Cross-Shopping

Amazon and Department Stores and Catalog Holding Companies all have significant advantages over the rest of us ... they have the advantage of "cross-shopping".

One of the ways to solve the low-cost / no-cost customer acquisition problem is to encourage cross-shopping. The catalog holding company avoids co-op taxes by mailing a customer from Brand 1 a catalog from Brand 2, trying to get the customer to buy from multiple brands.

The solo cataloger or solo e-commerce brand is at a distinct disadvantage ... they don't have the cross-shopping opportunity, so they pay taxes to co-ops or Google or Facebook.

The retailer used to have a cross-shopping advantage (the mall) ... but as many malls die, cross-shopping dies with it, causing even more store closures, causing even less cross-shopping to happen.

Amazon is re-defining cross-shopping ... and they get all of the benefits. They are doing to e-commerce what Wal-Mart did to Downtown America.

Think carefully about what is required to allow your company to enter the cross-shopping realm, especially if you are a standalone company.

An Employee

Your brand is a traditional catalog brand. You have a Director that you think highly of ... you pay her $100,000 a year and a 20% bonus.

A digital brand offers your Director $150,000 a year and a 40% bonus.

What do you do?

Do you let her walk because your compensation manager has rigid salary bands that must be adhered to?

Do you promote the individual?

Do you match the salary?

If you're in the catalog and/or retail industry, the answer has all-too-often been ... "Let Her Walk".

And for a decade, we've let the brains drain out of the building. When the brains drain out of the building, we lose our ability to modernize our businesses.

I ran across an instance last month ... I was told that the company lacked creativity, and didn't have the staff required to do new/interesting work. The compensation team had salary bands, and was not terribly willing to accommodate unique circumstances.

If we want to modernize and dig out of our challenges, we're going to have to make exceptions. It's not enough to pay somebody at the top end of a salary band. We're going to have to create our own bands for exceptional/gifted/necessary employees.

Or we can accept tepid results, right?

Channel Interaction

E-commerce is going through an interesting transition.

Catalogers went through the transition two times ... from mailed orders with an order form and a check (think 1980) to phone orders with a credit card ... and then from phone orders with a credit card to e-commerce (think 2000 - 2005).

Retailers went through a wild transition. Back in 2005 - 2010, e-commerce actually helped drive store orders. You'd measure the dynamic, see that it helped stores, and you'd be led to believe that e-commerce was good for stores. I was. I was wrong. As we went from 2010 - 2015, metrics shifted.

• From 2005 - 2010, if a customer bought from e-commerce the customer then shifted the next purchase in stores.
• From 2010 - 2015, if a customer bought from e-commerce the customer then shifted more toward e-commerce, depleting future store purchase potential, hurting stores.

The key is to identify the inflection point when metrics shift ... when you notice that the new channel begins to take "ownership" of the customer, you have problems.

E-commerce is going through a challenge today.

• From 2011 - 2016, if a customer bought from a mobile device, the customer shifted back to e-commerce for a next purchase.
• In 2017 - 2018, if a customer buys from a mobile device, the customer is shifting more and more to mobile devices on future purchases.

The implications are huge. If customers begin to stop interacting with desktop-centric websites, you have to think hard about how you provide a good customer experience with limited screen space. More important ... you have to think about a future where conversion rates are lower ... how do you keep demand up when the customer becomes less likely to purchase?

And I know people have been talking about this for a decade.

But folks aren't forecasting this stuff out into the future.

Catalogers didn't forecast this stuff out into the future, were caught flat footed, and in many cases were cut off from the future of commerce.

Retailers didn't forecast this stuff out into the future, were caught flat footed, and in many cases began having to close stores because they didn't understand how the metrics interacted.

The same transition is coming to desktop/laptop e-commerce.

Are you ready for it, or are you about to be caught flat-footed?

Discuss.

Customer Acquisition: Interplay Between Metrics

Here's a common problem ... we manage a business where customers have minimal long-term value.

Think of it in terms of twelve-month future value, let's simplify for a moment. You acquire a new customer. Here are a handful of scenarios:

Scenario #1:  30% Rebuy Rate, $120 future spend per repurchaser, 60% gross margin, 15% pick/pack/ship expense, $8 of annual marketing expense.

• Profit = 0.30 * 120 * (0.60 - 0.15) - $8 = $8.20.

