pepper Morgan Pressley: I see where he's going with this.
Meredith Thompson: I don't.
Pepper Morgan Pressley: He's going to view this as a separate line of business. Or worse, his own brand.
Roger Morgan: You know me well.
Lois Gladstone: Are you saying that this is a new brand? Like "Roger's Dresses"?
Meredith Thompson: Don't you dare.
Roger Morgan: I like the name!
Lois Gladstone: Roger's Dresses!!
Roger Morgan: As a startup, I could get money from the sharks on Shark Tank!
Meredith Thompson: No, we're not doing that.
Roger Morgan: We're not doing Shark Tank again?
Meredith Thompson: I can't let you start your own business on Amazon with my merchandise.
Roger Morgan: Why not?
Meredith Thompson: Because it is MY merchandise!
Roger Morgan: I'd buy it from you, making it MY merchandise!
Pepper Morgan Pressley: I can't believe I'm saying this, but I agree with Roger.
Lois Gladstone: Me too. Meredith, you'll make more money selling merchandise to Roger than you'll make selling it under the Gliebers Dresses name.
Winston Jennings: What is wrong with you people?
Lois Gladstone: We made eight-hundred-and-twenty-four dollars of profit last year. That's what is wrong with us. Something needs to change.
Winston Jennings: Don't you understand? You are moving away from the catalog business model. You can't do that! Vendors depend upon you. What happens if everybody starts to make the kind of decisions you are thinking about? Think about the vendors. The vendors, folks. Think about them. They're the backbone of the industry.
Roger Morgan: Then vendors make less but brands diversify and the expense structure shifts away from vendor support to Amazon support. In some ways, it's like Amazon does free marketing for Roger's Dresses.
Glenn Glieber: I love free marketing!
Meredith Thompson: Winston, you were supposed to talk everybody out of this. Now we have a new brand. You are welcome to leave.
Winston Jennings: You don't have to implement Roger's Dresses. Just don't sell your merchandise to him.
Roger Morgan: I'll go directly to Meredith's vendors. Then I don't have to pay a commission to Meredith.
Winston Jennings: You shouldn't have silos.
Roger Morgan: Amazon has Amazon and Zappos. Both sell the same stuff. Why is it ok for Amazon to have silos but we shouldn't innovate?
Winston Jennings: This isn't innovation. This is cheating. Do the hard work to get your catalog ducks in order.
Roger Morgan: Roger's Dresses. I can't wait to design a logo.
Pepper Morgan Pressley: Oh brother.
Roger Morgan: Two day free delivery. I can't compete with that at Gliebers Dresses.
Meredith Thompson: It's your job to compete with Amazon!!
Roger Morgan: If you can't beat 'em, join 'em!
Pepper Morgan Pressley: I liked the idea until it became Roger's Dresses. Why do I have a feeling this isn't going to end well?
I know, I know, you are supposed to offer the same merchandise in every channel and create a frictionless omnichannel customer experience ....
Look at the first four rows of our life table (values of 0/1/2/3). These are the first 12-15 weeks after a customer buys for the firs...
Just $0.99 folks (click here) . The new Marketing Leader has a short window to make a difference, to set a tone for the upcoming year...
In our simulation, we learn that there are different definitions of Carrying Capacity. If the CFO demands that we maximize profit o...