What Was The Point Of The Last Two Weeks?

Sure, I shared a few thoughts and you may have disagreed with them, but what was the point?

The point was to demonstrate that most of us are ultimately in the "SELL" quadrant. We don't have the creative chops of a Duluth Trading Company, we don't have the financial resources to "BUY", and we are never going to "SCALE" and play with the big brands.

So if we're in the SELL quadrant, we have two choices when we are ready to sell in 2019 or in 2029 or in 2059.

1. We can sell for pennies on the dollar.
2. We can sell to top dollar.

Which would you rather sell for?

If you had to honestly look at your business today, are you closer to selling for pennies on the dollar or are you closer to selling for top dollar?

Too often, I'm contacted by companies who could only sell for pennies on the dollar, or by companies looking to purchase brands for pennies on the dollar. The companies who are worth pennies on the dollar tend to have something in common.

• They hold on to the past while publicly acting like they are a modern brand.

In other words, these companies exhibit the characteristics of a company stuck in 1993.

• Meetings are about catalogs, not about merchandise.
• The lobby is littered with catalogs and does not have a digital presence in any way other than the LED television which is showing images of catalogs being created.
• People care passionately about how the April catalog is performing during the first four hours of the in-home window and do not care about how paid search is performing at all ... "that's what our paid search vendor is paid to do."
• More than half of new customers are acquired via catalog co-ops, Google, and/or Facebook.
• The ad-to-sales ratio is > 25%, mostly comprised of paper, printing, and postage.
• Orders are still being mailed with an order form and a check.
• Merchandise doesn't sell online unless a catalog is in the mail at the same time.
• An Executive is obsessed about "competing with Amazon", as if that were something that a < $500,000,000 brand can actually do.
• There are actual discussions about whether a catalog should be 64 pages or 68 pages, and those discussions last longer than 5 seconds.
• Employees < age 35 are not trusted.
• Customers are generally age 60-75, but list vendors say that your target audience is a 35-55 year old suburban woman.
• Somebody (or Everybody) at an Executive or Director level is constantly telling employees that the brand is an "omnichannel" or "multichannel" brand and left catalog marketing long ago and then holds meetings to talk about how digital marketing channels must support the catalog.

The last bullet point is probably most important. I run into it all the time. An Executive will tell you that because there is an email program in place and because the Twitter feed is followed by 2,194 people (only half are bots) that the brand is no longer a catalog brand but instead is a modern omnichannel brand that supports a middle-aged consumer.

This is what the past two weeks have been about. If your brand routinely falls into the bullet points above, you are in the SELL quadrant and you are skewing toward getting pennies on the dollar when you finally decide to SELL.

You can improve the profit-and-loss statement by being tactically better, no doubt about it.

You can improve the profit-and-loss statement by changing your culture, by recognizing that it is 2018 and it is time to put some of the legacy of 1993 to rest.

It's really hard to be tactically better if your culture won't accept the tactics that make you tactically better. That's the point of the past two weeks.

Selling Is A Time-Honored Strategy

I know, I know, you read my stuff about where catalog brands and e-commerce brands are headed, and you repeatedly see me suggesting that you are in a "SELL" quadrant and you get upset with my line of reasoning.

You've been in business for forty years ... you just need to figure out a path to the future. Every company has rocky stretches. You made it through the Great Recession. You are a success story.

Selling doesn't mean you are selling today.

Selling means that the end-game is to be sold.

Look at HelloFresh (click here). They appear (my opinion only) to be employing the time-honored three-step process.

1. Go from 0 to 60 in 1.8 seconds.
2. Pay initial investors via an IPO.
3. Pay IPO investors by selling to Kroger or Albertsons (or Target or Wal-Mart or Amazon).

Companies are sold for many reasons.

• They are dying and can be purchased for pennies on the dollar.
• They serve a purpose in the future of competitive commerce.
• They are incredibly healthy and somebody "has to have the brand" and is willing to pay top dollar.

Why can't you be in the third category?

I'm trying to help you avoid being in the first category.

Make sense?

Everything Else Is Fine: Buyers Would Love To Have Us In Their Portfolio

There are two types of phone calls.

The first call comes from an Owner / CEO. She has a 40 year old business that partially navigated the transition to e-commerce but missed the mobile/social boat and is now dependent upon the catalog co-ops for new names and catalog co-op performance is -15% this year and -40% over the past decade. "Everything else is fine, Buyers would love to have us in their portfolio."

The second call comes from one of +/- 20 potential buyers:

• "We're not buying this brand unless there is a future business without catalogs and a fully-developed customer acquisition plan that does not rely upon catalog co-ops, Google, and Facebook."

Do you see the disconnect?

Most of us aren't going to "SCALE" and compete against Wal-Mart and Amazon (and indirectly with Apple / Facebook / Google).

Most of us aren't going to "BUY" ... we're not going to become a holding company.

Most of us, deep down, don't want to be UNIQUE. Mention Duluth Trading Company to a New England cataloger and the groans will be heard all the way in Southern Wisconsin. Mention Supreme (click here) and you'll hear every excuse in the book why that business model can't work (though it does). So deep down, we don't want to be UNIQUE.

Which puts us in the only box left ... "SELL". The end game is to sell. It might not happen in 2018 or 2019, but it is coming. Especially for the lone-standing catalog brand without a UNIQUE strategy. And if the end game is to sell, then it is really important to do the following:

• Tidy up retention efforts.
• Generate quality ROI via customer acquisition.
• Polish up the profit and loss statement.
• Prove that Lifetime Value is fantastic (you know LTV down to the penny, right?).
• Show a path to the future that does not include old-school marketing.