Scenario #2:  30% Rebuy Rate, $120 future spend per repurchaser, 50% gross margin, 15% pick/pack/ship expense, $8 of annual marketing expense.

• Profit = 0.30 * 120 * (0.50 - 0.15) - $8 = $4.60.

Scenario #3:  30% Rebuy Rate, $120 future spend per repurchaser, 40% gross margin, 15% pick/pack/ship expense, $8 of annual marketing expense.

• Profit = 0.30 * 120 * (0.40 - 0.15) - $8 = $1.00.

In a low rebuy rate environment with low annual spend per repurchaser, gross margin become critical to long-term value.

Look at this scenario:

Scenario #4:  20% Rebuy Rate, $500 future spend per repurchaser, 30% gross margin, 15% pick/pack/ship expense, $8 of annual marketing expense.

• Profit = 0.20 * 500 * (0.30 - 0.15) - $8 = $7.00.

High future spend offsets low repurchase rates and low gross margin dollars.

One more scenario:

Scenario #5:  50% Rebuy Rate, $400 future spend per repurchaser, 25% gross margin, 15% pick/pack/ship expense, $8 of annual marketing expense.

• Profit = 0.50 * 400 * (0.25 - 0.15) - $8 = $12.00.

When gross margins are low, you need high annual spend and high repurchase rates (think Amazon) for the long-term profit equation to work out well.

Measure how all of your metrics interact. The interplay between repurchase rate, annual spend, and gross margin yields long-term value ... and ultimately determines whether you need a low-cost / no-cost customer acquisition program.

You Must Do Something Different

That's the name of the session I am speaking at on April 5 ... click here to get yourself registered ASAP!!!!

The theme is "You Must Do Something Different".

Now, doing something different is a "conditional" statement. If you are Wayfair, doing something different might mean recognizing that you've hit a customer acquisition wall and you need to develop a "mature-business" style advertising campaign. If you are Serengeti, it might align with making the transition from being catalog-first to online-marketing-first (yes, this a problem - most traditional companies that existed prior to the internet have not made the transition to being online-first). 

If you are a cataloger catering to a 71 year old customer? Your problem is much, much harder to deal with.

So on April 5, we're going to have an honest discussion about where we are and where we're going. In person! You're not going to get a keynote speaker who paid a $20,000 sponsorship fee to give you "Five Quick Tips For Optimizing Engagement Using Artificial Intelligence To Create Personalized And Relevant Experiences". If you want something like that, there's plenty of conferences to choose from.

Nope - this conference is for the smart people in the audience. People like YOU! People who want to make a real difference.

Come on, join me on April 5 ... click here for the deets.

We're Not Doing That

Today is our last day of business fiction. If you are sick and tired of reading about Gliebers Dresses, then skip today's article and read this piece of thought leadership about closing stores (click here).

SETTING:  Gliebers Dresses Executive Conference Room

Glenn Glieber (Owner/CEO):  The extended forecast is calling for warm weather. I told all of you that the silly groundhog in Pennsylvania has no idea what is going on.

Pepper Morgan-Pressley (CMO):  Can we get started?

Lois Gladstone (CFO):  What's the hurry? Are you prepping your resume for the day that Amazon opens their second corporate office in Boston?

Glenn Glieber:  Wait, what? Pepper, you'd leave us to work at Amazon? They don't even have a catalog. What would you do for a job?

Roger Morgan (COO):  You couldn't get a job there, Pepper. Your skills don't port over to the digital world.

Pepper Morgan-Pressley: What do you know about skills?

Roger Morgan: I read a Woodside Research white paper, valued at $1,495. It said that all marketers need to radically reinvent themselves in the "Age of Amazon". It's a thought provoking piece written by an analyst who has been at Woodside Research for 20 years and does not have a Twitter presence to speak of and speaks at conferences like he always has and has consistently turned out white papers with quarterly regularity.

Meredith Thompson (Chief Merchandising Officer):  Sounds like he needs to radically reinvent himself first before telling Pepper what she needs to do.

Roger Morgan: He gets paid when he scares people into doing exactly what the vendors who ultimately pay his salary want the client to do. Isn't thought leadership wonderful?

Lois Gladstone:  Did the article say anything about what companies need to do to compete in the "Age of Amazon"?

