Strategic Building Blocks For Merchandising Success

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Analysis: Analysis is a critical part of merchandise planning. We learn from our mistakes and our successes. The key is to use simple measures and not get bogged down in "analysis paralysis." Detailed analysis is important afterward but while you are in season, analysis might not be available. As an example, by estimating percent of a page and approximate page costs, you can get to almost the same answer as doing a detailed square-inch analysis. If an item projects to lose money at 25 percent of a page, it won't do much better at 20 percent. Use multiple measures, such as page average, average item, average page, etc. Don't forget to include your gut and instinct.

Brand:Your brand is the decision driver behind everything you do and is the guiding force behind all strategic product decisions. Is it front and center in all you do? Have you created a brand fit chart that serves as a product compass to your merchants? Are you in love with your brand? Are your customers in love with your brand?

Champion: Don't start a project without one. Don't expect to finish a project without one. Where creative, qualitative work is concerned, one person with passion trumps many with enthusiasm. Give your champion the freedom and responsibility to drive your project. Your job is to clear obstacles, provide resources for the project champion and get out of the way.

Demand: Planning and fulfilling customer requests for products are what make catalogs different from brick-and-mortar stores. But the key is to ensure that we capture demand even if we can't fulfill it. This is sometimes referred to as lost or shadow demand. When we ask clients for their fill rates and they say, "My initial fill is low, but we fill 98 percent of our demand," through experience we know that not all demand is being captured. By not capturing all demand, response rates and average orders are understated. There are potential incremental list rental costs if names that could have been on your house file must be re-rented because customer information is not captured.

Emotion: How does your brand make you feel? More importantly, how does your brand make your customers feel? Research shows it's the emotional aspects of a brand that resonate with customers and keep them coming back. The more emotional needs of your customers that you can meet, the more connected to your brand they'll be.

Forecasting: The key to accurate forecasting lies in a disciplined, thoughtful approach to planning. However, our key word in forecasting is relationships. Consider the relationship the item has with other items in the category, on the page, in your catalog, to the market. Consider its price point and value relationship. Try to consider the customer's perception of its value and presentation. Factor its amount of space, presentation and location in the book. Don't do item forecasts in isolation, as the sum of the parts always exceeds the budgeted demand. Finally, follow the Mollo Rule of Forecasting: Always forecast your items presuming that out of stocks can be reordered and back in stock within 60 seconds. That's right, 60 seconds. Too often we see forecasts based on lead times or minimum orders. That approach always leads to back orders and overstocks.

Gaps: Your mother always told you not to follow the crowd. She was right. The worst thing you can do is follow where your competitors lead. Don't just copy. Don't just tweak. Look closer ... what isn't being offered in the marketplace? Where are the merchandising gaps? Find your niche. When everyone zigs, go ahead and zag.

Heroes: Heroes are those products that are the workhorses of your business. Heroes are those products that go back to your company's roots - perhaps they're even the reason the company was started in the first place, such as Lillian Vernon's personalized handbag or L.L. Bean's hunting boots and boat tote bags. Heroes are those products that customers can't get enough of. Have you paid them the honor they are due by leveraging them in as many ways as possible?

Inventory: Physical inventory is one of the largest assets (or liabilities). Properly controlled inventory can move substantial profit to the bottom line. It's usually treated as a second-class citizen, yet it touches every department. This inevitably leads to finger pointing rather than cooperation focused on the business itself. Share responsibility: Make buyers and inventory jointly responsible for fill rates and overstock so they work together to balance purchases and inventory turns to support customer needs. Create an actual seasonal budget for inventory/merchandise purchases and track it the same way you create and track payroll, catalog costs, costs per order, etc. It requires a strong inventory person working with finance, but it can save hundreds of thousands of dollars and will result in better cash flow, less overstock and faster inventory turns.

Justify: Never include an item simply because you have the inventory. If planning has been done diligently, the merchant will look for the best product that will make money. Will it compete with another item in the same price point within the category? Give customers a choice in low, moderate and a higher price point.

KISS: You know the acronym. It's all about keeping it simple. Customers look to you to be their editors. With too many choices and too many micro-level decisions before one can buy a product, companies that edit well will win customers' hearts. Is your copy clear and brief? Is your ordering process short, sweet and convenient?

Listen: It's not about you. It's about your customers. How well do you listen to their needs? Get on the phones, read the e-mails and the snail mail. Hang out with your customers. Listen to what they have to say about your products and services, to what they have to say about their needs. Listen to the nuances. Listen to what they're not saying, too. Share this listening with others in your merchandising department.

