Merchandise Dynamics Video Series

From time to time over the next few months, I'm going to explain Merchandise Dynamics project work via a video series. The first video is available here.

Click here for project pricing.

Best Marketers

Alright peeps, send me an email and tell me which vertical does the best job of marketing, causing you to spend more than you'd normally spend. Tell me what it is about the marketing that inspires you to purchase more often.

I'll summarize your results and share them next week if I get sufficient responses.

P.S.: I ask because, as you know, I'm deep in the headphones rabbit hole and those folks know how to market to weak-walleted individuals like me. The wine industry does a pretty good job as well.

What They Say ... What You Need

They say stuff like this:

And yet, your top three emails to me are about the following topics.

1. Merchandise - is there a merchandise problem?
2. New Customers - there IS a new customer problem.
3. Shutting Down a Catalog Division (because the paper/print/postage folks are running some of you out of business).

We go through waves ... when what you read aligns well with what you need ... and in 2024, where what you read is fundamentally disconnected from your actual problems.

Focus on your actual problems.

Great Moments in Omnichannel History

And here you are trying to conceive magical Cyber Monday discounts (see text above underlined area in orange).

Are You Proud Of What You Sell?

Drop.com just plain tells you how many pair of HD6XX cans they've sold. They know this is possibly the most popular audiophile headphone ever sold, and has been for twenty years. It's no secret. So why keep the number of units sold secret?

I mean, if 188,600 sell through drop.com, how many sell through Amazon and Crutchfield.

If you have a popular item and you're trying to close the deal, tell the darn customer that the item is embraced by your community. Signal to your customer that the customer has to own that item, ok?

Kind of Like Leasing a Car

Wowzer.

Paid Search Usage by Life Stage

We can look at merchandise, we can also look at Marketing Channels. Here is the percentage of demand spent via Paid Search by customer life stage.

• 1x Buyers = 25% via Paid Search.
• 2x Buyers = 21% via Paid Search.
• 3x Buyers = 21% via Paid Search.
• 4x Buyers = 21% via Paid Search.
• 5x Buyers = 21% via Paid Search.
• 6x - 7x Buyers = 20% via Paid Search.
• 8x - 10x Buyers = 20% via Paid Search.
• 11x - 15x Buyers = 18% via Paid Search.
• 16x+ Buyers = 17% via Paid Search.

What this brand sees is not what I am used to seeing. It is common for the paid search (or PLA) rate to go from 25% in a first order to 3% among loyal buyers. This brand, however, has problems. The most loyal buyers are still comparison shopping. You'd think that by the time the customer got to a 16th order the customer wouldn't need to get to a 17th order with the help of Google.

But here we are, regardless.

This usually represents a marketing strategy issue. The customer doesn't necessarily trust the brand ... why else would the customer be comparison shopping / searching?

Items That Appear In Multi-Item Orders

In a typical Life Stage Analysis within a Merchandise Dynamics project, it is common to see exaggerated trends when comparing first-time buyers to loyal buyers.

I code every order in the database to see whether the order had multiple items (I call this MUL or "multiple lines") and/or had multiple categories (I call this MUC) in the order.

Let's look at MUC, or multiple categories, by life stage.

• 1x Buyers = 18% of spend tied to orders with multiple categories in the order.
• 2x Buyers = 26%.
• 3x Buyers = 29%.
• 4x Buyers = 32%.
• 5x Buyers = 32%.
• 6x - 7x Buyers = 32%.
• 8x - 10x Buyers = 34%.
• 11x - 15x Buyers = 38%.
• 16x+ Buyers = 39%.

Interestingly, 1x buyers purchase 1.95 items in a first order ... 16x+ buyers purchase 2.53 items per order. So there is some difference. Also interesting? 1x buyers purchase $54.60 items in a first order, 16x+ buyers purchase $44.69 items in their loyalty-based orders.

In other words, first-time buyers are focused on what they are looking for ... loyal buyers are grazing from a larger assortment.

Use those facts in your marketing efforts, peeps. 

What Happens At Different Life Stages?

One of the first analyses I run in a Merchandise Dynamics project is the Life Stage Analysis. Specifically, I want to know what customers do at different phases of their Life Stage with your brand.

For instance, this is the percentage of AOV spent by customers on new merchandise (new in the past year) for a brand.

• 1x Buyers = 26%.
• 2x Buyers = 31%.
• 3x Buyers = 33%.
• 4x Buyers = 34%.
• 5x Buyers = 35%.
• 6x - 7x Buyers = 34%.
• 8x - 10x Buyers = 36%.
• 11x - 15x Buyers = 38%.
• 16x+ Buyers = 40%.

Tell me what you observe?

Either this brand features existing items to prospects and customers early in the life cycle, or my goodness, existing items are what customers early in the life cycle "need". Conversely, loyal buyers might be bored with the old-school assortment, allocating additional dollars to "newness".