Roger Morgan: That was in a different paper that we paid for, called "Brands Need To Radically Reinvent Themselves In The Age Of Alexa".

Lois Gladstone:  Alexa?

Roger Morgan:  By putting technology in the title, Woodside Research learned they can sell more reports. It's a data-driven approach to thought leadership!

Lois Gladstone:  For God's sake, what did they have to say about what brands should do?

Roger Morgan:  The article says that brands are being squeezed. Amazon and Apple and Facebook and Google are like vending machines and brands are hungry for Twix bars and the only way to get the Twix bar is to pay a nominal fee for it.

Meredith Thompson: And then all you get is junk food after paying them, #amirite?

Roger Morgan:  The article suggests that we're going to have to make changes. The article thinks maybe 2018 is the year to sell.

Meredith Thompson: WE'RE NOT DOING THAT.

Roger Morgan:  Don't react like that.

Lois Gladstone: You mean don't over-react like that.

Meredith Thompson:  I put my entire career into this company. The last thing I want is for my hard work to be absorbed and unappreciated by Wal-Mart.

Roger Morgan: Oh, the article said Wal-Mart and leading brands have no interest in catalog brands. They only want to acquire companies that have a path to the future with a younger-than-average customer.

Meredith Thompson:  Then we're safe, nobody wants to buy us. End of discussion.

Pepper Morgan-Pressley:  Not true. I'm sure the folks at Bricolage Brands would be happy to have us. I'd hate it, but they'd love to pulverize our customer file for their benefit.

Roger Morgan:  Pepper is right. We bring a diverse customer base to the table. Catalog Holding Companies would love to have us become part of their family.

Meredith Thompson:  We're not doing that.

Roger Morgan:  Why not?

Meredith Thompson:  Because I have no interest in having my customer file become free marketing for Bricolage Brands.

Glenn Glieber:  I love free marketing!

Meredith Thompson:  Free marketing works when it benefits us. I don't want to live in a country where I have to give so that lesser deserving people get.

Roger Morgan:  The people at Bricolage Brands are lesser deserving? They make more money than we make on an annual basis.

Lois Gladstone:  I'm going to say something I never thought I'd say. Roger, you are right.

Roger Morgan:  We could go down the path that Duluth Trading Company went down.

Meredith Thompson:  We're not doing that.

Roger Morgan:  Why not?

Meredith Thompson:  The last thing I want to emulate is a lazy catalog who uses crass male humor to get the customer to purchase.

Roger Morgan:  Their sales tripled in the past decade!

Meredith Thompson:  We're not doing that.

Roger Morgan:  Don't we have to do something different?

Meredith Thompson:  We just had the best year in the past five years!

Roger Morgan:  And our results were laughable.

Meredith Thompson:  You are laughable.

Pepper Morgan-Pressley:  Lois, how much might we fetch if we sold out to somebody like Bricolage Brands?

Meredith Thompson:  We're not doing that.

Lois Gladstone:  We're certainly not going to get top dollar. Maybe twenty-five million dollars? Twenty million? That's on a good day.

Meredith Thompson:  We have fifty million in net sales!

Lois Gladstone:  And only a million-and-a-half of earnings before taxes.

Pepper Morgan-Pressley:  They'd be licking their chops, wouldn't they? They'd scoop us up for ten million, force a ton of change upon us, harvest our customer file, and then what?

Meredith Thompson:  We'd be told that 20% of our merchandise assortment would have to be comprised of items that their other brands sell. I tell you what, I'd quit on the spot!

Roger Morgan:  Who says they'd want you to come along with them in the first place?

Meredith Thompson: What?

Roger Morgan:  Who's to say they wouldn't just fire all of us five minutes after acquisition? Glenn would walk away with ten million and the rest of us would get a quarter million as a going away present.

Meredith Thompson:  You know how you stop that from happening? You don't sell.

Lois Gladstone:  But don't we have to do something different?

Meredith Thompson:  Why?

Lois Gladstone:  Because sales have been flat for five years and we keep cutting expenses to make the p&l work and next thing you know the only employees we're going to have are you and Roger managing a bunch of robots.

Meredith Thompson:  What is wrong with making a million-five in profit on fifty million in sales?

Pepper Morgan-Pressley:  Because if you look five years into the future, we won't be able to acquire customers because our customer base is retired or dead. Neither audience has money.

