Business Does Come Back

Let's roll the clock back to 2001-2002. Here's one example of the hole in demand from September 2001 ... notice that business does rebound. Business does come back.

The challenge we face this time is different.

For many e-commerce businesses, right now it's practically "business as usual". They managed inventory well and some are experiencing sales surges while others are running -10% or -20% ... not great, but manageable.

Retail is a whole 'nuther story. Pretend you are Ann Taylor. Your mall operator shut down your stores. You've got all that inventory sitting there until sometime between mid-May and maybe mid-August. How do you predict how much inventory you need to buy for Fall/Winter? "AI" cannot help you with that one.

When business does come back (and it will), there will be a transition period where stale merchandise has to be sold, typically at fire sale prices. The challenge will be to get through that process with as little damage as possible to an already hobbled p&l before anything else happens.

Our industry is well prepared to handle this transition.

• Baby Boomers have been through numerous challenges and know how manage crisis situations.
• Gen-X leaders survived the dot.com crash and the Great Recession.
• Millennials have operated in an odd business climate for an entire career!

We have the right mix of talent, experience, and modern viewpoints to get through this challenge. Business does come back ... and you are going to be the person who helps bring it back!

For My Catalog Readers

If you are required to cut back on marketing spend (at the very time when you need to maintain marketing spend to keep the wheels on the bus), you need a plan.

For my catalog readers:

• This is not the time to cut back on customer acquisition ... the opposite of what you are being told. You will need the new customers when things return to normal.
• This is EXACTLY the time to cut back on mailings to average/marginal customers. Across my sims it is obvious that nearly every catalog brand is over-mailing average and marginal customers.
• If a customer has clicked through an email campaign in the past month, cut back on catalog mailings and ramp-up on personalized email campaigns.
• If a customer has purchased via email marketing in the past year, cut back on catalog mailings and ramp-up on personalized email campaigns.
• If a customer has purchased via any type of social activity, cut back on catalog mailings as you already have a mostly free channel to "engage" the customer in.
• Most "digital" customers are less likely to purchase in the future ... and their transactions are likely 50% or more "organic" (i.e. not driven by catalog marketing). Have your marketing analyst carefully assess the viability of catalog marketing to this audience.

If you don't have a process to evaluate the bullet points above or don't have the bandwidth to do so, contact me right away and we'll get busy, ok??  (206-853-8278 ... kevinh@minethatdata.com).

Finally ... for catalog readers ... it is really important to measure File Power each week. Every Monday morning you absorb transactions from the week prior, you assess how far response is from normal, you plug in response efforts by week through mid-summer assuming things continue "as-is", and you forecast weekly / monthly sales as a consequence. This is where leadership and a forecast/simulation environment become so darn important.

P.S.:  You were born to be a Leader at this unique time in history ... you've got this!!!!

CUT THE BUDGET - NOW!!!

Your CFO just video conferenced with you from her home ... where her eight year old pup is busy tearing into a t-shirt left on the floor.

Business is down 30%, and she's afraid you'll be out of business if this "virus-paranoia" as she calls it continues into the summer. Your forecast suggests this will continue longer than into the summer.

She's run a profit-and-loss statement, assuming you end the year down 30% on the top line.

Ouch.

She also knows that she can't demand layoffs because nobody will buy from a brand that fires people because customers aren't buying because customers may be dying.

So she's come to you.

She's looking at the Ad Cost line.

She thinks that thing needs to be at $5,000,000 this year, not $10,000,000.

She wants you to cut the living daylights out of your marketing budget.

And she doesn't want sales to disappear.

Good luck!

If your CFO is smart, the last thing she's going to ask you to do is cut the marketing budget. She knows that if you cut the marketing budget, your p&l will change:

So yes, you saved the p&l. But you lost $8,000,000 of FILE POWER on top of the $15,000,000 of File Power that the virus took from you. This means that next year will be lousy.

Yes, you're trapped between a virus, a CFO, and a looming File Power issue. It's up to you to triangulate around the issue. And you can do it!!



P.S.: Somebody is going to tell you to stop your customer acquisition efforts. That "somebody" is 100% wrong. You'll need all the new customers you can get so that when the hounds are released and the world returns to something closer to normal you'll have a business.

As Malls Close

They're closing malls in Pennsylvania.

Brands like Patagonia and Urban Outfitters are shutting down.

All necessary, of course. If you think it is an overreaction, that's your perspective and let's pray that you are proven right.

