September 07, 2017

Gliebers Dresses: A Potential Buyer

Yes, this is a fictional story about a catalog company in New England. If this isn't your cup of tea, then feel free to browse the most popular article I wrote in August (click here) or take a look below at L.L. Bean getting tons of low-cost customer acquisition exposure courtesy of non-stop hurricane coverage.

Setting: The Gliebers Dresses Executive Conference Room. A potential buyer, Santa Ana Equities, surfaced in recent weeks. They sent a representative, Gerri Stapleton, to visit with the Gliebers Dresses Executive Team.

Glenn Glieber (Owner / CEO):  Well, on this beautiful fall day we consider a potential spring for our business. Gerri Stapleton is here to talk to us about our business. Let's grant her every possible courtesy as we begin our discussion.

Gerri Stapleton:  Let's get right to it. Tell me about your strategy for 2018.

Meredith Thompson (Chief Merchandising Officer): That's an easy one. We're going to leverage catalog mailings to deliver a trend-right assortment to a price-sensitive shopper trying to navigate today's competitive environment.

Gerri Stapleton: That's not a strategy. That's a paragraph from a Woodside Research report.

Roger Morgan (Chief Operating Officer): She's right!!

Gerri Stapleton: Be specific. What are the five strategies you are employing for 2018 to grow the top-line?

Meredith Thompson: We've done a lot of testing on our in-home dates in January. We think we should go with January 6. It's far enough away from New Year's Day but it allows us enough spacing to get the February catalog in on February 2, giving the customer time to buy before Valentine's Day.

Gerri Stapleton: That's not a strategy, that's a tactic, and an elementary one at that.

Lois Gladstone (Chief Financial Officer): Somebody woke up on the wrong side of the bed this morning.

Gerri Stapleton: Excuse me?

Lois Gladstone: Look, we're not Instagram. We're not trying to own the world. We mail catalogs.

Gerri Stapleton: Then you probably have a comprehensive strategy for mailing catalogs.

Lois Gladstone: We do! It's called the mail plan.

Gerri Stapleton: What?

Lois Gladstone: Pepper maintains the mail plan. It's the bible that fuels our business. Well, it's more like a spreadsheet, to be honest.

Gerri Stapleton: Who is Pepper?

Pepper Morgan-Pressley (Chief Marketing Officer): I am.

Gerri Stapleton: And you maintain the mail plan, is that correct?

Pepper Morgan-Pressley: I enter numbers into it. It's a living, breathing document that everybody owns, to be honest.

Gerri Stapleton: What does that mean?

Pepper Morgan-Pressley: A living breathing document?

Gerri Stapleton: No, a document that everybody owns. What does that mean?

Pepper Morgan-Pressley: I'll give you an example. Last Friday Meredith went into the document and unilaterally determined that the January catalog should be mailed on January 6 instead of January 2. This spurred a series of cross-functional meetings. Creative said we could meet the January 2 in-home date, but the merchants were compelled to mail the catalog later. We compromised and now the January catalog is in-home on January 6. I took the demand plan down by a quarter million dollars as a consequence.

Gerri Stapleton: So you made a decision that will result in less demand, less sales, and less profit? And everybody is ok with that?

Pepper Morgan-Pressley: Our printer wants us to co-mail the catalog with other brands on that date, so our vendor ecosystem gave us a handful of discounts to make it happen - the net impact won't be that bad on the p&l.

Roger Morgan: Also remember, Pepper, that AfterNine told us to not do smaller page counts in catalogs because then sales decrease - so we added twenty-four pages to the January catalog and sales are forecast to increase. You have to look at this stuff in total.

Gerri Stapleton: Who is AfterNine?

Roger Morgan: They are a catalog agency. They have all sorts of great ideas that increase sales, like mailing more catalogs and adding pages to catalogs. When we do exactly what they tell us to do, the entire industry generates more revenue.

Gerri Stapleton: But do you generate more profit?