This kind of finding represents a perfect place for email marketing personalization. Show newness to the best customers, show long-term winning items to prospects.

30 Weeks Out Of 52

Amazon will host a Spring Sale next week.

There comes a point in the evolution of many brands where you cannot grow via marketing channels, and you cannot grow via merchandise productivity. It's a dire moment. You've exhausted everything you know. For some of us, it happens at ten million in annual sales. For others, it happens at the intersection of AI and World Domination.

During the dot.com era, I worked at Eddie Bauer, 1998. Business was awful. I attended a meeting where the marketing folks were bereft of ideas, the vault of merchandising brilliance was empty, and the creative folks (in response) overhauled imagery (i.e. younger), further harming sales.

And yet, the parent company (Spiegel) wanted the business fixed.

In a meeting with several Business Leaders, somebody broached the topic of adding a 31st sale week to the calendar (we were at 30 weeks of 52 with sales events). That would boost sales ... and nobody had to do any real work whatsoever ... just take 40% off everything and call it a day.

The CEO at the time, somebody I adored, said "we have to maintain the integrity of the sale calendar ... eventually, every week is a sale week and that means no weeks are actual sale weeks". In other words, he was prophesizing modern omnichannel Macy's.

Now we have Amazon ... one ... two ... three ....

Stores are Closing

Even the successful folks (click here).

There is a dearth of Leadership in Retail and in Old-School Cataloging these days, and when that happens, third-party voices fill the void ... and for good reason ... they're trying to preserve what they had/have.

I've had the good fortune to work with a handful of e-commerce brands in the past six months who are thriving. Their approach to marketing and merchandising is fundamentally different than what third parties are telling you to do. "Be Amazing" is not a strategy. "The Power of Paper" is not a strategy. "Omnichannel" is not a strategy. Those are things that are said when folks don't have a strategy.

I live in Arizona. If you take a drive North on Loop-303 from I-10 toward I-17, you can see the future of commerce.

• Endless distribution centers. Endless. Enormous. Cold. Sterile. They make sure your frictionless digital experience results in your dog chews arriving in two days.
• A UPS hub with so many trucks that it can be hard to get through a red light if you are turning left.
• Costco and Total Wine. Ponder that one for a moment.
• The sprawling TSMC semiconductor chip plant that would likely be seen from the surface of the Moon.

You don't see a brand new "Galleria".

Across my client base, I see some extremely wise 60+ year olds who are handing the keys to the future to a new generation of Leadership. Smart. They're letting the experts apply their knowledge.

New generations of Leadership easily see that we are replacing 6,000 square foot stores at 300 locations across the country with a 300,000 square foot distribution center paired with a delivery network that includes giants like UPS and your neighbor Heather driving a 2006 Toyota Corolla (sorry, she's saddled with all of the fixed/variable costs associated with owning a car). That system, albeit unfair to some, is more efficient than forcing a customer to drive 20 miles to the Galleria to purchase a product without the ability to comparison shop.

The future, to be honest, is so darn exciting! It's fundamentally different than everything we experienced prior to 2020, of course. That shouldn't scare us from changing. And it most certainly shouldn't dissuade us from handing the keys over to the next generation of business leaders. 

Remember the scene in Moneyball (yes, I'm watching it again) where Billy Beane is talking to David Justice in the batting cage? Beane wants to extract every last ounce of playing ability Justice has, Justice wants to stay in the league. Beane tells Justice to be a Leader to the younger players on the roster. Justice agrees to do that.

You see where I'm headed with that comment, right?

By the way ... watch just the first minute of Iowa Lottery magic from 1986 here, as Iowans were formally introduced to the magic of gambling. This is what we look like if we don't change.

Yeah, This Is Happening

This one is for our catalog readers.

Two vendors communicated to me today that print is "surging".

Midland Paper communicated today that paper for catalog marketing is ... not ... surging. Click on the image, look at the graph on the upper left portion of the slide.

Catalog circulation (that's you) is down more than 40% since 2018 ... and catalog circulation in 2018 was down by more than half since 2007. Which means that about 20% of what existed in 2007 (when I started consulting) still exists today.

Here's a preview of coming attractions.

• If you haven't already shifted all customer acquisition efforts to digital and other tactics, it is immediately time to make a change. Go.
• As paper/printing/postage costs continue to increase, it will become very difficult to use paper to reactivate customers.
• Should costs continue to increase, you will only mail your very best customers in 3-5 years. It will be "over".

Have you watched the movie "Don't Look Up"? There's an asteroid hurtling toward Earth, there are scientists who try to warn Earth to do something ... anything. Nobody listens. The ruling political party encourages people to "Don't Look Up". As the crash of the asteroid is imminent, a feeble attempt to detonate the asteroid is hatched. It doesn't work. The ruling political class escape on a cryogenic space ship while the inhabitants of Earth are left to deal with their fate.