Meredith Thompson:  I suppose we should become an online-only brand? I've heard that one a million times in the past fifteen years. That's what the idiots and simpletons tell us to do. We're not going to do that.

Lois Gladstone:  What are you willing to do?

Meredith Thompson:  I'm going to keep plugging along until I retire in five years. And y'all are coming along for the ride.

Pepper Morgan-Pressley:  We'll be out of business by the time you retire.

Meredith Thompson:  I don't care if we're out of business five minutes after I retire.

Pepper Morgan-Pressley:  So you don't care about the four-hundred people who work here with you. You only care about yourself? That's pathetic.

Meredith Thompson:  Think about all of the people who've had great careers because of my Leadership? I rained money down on tens of thousands of people during the course of my career.

Lois Gladstone:  Just not in the past decade.

Pepper Morgan-Pressley:  Are you afraid?

Meredith Thompson:  Afraid of what?

Pepper Morgan-Pressley:  Are you afraid of doing things in a different way? Are you afraid of doing something different?

Meredith Thompson:  We merchandise websites, landing pages, Instagram, Facebook, Twitter, Snapchat. Most of those brands didn't exist fifteen years ago. Everything I do is different.

Lois Gladstone: Except for the catalog.

Pepper Morgan-Pressley:  That's the constant. Everything we do has to align with the catalog. Meredith, you won't even let me post new images off of my iPhone on Instagram - you demand that we re-purpose catalog creative so that we have an omnichannel presence.

Meredith Thompson: Watch your mouth! We'll never post hideous images from a phone on Instagram. We're a professional, aspirational brand.

Pepper Morgan-Pressley:  And our potential prospects want us to be authentic. They don't want something taken in a photo shoot up in Franconia.

Meredith Thompson:  It's beautiful up there!

Pepper Morgan-Pressley:  Let me do something different.

Meredith Thompson:  No. This is who we are. If you don't like it, go work at Amazon when they open up in Boston in a few years.

Roger Morgan:  They'd never hire us. None of us have the kind of resume that speaks mobile success in the past decade. Well, I do. But not the rest of you.

Glenn Glieber:  Well, another meeting has come and gone. We sure had a spirited discussion, and that's what I love about my company. We can talk about anything, can't we?!

What To Do? What To Do?

Time for you to put your strategic hat on and be a CEO, ok?

Let's pretend you were Glenn Glieber, the CEO at Gliebers Dresses. You're not watching Jeopardy on your DVR, you are actually trying to fix your business.

You are dealing with many different issues.

1. You made new merchandise mistakes in 2016 that are hurting you in 2017.
2. Existing merchandise is generally dying, due in part to odd decisions on behalf of the merchandising team.
3. The catalog co-ops are dying, and Google/Facebook are becoming too expensive to be meaningful large-scale customer acquisition channels. As a result, new customer acquisition via "plug-and-play" channels that require no creative knowledge is in free fall.
4. Gliebers Dresses is trying to compensate for this issue by doing more reactivation marketing ... but then the marketing is uninspiring (i.e. mail more catalogs).
5. The customer base aged, and that's a bad thing not so much because the customer is old but because the customer has specific merchandise preferences (stuff older customers like) and that means that when online marketing actually works the younger prospect visits the site and says "THIS IS STUFF FOR OLD PEOPLE" and she bounces and then the online marketing wonks tell Gliebers Dresses how to do things to optimize the site that won't work because the 64 year old customer who likes the site doesn't want the site to change. You cannot become a "digital brand" unless you are targeting a "digital customer" and you aren't doing that selling fashion that appeals to a 64 year old customer.

It's not like Gliebers Dresses has a ton of cash to go out there and buy other brands.

Gliebers Dresses is never going to "compete with Amazon". Ever. Gliebers Dresses had more than 40 years to figure out how to scale and failed to do so.

Gliebers Dresses COULD become a "UNIQUE" brand. The merchandise could be whimsical. Catalog copy could be enjoyable, readable, and not a description of the item. They could sell space in the catalog to other brands, almost becoming a media company. They could advertise in a manner complementary to Duluth Trading Company (sans humor). They could provide outstanding customer service ... a curated experience like Stitch Fix or they could become the Nordstrom of online service. They could work hard to create word-of-mouth. It would require a complete re-think as to how to build a marketing department.