Roger Morgan: Listen, catalog vendors pay AfterNine tens of thousands of dollars to speak at the AfterNine conference in December. The vendor community offers Thought Leadership that integrates with the AfterNine product assortment. Then AfterNine tells us what to do. Then we do it. Then all of the vendors get paid. That's how the catalog industry works. How else would the entire industry stay in business? We have a paper rep, maybe you know him, Sal Tarton. Sal says if this system didn't exist, he'd have to find a new job.

Pepper Morgan-Pressley: Gerri, in a perfect world vendors would offer services that earn business organically, generating profit for us in the process.

Gerri Stapleton: Roger, are you telling me that you are stupid enough to let outside vendors determine the tactics you use, tactics that allow outside vendors to generate profit?

Roger Morgan: It's the right thing for the catalog industry. 

Gerri Stapleton: Is it the right thing for Gliebers Dresses?

Roger Morgan: Once your paper rep takes you to a fine steakhouse, you'll realize it's the right thing to do. And the AfterNine folks have a breakfast bar that is to die for. They have a Millennial Outreach program where they serve avocado toast. It's something to behold.

Gerri Stapleton: I've worked at companies where the entire Executive Team would be fired on the spot if they fell for this system of payola.

Meredith Thompson: Maybe you fire people on the West Coast or on a reality TV show, but here in New England a handshake and partnerships still means something.

Gerri Stapleton: What does that even mean?

Lois Gladstone: It means you are kind of mean to us.

Gerri Stapleton: You don't have a strategy and you let vendors run you in circles in exchange for avocado toast. Somebody needs to rattle your cage.

Roger Morgan: Gerri, people like you and I like to keep up on best practices, so you should appreciate this ...

Gerri Stapleton (interrupting Roger): I detest best practices.

Roger Morgan: Say what?

Gerri Stapleton: Best practices are for copy-cat companies who lack imagination and do not have the guts to take a risk.

Roger Morgan: Um, maybe you'll feel different after reading this document in my left hand from Woodside Research. At just $1,495, it's got everything you need to be successful. It's called "Best Practices for Modern Multi-Channel Retailers."

Gerri Stapleton: Let me ask you a question, Roger. What is the three-year sales trajectory at Woodside Research?

Roger Morgan: Uh, well, they're flat. Sales have not grown in three years at Woodside Research.

Gerri Stapleton: Let me get this straight. Woodside Research has access to all the research they sell to you, for free, and they cannot grow their own business using the very research they're telling you that you must adhere to in order to grow your business. It means what Woodside Research sells you has no value, or they'd be able to grow their business exponentially using their own advice.

Roger Morgan: Lois is right, you are mean.

Gerri Stapleton: If my firm is going to buy your business, my firm needs to feel one-hundred percent confident that we are purchasing a valuable asset that will grow in the future. So far, you've convinced me that you are good at entering dates into a spreadsheet and you love avocado toast.

Roger Morgan: I said Millennials love avocado toast.

Meredith Thompson: Maybe Gerri needs a history lesson on the catalog industry. Then she'll understand how we got here. You see, back in the early 1900s companies like Sears ...

Gerri Stapleton (interrupting): In 2017, companies have comprehensive digital marketing plans. Can you share your digital marketing strategy with me? How about your mobile strategy?

Lois Gladstone: Pepper, take it away!

Pepper Morgan Pressley:  If you go into our mail plan spreadsheet ...

Gerri Stapleton (interrupting): Are you telling me your digital strategy is in your mail plan spreadsheet?

Roger Morgan: That's called multi-channel integration. Read the report, lady.

Gerri Stapleton: Why is the digital strategy in the same spreadsheet as your mail plan?

Roger Morgan: Because if you had read the report, you'd know that Woodside Research told us that all marketing tactics need to be integrated. 

Gerri Stapleton: Are all of your marketing activities integrated?

Roger Morgan: All of our digital strategies support the catalog.

Gerri Stapleton: I was asking Pepper.

Roger Morgan: Please.

Gerri Stapleton: Pepper, are you the Chief Marketing Officer?

