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For only $2,500, you get to learn if your Merchandise Productivity is increasing or decreasing. Pretty important stuff. You get to learn if you are meeting new + reactivated customer goals or not. Odds are not in your favor that both metrics are increasing ... so you'll learn how you stack up against other participants.

You've got twelve days to get your ducks in a row ... data is due October 23 ... your analysis will be delivered on or before October 31.

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Player Development vs. Merchandise Development

Think about the process a Major League Baseball player goes through.

• Little League / Select Teams.
• High School / College Path.
• Drafted.
• Rookie League
• Low-A.
• High-A.
• Double-A.
• Triple-A.
• Major Leagues.

By the time a player arrives at the Major League level, the player has likely played in between 750 and 1,500 games and has taken countless batting practices and been involved in endless fielding drills. The player has been "developed" ... has been given exposure to countless situations that allow the player (merchandise) to achieve potential.

Football and Basketball leverage development through the High School / College path.

Think about Soccer ... you have Under-15 and Under-17 and Under-19 and Under-21 teams ... you have academies bringing in players who have yet to solve an algebra equation. You have club teams at low levels, you have club teams at high levels, you have the Premier League or the Bundesliga. You have your National Team. In other words, you have an entire player development process, designed to vet out the best players (merchandise).

How about you, the e-commerce marketing pro? What is the process you employ to give your New Merchandise the best chance of success? Do you have a process in place to give exposure to new items, to quickly promote new items into inexpensive digital marketing strategies, to move the successful new items in email campaigns to prime landing page and home page real estate, and then finally move the items to really expensive print strategies?

You don't have a process?

It's time to catch up to the competition. You, as a marketer, play a more important role than the merchant at developing new items. You control marketing channels, channels where new items gain exposure. It's up to you - not the merchant - to provide adequate access for new items.

Yes. You.

Can you articulate the marketing strategy you leverage to develop new items? If the answer is "we label new items as new items on our landing pages", you are behind the competition.

Differences Between Game Management and Campaign Management

Packers coach Mike McCarthy, in his eleventh year as Head Coach, employs a modern version of the West Coast Offense adapted for today's Spread Offense reality ... with Packaged Plays that give individual players and the Quarterback individual choices on each play.

His play sheet (click here) has several hundred plays that are installed for each game. Say his Packers are trailing 24-20 late in the fourth quarter, with fourth down and ten at the opposition fifteen yard line. Coach McCarthy has maybe a dozen options that have been practiced for this situation - and maybe three or four options that align with the tendencies of the opposition. His team may not succeed on fourth and ten, but his team already succeeded by being prepared for this situation.

In football, you have an overriding philosophy (West Coast Offense with modern Spread Offense adaptations). You have a General Manager and Scouting Team that draft players (merchandise) that fits into the overriding philosophy. You have a coaching staff that train players how to integrate game situations with the offensive philosophy. The team practices often. And then, on game day, the team is prepared for myriad situations.

Game Management is, in many ways, the outcome of choices made days / weeks / months / years ago. Yes, choices are made in-game, but there is a strong interaction between past and future.

How about Campaign Management?

1. What is the process you, the marketer, utilize to develop merchandise? Yes, you, the marketer? If your answer is "that's their job", you are already multiple steps behind the competition.
2. If sales decrease by 10% on Monday and Tuesday, how many campaigns/strategies do you have on your worksheet to address the problem? If your answer is "deeper discounts and promotions", you are already multiple steps behind the competition.
3. Do you have a process in place to allow your staff to practice? In other words, is your staff executing campaigns in real-time, all the time? Or do you utilize simulations so that your team can practice situations that they are likely to experience in the real world at some future point in time? If your answer is "we don't practice anything", you are already multiple steps behind the competition.

Game Management and Campaign Management are essentially the same thing. And when viewed similarly, we quickly learn just how far most of us are behind the competition.

What do you plan to do to catch up? Discuss. And the right answer isn't "the right discount to the right customer at the right time" ... that's how you know you are way behind the curve.

Differences in Analytics between Sports and E-Commerce

Baseball folks learned that "Exit Velocity" is really important.

In other words, a bad player can hit a flair into right field - a base hit - earning credit for a hit during a poor piece of hitting. Conversely, a great hitter can hit a line drive at 100mph that is caught by the shortstop, who just happens to be standing in the right spot at the right time. The lousy player gets credit for a hit, and the batting average and on-base percentage and slugging percentage all increase. The good hitter doesn't get credit for a good at bat.

Typical metrics don't necessarily even out during the course of a season.

But when you measure Exit Velocity - how fast the ball rockets off of the bat, you get an idea who hits the ball well. Over time, a low batting average paired with a high exit velocity will yield a batter with a good batting average.

In baseball, the metrics all evaluate how players (i.e. the merchandise) perform. Gains are made that yield more wins (i.e. merchandise productivity) in the future.

How about in e-commerce? Where is all of the innovation in analytics?

• In merchandise productivity?
• In customer productivity?
• In campaign productivity?