Or they could spend the next 18 months preparing to sell.  I hear Potpourri Group is in a buying mood. Fix the p&l, and allow Glenn Glieber to head off into the sunset in Suburban Phoenix, where temperatures average in the mid-upper 70s in March.

Put on your CEO hat.

Tell all of us what you would do?

I'll publish credible answers to this question.

Maybe It's The Weather

If you sit in an Executive Meeting at Gliebers Dresses, you're bound to hear one of two themes.

1. When business is good (25% of the time), either Meredith (Chief Merchandising Officer) has great merchandise and/or Roger (COO) is touting an omnichannel initiative that he has no control over and didn't think up on his own and quite honestly was never executed by Pepper because she has contempt for the times (always) when he steps all over her job responsibilities.
2. When business isn't good (75% of the time), either Pepper (CMO) didn't mail the right customers, didn't send email campaigns to the right customers, didn't execute search campaigns well, showed an image that wasn't "brand appropriate" on Instagram, didn't execute 40% off and instead put 30% off on the catalog, failed to put a big enough dot on the catalog, failed to call out on the catalog that there were 27 new items this month, failed to add four pages to the February catalog, failed to properly put appropriate oversights on YouTube when a Gliebers Dresses ad ran on top of a disturbing video, didn't get the 40% off promotion put up on Twitter prior to 3:00pm, failed to personalize the website, failed to provide an accurate hourly sales forecast by channel, personalized the website too much ... or ... blame Pepper because she didn't account for "The Weather".

When I worked at Eddie Bauer (now more than twenty full years ago), it was common for the sales rep of a weather forecasting agency to call me weekly.

• "Did you notice how cold it was in New Orleans last week? Imagine if you could have known that more than two weeks in advance and then sent your New Orleans store a fresh batch of heavy coats? Imagine what that could have done to the bottom line?"

When I worked at Nordstrom there was a meeting where the topic of weather came up, and an Executive said ... "stop blaming, start selling". Interesting thought, huh?

Once I was asked to map weather issues ... and in the process of creating the map, I learned something amazing. The same trends have held for the past decade.

1. "Catalog" customers, however you define them, tend to live in rural areas.
2. "Online" customers, however you define them, tend to live in suburban areas.
3. "Retail" customers, however you define them, tend to live in urban areas.

And if you plot a map of Gliebers Dresses customers, you'll see the trend in living color ... New Hampshire, Vermont, Maine, Appalachia, the Great Plains, the Rocky Mountains ... they all index well-above-average for sales penetration.

Maybe the weather is impacting sales (though it can't impact sales every year, eventually you are accountable).

But maybe you'll unearth a larger and more strategic issue.

How does Gliebers Dresses move into the future if it caters to a rural 60+ year old customer who likes receiving catalogs to the point of not shopping online?

Spend some time trying to answer that question on behalf of Gliebers Dresses, ok?

All Sorts of Merchandising Problems

The "Class Of" report is one of the most insightful, useful, and easy-to-create reports that exist.

And at Gliebers Dresses, we immediately identify a series of challenges.

Recall that new merchandise performed poorly in 2016 but performed better in 2017. The "class of" report illustrates several key issues.

1. New merchandise in 2016 generated $29.8 million in annual demand, down two million from the year prior.
2. In 2017, new merchandise generated $1.6 million more volume, but the business generated $1.0 million more volume. This means that existing items generated less volume.
3. Look at the multi-year trend in demand from new merchandise. In 2014, $33.1 million came off of just 998 styles. In 2015, volume decreased by $1.3 million on 169 more styles. In 2016, Meredith responded by decreasing styles (why?) and then demand dropped by another $2.0 million. In just two years, $3.3 million was lost from new merchandise. This is a clear merchandising issue.
4. Look at the year after an item was introduced ... in 2015, $11.7 million ... in 2016, $10.9 million ... in 2017, $6.3 million. The new items that performed poorly in 2016 performed horribly in 2017, costing Gliebers Dresses another $4.6 million in demand.

Meredith Thompson is not going to receive the news very well, is she?

Have you had a chance to run a comparable table? Do it!!

We'll discuss merchandising challenges at the VT/NH Marketing Group event on April 5. Why not join me (click here)???

Conversely ...