Pepper Morgan-Pressley: Yes.

Gerri Stapleton: Then why aren't you answering my question?

Roger Morgan: Pepper isn't answering the question because, as I am trying to explain to you, we are an integrated organization.

Gerri Stapleton: Roger, I don't need you mansplaining anything to me. I'm sure Pepper can speak for herself.

Glenn Glieber: What is mansplaining?

Roger Morgan: Let me take a moment to explain it ...

Lois Gladstone (interrupting): Roger, please.

Roger Morgan: Meredith is right, you don't understand the history of the catalog industry, and as a result you couldn't possibly understand how we got here and why we make the decisions we make. You don't understand the value a catalog business model generates.

Gerri Stapleton: I may not understand how you got here, but I'm pretty confident I can describe where y'all are going in the future.

Glenn Glieber: I'd like to hear Gerri's point of view on that topic.

Gerri Stapleton: Let me give you an example. ESPN. They leverage a traditional business model via cable. But customers are cutting the cord, especially younger customers. This means ESPN gets less and less revenue. However, ESPN's costs are fixed. They pay a hundred million dollars a game for Monday Night Football! So the math doesn't work, and you look into the future and you see a financial cliff on the horizon. Given the information I just shared with you, what should ESPN do?

Meredith Thompson: They're toast unless they embrace a digital future with younger customers!

Lois Gladstone: But that creates problems, because they have fixed costs that don't change, and they won't get as much revenue going digital with a younger audience. They need to get out of some of their contracts. And they've already fired talent to trim costs.

Roger Morgan: But if they do that, their programming won't be as compelling.

Lois Gladstone: They can produce more opinion-based programming. That doesn't cost them anything but they can keep viewers while they figure out how to get to the future.

Meredith Thompson: Opinion-based program is a vapid waste of time. It changes their brand. They optimize for the short-term but hurt the long-term.

Pepper Morgan-Pressley: Have you seen how hard they are promoting their mobile phone apps on college football games? They're trying to encourage their customers to shift to digital.

Lois Gladstone: They're going to have to increase carriage fees and ask for more advertising revenue.

Roger Morgan: But cable companies will balk at the carriage fees, and if they pass 'em along to customers then more customers will cut the cord, further accelerating their demise.

Gerri Stapleton: Good! Y'all understand the issues that a company in a different industry deals with.

Meredith Thompson: It's not rocket science.

Gerri Stapleton: Are there any parallels to your business?

Meredith Thompson: Yeah! Pepper tried to get our customers to use an app once and it didn't work. She even advertised the app on page 27 of the October catalog. If you can't get a customer to use an app after reading about it in the catalog, then mobile strategy is pointless.

Lois Gladstone: We conducted surveys. Our 64 year old customer told us she couldn't read the app on a small mobile device. That's why catalog marketing is so critical. We can use large fonts to engage the customer. Catalogs are a fantastic form of engagement. Did we tell you about the reading glasses promotion we ran in the November catalog last year? That was a home run!

Gerri Stapleton: Anybody else?

Pepper Morgan Pressley: You are saying that we are like ESPN, but it's easier for us to see problems in other industries than it is to see our own problems?

Roger Morgan: If I can speak for you for a moment, I'd suggest Pepper isn't saying that. Pepper is suggesting that ESPN employ the type of multi-channel and omni-channel solutions we've been employing. I think Pepper has been reading Woodside Research reports! Good girl, Pepper!

Gerri Stapleton: Oh my goodness.

Meredith Thompson: Roger always treats Pepper that way. He's a nice guy once you get past the obvious flaws in his personality.

Gerri Stapleton: Glenn, I've got everything I need. Thank you for your time.

Lois Gladstone: But you haven't even gotten to the financials yet!

Gerri Stapleton: I'm confident I can predict what the financials look like.

Roger Morgan: We made eight hundred and twenty-four dollars last year!

Glenn Glieber: Gerri might be mean spirited, but imagine what our future would look like under her leadership?

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