It's all the latter, isn't it? Your favorite guru is trying to figure out how to attribute customer orders to various marketing campaigns so that you know which campaigns work.

This is similar to baseball analytics folks trying to figure out the exact reasons why the Pittsburgh Pirates beat the Milwaukee Brewers 3-1 on August 28.

In sports, the analytics effort is focused on removing as much variability as possible, so that a clear story on merchandise (player) performance can be understood.

In e-commerce, the analytics effort is focused on diving into as much variability as possible, so that an unclear story can be crafted regarding how customers interacted with marketing campaigns.

The next round of competitive advantage in e-commerce comes from a shift in focus ... away from the interaction between customers and marketing campaigns ... toward a focus on the interaction between customers and merchandise sales. It's just a matter of time. And those of you who hire analysts to focus on Merchandise Productivity are already well ahead of the curve.

How many of you in marketing e-commerce have hired an analyst to focus on Merchandise Productivity? Your answer to that question tells us if you are ahead of the curve, or behind the curve.

Football and Nordstrom

Last weekend was the start of the National Football League season.

Think about what this machine does to generate revenue.

1. You can attend a game, though that's hard to do as many teams sell-out prior to the beginning of the season ... so you'll pay 2x or 3x or 4x face value for a ticket through the secondary market. But if you attend, you tailgate before the game, creating a sense of unity and common purpose among the fans who attend (and you'll pay for parking - you don't pay for parking at Macy's very often, do you?).
2. You can watch your favorite team for free on television, as long as you live in the market of that team. If not, fork over hundreds of dollars for NFL Sunday Ticket.
3. Have money? You can bet on your team or any other team.
4. Don't have money? You can play in a Fantasy Football League, drafting your own team and competing for a title. Now you have a vested interest in watching the games, because the outcome of the games determines how your fantasy team performs. #engagement
5. ESPN and Fox and countless online outlets breathlessly cover the sport, holding your attention ... at no cost. #engagement

In other words, there's a whole ecosystem that surrounds the slate of games each week. Most of it is free, designed to keep you interested digitally. Diehard fans pay money ... the best fans pay a lot of money ... and the wealthy fans pay through the nose for their fifty yard line in-stadium experience and club seats and prime rib at halftime.

I know, I know. You work at Macy's. Or for a catalog brand with one store. You're going to tell me that there's no way that the NFL experience translates to retail. I got a lot of emails yesterday, and a lot of tweets over the past month telling me that I'm wrong.

I am going to tell you that you are wrong.

Now, I haven't worked at Nordstrom in a long time. But let me tell you a story of when I did work there. Every July, we held our "Anniversary Sale". This wasn't your typical sale (20% off, shop now) that most retailers exploit for 43 out of 52 weeks a year, thereby fully diluting the impact of each individual sale. Not even close. This was the first introduction of the Fall Merchandise Assortment. Here's how the event worked (I haven't worked at Nordstrom in years, so the event is likely different today).

• New Fall Merchandise Was Offered at Around 20% Off For 17 Days.
• Then Fall Merchandise Went Back To Full Price, Through The Rest Of The Fall.

That strategy, alone, was enough to cause utter madness. I had to work in a store the first day of the sale. Nuts, folks, nuts.

But here's the part of the strategy that worked against every #bestpractice in the industry.

The Nordstrom family authored rules that my team researched on their behalf. If a customer spent $750 in the past twelve months, the customer was eligible for special benefits.

1. The customer, through contact with a store employee, could visit the store one week prior to the start of the sale.
2. The customer could see the Fall Merchandise Assortment before anybody else - the store employee walked the customer "backstage", if you will, and gave the customer a private showing of the new merchandise assortment.
3. The customer could pick-and-choose the items s/he wanted.
4. The customer could not take the items out of the store, however. The items were "held" for the customer.
5. On the first day of the sale, the customer walked into the store, met with his/her personal shopper (I.e. store employee), paid for the merchandise, and then waited while his/her merchandise was brought out. The customer paid for the merchandise, and felt special waltzing out of the store while the rest of the customers battled for the assortment on the sales floor.
6. The store employee, as always, earned 7% of the sale (does that happen at Gap?)
7. Oh, did I mention? The customer could invite a friend who did not achieve the $750 level to attend as well, and the friend could purchase as well. #customeracquisition

You might think, "who would be crazy enough to pre-order the merchandise and then wait for a week and then have to go back into the store a week later?"

Who would be crazy enough to do that?

The Very Best Customers That Nordstrom Earned Via Years Of Outstanding Customer Service, that's who.

My team tested the impact of this strategy ... customers who were enrolled into this program, on an equal recency/frequency/monetary basis ... spent 20% more than other equal customers.

20% more!!!!!!

Did I mention that sales from mid-July through early-August were equal to Christmas sales levels?

When is the last time you got customers to spend 20% more without investing marketing dollars or discounts or promotions (remember, the sale was going to happen no matter what)?

What would you do to generate a 20% sales gain among your best customers between Black Friday and Christmas? You'd pretty much have to beg the customer to buy something, right?