We know that 2016 was a bad year, and 2017 was a "better year" at Gliebers Dresses.

We know that new merchandise didn't perform well in 2016 and performed "better" in 2017.

This is the comp segment table for existing merchandise ... we easily observe that existing merchandise performed about average in 2016 and performed poorly in 2017.

Existing merchandise performed poorly in 2017 and yet the business improved in 2017!

This tells us that new merchandise is the driving force behind Gliebers Dresses.

Meredith Thompson (Chief Merchandising Officer) at Gliebers Dresses is going to have to answer a few questions, don't you think?

We'll talk about issues like this at the VT/NH Marketing Group event on April 5 ... click here to join me!!!

Want To Figure Out How To Save A Dying Mall? Here's Your Chance!

Click here to play this simulator from Bloomberg. If you think you have answers, try your answers out here.

Oh, That's A Problem!

Yesterday we learned that there may be a merchandising problem at Gliebers Dresses.

Today we can see the problem clearly. There IS a merchandising problem at Gliebers Dresses!

This is the comp segment table for new merchandise. Tell me what you observe?

Let's take a step back. Here is the profit and loss statement for Gliebers Dresses.

We know that 2016 was a bad year, and we know that 2017 was a better year.

The new merchandise comp segment table shows us that 2016 was a bad year for new merchandise, and 2017 was a better year for new merchandise.

Isn't that interesting??

Tomorrow I'll show you what happened with existing merchandise.

You don't want to miss our event on April 5 at the VT/NH Marketing Group (click here). We'll talk about issues like these, and we'll discuss what needs to change in order to grow our businesses.

A Merchandising Challenge Is Identified

The comp segment report quickly identifies challenges ... and the report identified two challenges at Gliebers Dresses.

Look at the most recent results from October - January ... all negative, following months of positive results. This generally happens when either the economy tanks (the economy was good) or when there is a merchandising problem.

Look at results from last year vs. two years ago ... almost entirely negative. This strongly suggests a merchandising problem.

Meredith Thompson (Chief Merchandising Officer) is not going to like the results. When you share them with her, she's going to find every reason possible to suggest that this is a marketing problem.

We already identified the marketing problem ... it's new customers.

Everybody plays a role when change is required. We know that new customers are becoming increasingly harder to acquire ... and we now know there is a merchandising problem.

We'll talk about these issues at the VT/NH event on April 5 ... click here to join me!!

P.S.: Recall that the comp segment framework measures customers with exactly two purchases in the past year, quantifying how much these customers spent in the next month ... re-running the query for thirty-six months using the same rules. This is the best framework I've identified to measure merchandising challenges.

Closing Down

One might think that the closing of the Porters Catalog (an apparel catalog brand synonymous with New England for forty years) would send shock waves through the Executive Team at Gliebers Dresses.

But that's not what happened.

Roger Morgan will make a critical distinction (to him). He'll say that the Porters Catalog was just that ... a catalog ... while Gliebers Dresses is so much more. He'll be the first to tell you that Gliebers Dresses is an "omnichannel brand that mails catalogs". He believes that Gliebers Dresses made it out of the forest, and are now charting their own path.

Pepper Morgan Pressley (Chief Marketing Officer) thinks that's a heaping cup of nonsense.

• "When a catalog brand goes out of their way to tell you that they have changed and they are no longer a catalog brand, rest assured that they are a pure catalog brand. Just because you pay affiliates and Google and Facebook money and just because you send six emails blasts a week and just because you send triggered cart abandonment emails doesn't mean you are no longer a catalog brand. If your internal processes are dependent upon a nine month catalog planning calendar, you are a catalog brand. If more than 30% of your new names come from the catalog co-ops, you are a catalog brand. If more than 60% of your marketing budget is paid to paper reps, printers, and USPS postage, you are a catalog brand. We need to stop lying to ourselves."

Lois Gladstone (Chief Financial Officer) thinks that Gliebers Dresses needs to go in a different direction.

• "We need to either go get market share among baby boomers right now, or we need to seriously think about what kind of company we want to be in five years. We don't exactly focus on strategic long-term planning around here."

Meredith Thompson (Chief Merchandising Officer) believes that Gliebers Dresses is poised to surge.