I've been writing here since early 2006. I feel like the scientists in the movie.

NASCAR

Yes, I will wander over to the topic for today in a moment. Here's the setup.

I was at the NASCAR XFINITY race in Phoenix on Saturday. This is racing's version of AAA baseball, a development series in the racing ladder system ... one step away from racing on Sundays in the Cup Series.

One of the women in the series is named Hailie Deegan. Her Dad is a famous in motocross racing, an impossibly difficult form of racing on motorcycles. Yes, there is a perception that she was born on third base and gets preferential treatment. People on Twitter will tell you so, unprompted.

Oh, she has talent. She won many late model races (racing at the "A" level in baseball terms) and took no crap from the guys she raced against. She moved up to NASCAR Trucks ("AA" level) and did not perform great. Regardless, she is signed by Toyota Racing Development, and as a result she's racing at the "AAA" level. 

Her first three races at this level were not great.

I watched her race on Saturday, in person. She was not fast, and you never know if it is the driver or the equipment (hint - it is usually the equipment). But she was not reckless - she protected her equipment, and she did not put other drivers in harm's way.

At one point, she lightly touched the wall about a quarter lap ahead of the leader (meaning she was about to be lapped and when that happens you are not having a good day). NASCAR threw a caution flag, likely unnecessary since drivers scrape the wall often. The conspiracy theorists piled on "THEY'RE PROTECTING HER, IT'S UNFAIR!", knowing the caution would bunch everybody up and protect her from being lapped. A few laps later with the field tightly bunched up post-caution, a big accident happened, and she was collected in the accident. A red flag was called ... cars must stop on the track. Her pit team told her to drive the car to the pits, she did that, NASCAR disqualified her and towed her car off the track in retaliation.

Twitter was mercilessly cruel ... , as it frequently is toward women. Men (it's mostly men) said she lacks talent, and because she was born on third base and has the backing of Toyota she gets to race in a series she isn't qualified to race in, while many other more qualified drivers can't bring sponsorship money to the sport so they cannot drive. They think her presence on a race track is inherently unfair to more talented drivers.

How does this story relate to you?

A few years ago, I told the CEO of a company that his business was struggling because he wasn't investing in new customers (have any of you ever heard me say that before?). The CEO told me that the comment was unfair ... while online startups had bottomless pockets via Silicon Valley, he had to fund customer acquisition efforts with the profit from his business, and as his business became less profitable he had less profit to invest in new customers, which caused the business to become less profitable. You see where that business is headed, right?

The CEO was grumbling because he wasn't in Hailie Deegan's shoes. He wasn't being given preferential treatment. He wasn't born on third base. To him, it wasn't fair that an online brand got VC backing that it didn't deserve and hadn't earned like his business earned.

Two things can be true at the same time.

1. Life isn't fair, and there is not one thing you can do to fight those who may have real or perceived opportunities because of fame or money.
2. It is your flippin' job to overcome adversity. Find a way.

If your competitor was born on third base (VC or Private Equity funding), they're lucky and you have to earn everything you're given. They're big and slow, you are small and nimble (sort of like that discussion from the movie Enemy of the State). They have to advertise in NASCAR, you get to take 1/40th the amount of the money and act immediately on the socials.

Yes, it is unfair that these well-funded online brands get opportunities you don't get. That doesn't mean you attack them ... they may be earning their opportunities, you don't know. Focus on your business. How can you be scrapy and find new customers in non-traditional ways?

How can you be scrappy and find new customers in non-traditional ways?

Headphones

Time for a merchandising story.

I've wasted thousands of dollars over the past four decades on headphones. I'm no different than any other headphone audiophile. You always think you can do better.

In the past year, I saved my pennies for a pair of Airpods Max. Mistake. They sound good. The feel really good on your head. But they aren't headphones as much as they are a computer on your head. Turn your head to the left while watching a movie on Apple TV and the sound shifts in your head. Cool? Absolutely. But it's a computer.

With quality sound gnawing at my soul, I decided to dip my toe into better sound. I got a great deal on a pair of Sennheiser HD569s. $99 ... I got them for $73. They sound so much better than my expensive Airpods Max. Connected to my little hybrid tube amp, they sound even better. Completely quiet background. Details in songs I had not heard before. A really, really good experience.

But obviously I could do better.I decided to go down the Reddit rabbit hole (and the YouTube rabbit hole). It's here that, quite literally, maybe fifty individuals steer the customer in whatever direction they want to steer the customer.