And yet, Nordstrom was pulling this off from mid-July to early-August.

My team sent letters to customers in April/May, telling the customer that the customer was within $x of meeting the $750 level to be included in the Anniversary Sale program. Those letters increased sales as well, pushing customers over the $750 level while generating sales in April/May.

The start of the NFL season is not fundamentally different than the start of the Fall Merchandise Assortment, offered via the Anniversary Sale at Nordstrom. There is an event off in the distance, customers can prepare for this event ahead of time, customers can take the events in for free, and best customers are essentially getting "Club Seat" treatment.

Yes, retail can emulate the sports experience.

But there needs to be a compelling event that is rare, one that offers something the customer wants, one that generates emotional benefits that encourage the customer to spend more prior to and during the event.

You can't replicate this experience by offering 20% off plus free shipping 43 of 52 weeks a year.

You have to have a series of events.

You have to work hard to create a sense of importance in these events.

You have to create an ecosystem that promotes the events ... this is more than paying a social media influencer $2,000 to say something nice. Think about Apple fanboys, for instance, because that's a good example.

And then you have to offer something so stunning that the customer has no choice but to participate.

I know, I know, this is hard work, and you are employed by Staples and there is nothing thrilling about selling inkjet paper. You have a different set of problems. You are being disrupted by e-commerce, and your industry leaders are telling you to turn your stores into distribution centers. You are being #disrupted.

But for everybody else, for those who do not sell commodity items that can easily be purchased at Amazon, you can create 4-5 events a year that are unique and interesting ... and then create a series of benefits that cause customers to spend money during the year so that the customer can participate in the benefits. This isn't gamification, it's common sense.

You just have to find a way to be creative - you have to understand what motivates your customer - and then you have to leverage your in-store experience in a manner comparable to a sports team.

Who within your company has the creativity to lead this process? That's a tough question to answer. And if you cannot answer the question, maybe that's what is holding your company back.

Commerce vs. Sports

Look at that image ... an image of the end zone at a Jacksonville Jaguars pre-season football game.

It's a swimming pool.

At an NFL stadium.

This should get us industry-folks thinking.

It got me thinking.

Retail is in a race to the bottom.

Sports is in a race to the top.

Are you going to find a swimming pool when you shop at your local Sears, or Macy's, or JCP, or Kohl's, or Shopko, or Wal-Mart, or any other classic retail brand?

I know, I know, you're going to say "should there be a swimming pool at your local Macy's?" And if you are going to ask that question, then I need to ask you a question.

• "Why do you need to shop in a Macy's store in the first place, when merchandise via an #omnichannel strategy is readily available online?"

The upgrades to the stadium in Jacksonville include fancier club seats and amenities.

In sports, you have two tiers of fans.

1. Those who watch on television.
2. Those who attend in person.

So let's draw a parallel in our world. In our world, there are two tiers of customers.

1. Those who shop online.
2. Those who shop in stores.

Now, yes, the #omnichannel theory folks will tell you that customers do both (shop online and in stores), much in the same way that customers watch sports and then occasionally attend sporting events in person.

Here's what is interesting.

1. In sports, you can watch the product for free, but fans continue to attend sporting events and continue to spend money at rates that outpace inflation.
2. In commerce, you can browse the product for free, but customers increasingly purchase the products online at lower and lower prices (similar to watching sports for close-to-free via cable/satellite), but in commerce, the lower and lower online prices are driving down prices in retail stores or are stopping customers from ever entering stores.

So in sports, the introduction of essentially free access to sports caused fans to want to attend in person and spend more.

But in commerce, the introduction of cheap access to merchandise online caused "brands" to lower prices further in stores to encourage customers to buy more in stores, and customers revolted anyway by visiting stores less often, and industry experts loved this dynamic and called it #omnichannel.

What the heck are we doing?

Maybe we have commerce all wrong. Backwards. Maybe growth in e-commerce can only be paired with a fundamentally different retail experience that causes the customer to want to participate in retail? Instead of digital integration that ruins retail, maybe we need a fundamentally different retail experience?

I know, I know, you are going to tell me that there's not a darn thing you can do to make the Office Depot in-store experience so stunning that the customer has to visit an Office Depot ... you'll tell me that you can't shove a swimming pool in an Office Depot store and hope for the best.

Agreed.

Maybe commodity-based retail has to go away.

It's pretty obvious that commodity-based retail IS GOING AWAY!

Maybe the style of retail that survives aligns with the style of sports entertainment that survived free broadcasts of the sporting product?

I am asking you to THINK ... the opposite of reading a research report coupled with a tweet from a vendor and a podcast from folks who don't actually work in the industry that currently fill you head with what you should do.

Please THINK.

What do college / professional sports teams do to get you off your couch and into a stadium where $$$ is spent?

How does that relate to modern retail (or modern cataloging, for that matter)?

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This time, we are analyzing the June - September timeframe. How did your summer stack up against participating brands? Let's find out ... email me at kevinh@minethatdata.com.