• "I read that 50% of all searches in 2020 will be voice searches. To me, this boils down to a marketing issue. The Porters Catalog died because it didn't keep up with the times. In our case, we're poised for success because we are a strong online brand. We send out those email blasts with 40% off, and those things really work well! All we have to do is keep mailing catalogs, and the catalogs provide the exhaust for the online channels to work well, and those online channels then fuel social media, and social media fuels mobile engagement, and mobile engagement leads to voice search, and voice search is the future. See how that works? We'll be fine."

Meredith's comments are telling. All of us hear this style of logic ... a seductive logic ... lizard logic. We believe we're a modern brand because we can connect nine unrelated dots that point to a vision of the future sold to us in a thought leadership piece on Linkedin. 

Gliebers Dresses Management feel confident they are nowhere close to closing down.

I asked Management another question ... "Have you ever thought about selling to a Catalog Holding Company?"

• Roger Morgan (COO):  I haven't read a single report from Woodside Research addressing the topic, so I don't think that's something we want to do.
• Pepper Morgan-Pressley (CMO):  Those folks homogenize the whole enterprise. We wouldn't have a unique marketing team. I don't need a bean counter in a corporate office telling me what is right for the brand I manage. Pretty soon we'd be absorbed and selling Boston Proper merchandise. Tell me how that's a good thing?
• Lois Gladstone (CFO): I think about it every day. We could fetch between $20,000,000 and $40,000,000. We're the dumbest company in America to not go do this right now before the wheels come off of the bus.
• Meredith Thompson (Chief Merchandising Officer): I'm not fielding any more questions from you.

What do you think this company should do?

Join us on April 5 to dig into this discussion (click here).

Innovation

There are many ways to innovate. You can invent a social network. You can create an app that solves a health care problem. Or you could create a billion dollar subscription-based apparel business.

The folks at Gliebers Dresses do not like Duluth Trading Company because they do not like the style of humor used by the brand. They also don't like Duluth Trading Company because they're a midwest-based brand that "doesn't count" in the eyes of Meredith Thompson.

While Meredith doesn't like Duluth Trading Company, she has utter contempt for Stitch Fix.

Always remember that any existing company could have created Stitch Fix, or could currently compete directly against Stitch Fix. So that hurts Meredith ... she doesn't appreciate anybody saying anything kind about a company that she could have created herself. Instead, Meredith oversaw a five-year profit-and-loss statement that looks like this:

When Roger suggests that the company "innovate", it eats at her soul.

When Pepper shows a five year customer acquisition trend that looks like this ...

... the trend eats at her soul. She's not going to tell anybody, but Meredith views the data as an attack on her ability to be a solid business leader. Remember, Meredith was Cataloger of the Year in 1981.

The "data" makes it clear that the company needs to innovate.

The business model of Stitch Fix is foreign to Meredith. Intuitively, she understands it easy enough ... customer fills out a profile, data determines what the customer receives, customer is shipped merchandise the customer didn't ask for, customer buys it anyway. But for "her generation", this concept is utter nonsense. This isn't how she would shop. Her friends wouldn't shop this way either. When her friends get together to play Canasta, they talk about what was in the most recent In The Company of Dogs catalog ... they don't talk about Chewy.com.

So again, Meredith knows why she needs to change/innovate. But change/innovation, as prescribed to her (and it's important to note that it is being prescribed to her, she isn't asking for it), is foreign. You'd have to be Meredith's age to understand. Change is easy when you are 27 and you are being lauded as Cataloger of the Year in 1981. Change is harder when you are 64.

The need to innovate eats at the soul of the person who has to carry out the innovation and has run out of ideas, thereby requiring Roger Morgan to have to innovate on her behalf. This causes people to perceive Roger as being "annoying".

The problem at Gliebers Dresses isn't Innovation. Every idea under the sun has been discussed, beaten to death, pro and con.

The problem at Gliebers Dresses is a lack of empathy for the person responsible for merchandising innovation. And while you might not have a lot of sympathy for somebody earning $250,000 a year plus a stealthy bonus, it's important to somehow make the person who maintains the culture of the company feel like s/he is innovating when in reality, it is you who is doing the innovation.