We'll need to assume that retail essentially shuts down for a couple of months. With luck, some sales migrate over to e-commerce, leaving you with an annual p&l that might have looked ok but will instead look like this:

You might lose almost 90% of annual (ANNUAL) retail profit by being virtually shut down for eight weeks. If you can move 20% of what you lose online (while holding e-commerce sales flat ... which is a big challenge), you double (in this example) e-commerce profit, saving your business for the year.

You were born to be a Leader ... you were born to figure out how to solve really challenging problems.

This is a really challenging problem.

You've got this.

Tomorrow we'll talk about what happens to File Power and Expenses ... given that your CFO is going to DEMAND that you cut that marketing budget in half to "save" your business at the very moment you shouldn't reduce spend a bit.

Quick Mini-Project Offer and a Freebie

Yup, you're dealing with coronavirus issues.

Sales might be down ... might be down significantly.

You're not even in the office.

And you are being asked to figure out what impact two months of bad business will have on 2020, right?

So let's try something. Since we're all working from home, let's do a virtual mini-project.

• Cost = $7,999. I'll measure the impact on File Power, and share with you possibilities for business bouncing back as well as sharing customers who you'll have to keep marketing to in order to keep growth possibilities alive. This is not a typical product offering, and is a product offering that is darn important given what is going on.
• We'll video conference or Skype ... face-to-face virtual meetings.

Send me an email (kevinh@minethatdata.com) or call me at 206-853-8278. We'll try to leverage our virtual office situation as well as is reasonable, given the challenges we're all facing.

And now time for the freebie ... in the spirit of virtual work environments, let's try something. I will offer three free File Power video conferences in half-hour increments on March 17, between 11:00am EDT and 5:00pm EDT. If you'd like to ask me any File Power questions ... as they relate to a business downturn, you may schedule a call (206-853-8278) or you may meet with me via Skype. Hurry - slots will fill immediately.

This Is Your Time To Shine

Well, the wheels started to come off the bus on Wednesday, didn't they?

This is your time to shine.

You are a Leader. A Professional. You have a position of authority for a reason. For times like this.

Nearly twenty years ago we went through a major disruption ... September 11. No NFL games. No MLB games. No flights anywhere. Markets disrupted. Lives taken. War coming. Anthrax. A generation of Leaders and Professionals pushed everybody through that experience.

This experience might be mild compared to that. 

This experience might be horrific compared to that.

Regardless, you don't control what is happening ... you control your response to what is happening.

This is your moment. You are a Leader. It's time to shine. I believe in you!! The people you lead need to believe in you.

What Does My Dog Have To Do With File Power?

See that big "crunchable" there? That's what I call those things ... my dog (Dash) loves 'em. He gnaws the hardened chicken off of them, then retires to a hard-earned nap.

Safeway and Walgreens sell them for about $5 a pair. My dog could work through six of those a day if left to his own devices, so that's an expensive hobby.

Safeway and Walgreens keep about four bags of those on hand each week, so I needed a different source. That's where PetSmart enters the picture. They sell the two-packs in large quantities. I'll order 30 2-pack bags. About the same price as Safeway and Walgreens. Delivery in 4-7 days, on average.

Then I noticed that Walmart sells 5-packs for about the price of a 2-pack at PetSmart. Ding! I order eight of the five-pack bags. Dash is happy. I'm happy. Delivery in about 36 hours.

This goes on for about two months.

And then?

Something changes.

The crunchables sent by Walmart are "different" ... packaged the same, priced the same, but the hardened chicken is no longer fused to the rawhide. Dash can peel the chicken off in about ninety seconds. Not only does he pile on the calories, but the whole game that he loves to play, a game that usually takes 10 minutes +/- ... the game is over.

He doesn't like the new formulation that the vendor created for Walmart in an effort to save cost.

And I don't like that PetSmart has price parity with Safeway/Walgreens. If I'm buying such a huge quantity, shouldn't PetSmart be able to save me a couple of dollars?

So I've reverted back to Safeway/Walgreens.

When PetSmart analyzes File Power, they'll see an infrequent customers ... and they'll conclude that I'm not worthy of their attention. They'll say I don't possess File Power.

When Walmart analyzes File Power, they'll see a lapsed customer ... and they'll conclude that I'm not worthy of their attention. They'll say I don't possess File Power.

Safeway/Walgreens will see that I lapsed in a product category and then returned. They'll say I'm worthy of their attention. They'll say that I possess File Power.

All four brands, of course, are "wrong". It's a product/price/quantity issue, and all four brands fail to meet my expectations.

Frequently, File Power is a byproduct of executing your merchandising strategy incorrectly. Get product/price/quantity right, and the customer delivers long-term File Power.