In other words, you've got to fix everything. The two biggest problems?

• New merchandise.
• New customers.

Buyers don't want old-school brands in the portfolio unless two things are possible.

1. There is a path to the future (new merchandise, new customers).
2. If there isn't a path to the future, the purchase price needs to be severely discounted to account for the fact that there isn't a path to the future.

It's time to pick up a broom and get busy sweeping the dust off the tile.

Tough Decisions on the Horizon

Last week we held our breath as tens of thousand of tweets from Shoptalk touted how technology will save retail.

Five years ago, we were told that technology would save retail. How did that work for everybody?

We're really good at cause-and-effect at a first-level. We can see how augmented reality might help Macy's sell something, and we then imagine a world where every retail brand used augmented reality to sell something.

What we're not good at is simulating cause-and-effect six levels away.

We can go back to 2013 when the tech vendors demanded that we embrace digital marketing to foster one-to-one relationships with customers in an omnichannel world. We were told to capitalize on the e-commerce gold mine. At a first-level, yup, that makes sense.

But then a whole bunch of things happened that we didn't anticipate.

1. Attribution vendors mistakenly took credit for orders that would have happened anyway, giving digital channels disproportionate credit.
2. This caused us to spend even more on digital channels than we otherwise would have.
3. All of our digital focus caused in-store orders that would have happened without digital advertising to shift online.
4. Once orders shifted online, store traffic decreased.
5. When store traffic decreased across numerous brands, all stores were hurt.
6. This caused CFOs to close stores.
7. When stores closed, sales disappeared (though profit potentially increased). E-commerce did not pick up the slack.
8. The brand is left weaker and smaller.

You can't blame this on Amazon. (1) - (8) above are our fault. We did it to ourselves. And we couldn't see (8) happening because we didn't simulate potential outcomes. We just remained at a first-level (digital is good and digital sales increase when you perform more digital marketing).

There are tough decisions on the horizon.

Tough decisions require us to think eight steps (or more) ahead.

But We Cannot Afford To Pay Our Employees

A company generates $50,000,000 in annual sales. This company pays marketing vendors a whopping $15,000,000 to generate sales.

The Executive Team is frustrated. They have a hard time keeping talent in-house. "We cannot compete on salary."

I offer the company an option ... how about a bonus structure that rewards employees when the company has a good year. A Director earning $120,000 a year could make a 40% bonus, earning an additional $48,000 if the company has a good year.

There's an interesting response to this proposition.

• "We can't let the employees earn a disproportionate amount of pay if the company does well."

Of course you can!!

You do this with your vendor partners all the time. 

• What happens when Search performs well? You invest more in Search, and your Search vendor gets paid more.
• What happens when Catalogs perform well? You invest more in Paper, Print, and Postage. A veritable plethora of vendors get paid more.
• What happens when Merchandise performs well? The vendors you bought the merchandise from get paid more.
• What happens when the Employees who hired the vendors to perform well cause the Company to perform well? They don't get paid more than maybe a cost of living increase.

How you pay your employees says a lot about who you are. A traditional company that rewards vendors for doing well but does not reward employees for hiring the vendors who do well will have perpetual talent challenges.

The Lobby

You enter the lobby of a catalog brand. There are tables surrounded by leather chairs. On top of each table is a veritable plethora of recent mailings. The February catalogs is there, and the February remail is there as well, just in case the 80 pages in the February catalog didn't resonate with you.

Mabel is at the lobby desk. After you sign in, she gives you a name tag. Your contact (the Chief Merchandising Officer) arrives five minutes later. She asks you if you had a pleasant trip? She asks you if you enjoyed thumbing through the February Catalog? Then she hands you a copy of the March Catalog.

You ask how the mobile channel is performing? She stares at you like you have lice crawling through your hair.

• "There's not enough acreage on an iPhone screen to share the assortment my team curated via our March Catalog."

Later, when you ask why the core customer is 66 years old, you are told that the Marketing team "doesn't know what they're doing".

Your lobby says a lot about the channels that you prioritize. Do you make sure that every visitor downloads your app, or do you hand the visitor a copy of your catalog? How you answer the question says a lot about who you are as a brand.

Meeting Structure

I sit down for a meeting to review quarterly results. The Executive Team get ready to dissect a hundred pages of results. The meeting organizer begins the meeting with a review of the three main catalogs and two remail catalogs that comprised the quarter.

Sales for the quarter were on-plan, but the catalogs were down about 5%. Folks begin to argue with the Chief Marketing Officer ... "you're measuring this stuff wrong, the catalog drives all of our channels".

The Chief Merchandising Officer commences a beat-down of the Chief Creative Officer. She shows the room how the spread on pages 6-7 of the February Catalog was not "trend-right". An in-depth analysis of the profitability of each item, measured via a square inch analysis, indicates that a handful of items performed poorly. The CFO begins a spirited discussion whether next year's February catalog should be 80 pages or 76 pages?

After two hours of back-and-forth comments, five minutes are spent on the email campaigns. One minute is given to a discussion about imagery on Instagram. Nobody talks about the fact that Search performance was up 20% on the same budget as a year ago (#optimization). The Chief Operations Officer mentions that she's tired of the retargeting ads that hound her across the internet. Nobody discusses the fact that a personalization vendor improved online conversion rates by 20%, which helped offset sluggish catalog performance.

At the end of the meeting, a task force is created to determine optimal page counts for 2019. 

What is the meeting structure like at your company?

If the catalog is the primary focus of any business review ... well, if it is, it says a lot about who you are as a company, doesn't it?