I spent two months reading headphone discussions on Reddit, watching videos on YouTube. Seriously. The experts want you to buy an open ear headphone (which means everybody in your house is going to hear what you are listening to). I can't do that, so it is closed ear headphones for me ... I don't want the audio quality loss with bluetooth headphones. I want corded closed ear headphones.

Months into my nightly Reddit-based education from users named "BoseStinks" and "Bonkers44292", there is one pair of headphones that keeps coming up ... not from the experts, but from actual users. They are the Meze 99 Classics ($309 ... currently available for $278). The people on Reddit DO NOT LIKE THESE HEADPHONES! But those who listen to music with the sole purpose of enjoying the music ... they like 'em.

And it turns out that headphone companies partner with a company called Drop to produce comparable (or in this case identical) models at a discount. For $169 ($10 first time buyer discount), I pick up a pair of the Massdrop 99 Noirs.

Oh.

My.

God.

Connected to my hybrid tube amp or to a Dragonfly Red dongle, these headphones are absolutely what the Reddit folks who refused to give in to the mob said they were.

• Fun.
• Musical.
• Bassy.

Turns out the 50 headphone influencers on Reddit demand that headphones match a "flat" frequency response. In other words, what the headphone produces should be identical to what the individual mixing the original song intended. In coffee terms, they demand that your coffee be black and be perfect. Put some cream in there? They don't like that.

These headphones are not a black cup of coffee. They add a little bit of bass, something that those who listen to R&B or Dance Music or Rap or some Pop Songs like. I've listened to hours of songs since getting them and I just couldn't be happier. I've heard things I've never heard in songs before. And for $169? My goodness. They are musical. They are fun! And they have a little bit more bass than they should have ... bass that can be equalized away if you don't like it. I'm sure a $1,000 pair of headphones will sound better ... but these things are fabulous and only cost me $169! Listen to this song with 'em. You'll find the song "fun" and "musical"! There are bizarre horns at the 0:54 mark in the right ear that I haven't heard in the eight years I've been listening to this song.

Why share this story?

1. Who controls your industry? It's a surprisingly small number of people. Why don't you have a relationship with these individuals? Better yet, why isn't one of your employees one of these individuals? Seriously.
2. Readers keep telling me that digital advertising doesn't work as well as it used to. If you were Meze, how would you fight 50 influencers on Reddit who don't like your product? Spending more on Google doesn't solve the problem, does it? More retargeting doesn't solve the problem. Paid social doesn't solve the problem. Meze, instead, sent a pair of headphones to a vocal critic and said "say whatever you like about them" ... and the person said positive things about them. That's a better use of money that spending money on channel-centric marketing tactics.
3. My long-term catalog readers keep telling me that the print industry is going to bankrupt them. Yes, they are going to bankrupt you. "Their influencers" have you convinced that you need them.
1. Hint ... you don't need them.

In 2024-2025, your customer acquisition efforts are increasingly focused on hand-to-hand marketing combat. You'll have to get into the trenches and convince individual customers that you matter ... like I have to do with you on a daily basis. You won't be able to pay Facebook a million dollars and let them do the work for you.

You're going to have to do the work.

They're All Less Effective

It's difficult to convey to professionals that, in many ways, old-school digital marketing is in decline ... and really-old-school print is in decline at a faster rate.

You see articles like this (click here) and you realize that third parties are promoting a medium declining faster than the medium they proclaim is in decline.

I have clients that have fabulous customer acquisition programs. For them, it's seldom about the "channel" ... it's generally about telling a story around the products they sell. 

It's funny how much better digital (and even old-school print) perform when you have a compelling story surrounding products/merchandise that customers care about, want badly, or need.

Winners? Units or Sales?

Pretend you have a $100 item that sells one unit. You also have a $5 item that sells 10 units.

The $100 item generated $100, but just one customer.

The $5 item generated $50, but may have generated up to ten (10) customers.

Which item is a "Winning" item?

Odd Things Happen When You Don't Understand How Customers Interact With The Merchandise You Sell

Very early in my consulting career I visited a company that simply did not understand how their merchandise performed.

The CEO told me there was a marketing issue.

The VP of Marketing told me that the analytics guru could not solve the marketing challenges the brand faced.

The Analytics Guru had no idea what was happening. This is a far more common scenario than analytics gurus would have you believe.

Just a simple review of their marketing reporting showed that there was a significant merchandising problem. All customer segments were performing 10% worse than the year prior. New/Reactivated customers were performing 10% worse than the year prior. Customers simply didn't like what the brand was selling.

The CEO, the Marketing VP, the Analytics Guru ... when told that there was a merchandising problem ... all dug in harder and fought for marketing solutions. When I didn't offer marketing solutions, they dug in against me. Now I was the problem!!

Can a business struggle because of marketing issues? Yes.

Is it far more likely that a business is struggling because customers don't want to buy the merchandise you are selling? Yes.