Maybe that means you have to create multiple brands ... keep Meredith focused on the catalog and congratulate her every time the catalog is on plan ... while giving Haley (the up-and-coming merchandising manager) responsibility for a modern mobile brand ... and if the startup works, Meredith gets credit as being a visionary responsible for shepherding a team responsible for creating a new brand. Maybe you have to play to Meredith's strengths instead of constantly telling her she is a fossil and constantly reminding her that outside vendors have technology to solve all problems.

We'll discuss these concepts on April 5 ... register here.

The Pot of Gold

Some of your vendor partners are telling you that your reactivation pool is a "Pot of Gold" ... just overlay some social data and demographic data and lifestyle data and whatever other data is being sold and if you use modeling strategies properly you'll be able to "reap the rewards" in their pot of gold.

And to a very small extent, many catalogers are listening. People like Roger Morgan, the COO at Gliebers Dresses. He loves vendors. He scores dinner appointments a couple of times a week, sometimes so desperate for company that he'll foot the bill. After splashing on some of that three dollar bathroom Polo and consuming a bottle or two of wine with a vendor rep, Roger and the rep talk "strategy" ... which quite honestly is a fancy word that describes the following phrase:

• "You can use our products and services to find your pot of gold within your reactivation audience."

At Gliebers Dresses, customer reactivation is important. But it isn't a panacea. Here are New + Reactivated customer counts for the past five years.

There's something there with reactivation, don't you think?

Strategically, Roger is working hard to step all over Pepper's job description ... and what the vendor community is selling him is "working" ... as reactivated counts are increasing by 2% or 3% per year. That's better than a kick in the head.

But it doesn't offset the structural issue that Gliebers Dresses is dealing with.

The structural issue that Gliebers Dresses is dealing with is this:

• Traditional Customer Acquisition is dying.

Did you hear that Facebook had fewer monthly active users in the US/Canada compared to last month for the first time in their history? That is a channel that is now dying. Google as we know it is slowly dying. Both will be around for the next decade. But times change, and those channels are changing as well. Catalog co-ops have been dying for a half-decade or more ... click here - I talked about the issue seven years ago.

In the image above in 2017, reactivated counts increased by 4,500 while new customer counts decreased by 67,000. I've witnessed many cases where reactivated counts are outrunning new customer acquisition failures. Those companies got out in front of the challenge and have (in the short-term) solved a structural problem.

Have you wondered why pure e-commerce brands would sell out to Wal-Mart? I've analyzed a lot of pure e-commerce brand data ... they have a Google + Facebook problem.

Can reactivated buyers truly be a pot of gold? Maybe.

Will they offset a structural problem that is coming at us at 300mph? No.

Which is why having a strong customer acquisition program that excludes catalog co-ops, Google, and Facebook is so critically important.

If all of those dinners had translated into 20% increases in reactivated buyer counts, Roger Morgan would be hailed as a visionary.

Join us on April 5 as we work through all of these challenging topics (click here to register).

Prices Up, Customers Down

Yesterday we discussed a four-year trend in new customers.

2017 = 645,110 (-9%).

2016 = 707,394 (-2%).

2015 = 719,693 (-6%).

2014 = 765,224 (-1%).

2013 = 771,550

2017 vs. 2013 results = -16%.

What's interesting, of course, is how this relates to the average price of an item at Gliebers Dresses.

2017 = $58.41.

2016 = $55.38.

2015 = $54.17.

2014 = $53.99.

2013 = $52.65.

2017 vs. 2013 Results = +11%.

Tell me what you observe?

This is one of the vexing challenges of modern cataloging and (more importantly) modern e-commerce.

1. It has become harder and harder to find new customers.
2. To compensate, CFOs have encouraged Merchants to bump up the price of new items.
3. New customers find the prices offensive.
4. Marketing is consequently blamed (not their fault), so they tack on 30% off plus free shipping.
5. Customer file is poisoned by discounts/promotions.

Roger actually says something insightful up there, doesn't he?

• "The future of cataloging is having a small customer file delivering large amounts of profit."

He (surprisingly) can see the future ...  a smaller business with a hyper-loyal (but tiny) customer base.

I want you to think about what all has to happen to move a business in this direction over the next five years ... and I want you to think about decisions+consequences. In the past few years, many folks have raised prices on new items, creating a negative feedback loop. Use your imagination to consider the consequences of this decision.

And together, we'll discuss this issue at the VT/NH Group event on April 5 (click here to register). Why don't you join me on 4/5?