Metrics: Creating a dashboard of key industry metrics is critical to success. Again, keep it simple. You don't have to create an encyclopedia of metrics. Some key metrics to monitor (from a merchandising/inventory perspective): demand, fill rates, back-order rates, cancel rates, return rates, overstock at cost and cost of overstock and inventory turns. You can't correct what you don't monitor.

Niche: Your niche is your specialty. Own it. Specialize, don't generalize. Focus on doing one thing or one category of things really well. Niche what you know. Some people see a market vacuum and fill it. This can be a strategy for failure. Your niche should be something you're passionate about. Niche what customers want. Some specialties are too tight. Work from the leading sales indicators to find your narrow-but-deep market.

Operations: This behind-the-scenes department can make or break a catalog business. Providing product samples or even a spec book with photos can provide the receiving department information to accelerate the quality control process. Or provide customer service enough information to answer customer questions quickly. Even providing a top 10 back-order list with expected due dates and updates can make call center operators sound more knowledgeable and provide a heads-up on incoming "hot" shipments.

Purple cows: When something is sacred, it usually is not talked about. This is NOT what we want for our products. No sacred cows, just purple cows. It was Seth Godin who coined the phrase, "purple cows." Tom Peters might say "wow products" or "dream products." Some of our clients say their products have to be "buzz-worthy" or "crave-worthy." What everyone means is that they want their products to be talked about. Raved about. Recommended to others. How many purple cows do you have? How many more can you add?

Quality: You have a few critical contact points with customers: the catalog or mailing; the call center; the delivery; the moment the package is opened; and the follow-up - the next mailing, the bounce-back e-mail or the return. Quality for catalogers means building a brand strategy around each key moment. Your brand needs to be clear and present in each of those contacts - in every detail. Everything should be thought through from the customer point of view.

Repurpose: There's a lot to learn from folks who survived the Great Depression. They reused everything ... twice, maybe even three or four times. In the product world, this is called "repurposing." It is an untapped wealth of innovation in many companies. Look at your best sellers from three to five, or 10 to 15 years ago or even longer. Can any art, copy, design or actual products be updated or reinvented to fit your customers' needs today? The fashion world is famous for this.

Stories: Direct marketing has several advantages over retail. One of the most important is storytelling. Customers come to us as much for the stories we tell as for the stuff we sell. We get to show and tell how special, unique and important an item is. The picture is why they're interested. The copy - the story - is why they buy.

Thunderstorm: Here's a unique brainstorm method - beyond the typical idea dump from the creative team. We use this for bigger concepts. The idea is this: Bring together a United Nations team - from finance, order fulfillment, purchasing, product management and creative - to focus on the cosmic concepts. Think outside the boundaries of your departments and job descriptions: What could our company do to surprise and delight customers?

Underneath: Yes, deadlines are tight. There's not enough time or people. Too many of us are on autopilot, just tweaking the plan from last season. Stop! Take time to understand what is happening underneath all the stats you're responding to, underneath all the best sellers, underneath all the products that are not selling. The customers are telling you important things, but you need to read between the lines.

Vendors: We're in a relationship business, built on trust and sometimes even on friendship: inward among ourselves, backward to our vendors and forward to our customers. We need to treat each person and each part of this process with care. If we buy and build things based on ethical values, it will show in the products we sell.

Web: Not so long ago, the Web was going to rule the world and catalogs would fade away. Well, the Internet has become a driving part of our business. But it's just another important way to reach customers. The businesses that succeed are sending customers a clear message: "We will be consistent across all channels, and our goal will be to make it convenient for you to reach us." We have to work harder to identify cross-channel shoppers, and we have to monitor costs so we can complement their experience between catalogs, e-mail promotions or in-store promotions. From a brand perspective, we have to ensure that a customer will have the same experience regardless of channel.

XL - XXL: In trying to cover the broadest range, we sometimes lose sight of the costs of achieving that business. Don't over-assort your product. This applies to SKUs within an item but also to your brand in general. Additional SKUs require attention, effort, inventory, warehouse space and operational costs for what - a few more sales? The costs far outweigh the advantage of carrying the extra SKUs.

Yawns: Does your company have MADD? Market Attention Deficit Disorder? We're in love with whatever's shiniest or newest. We're easily bored with what we did last year, last month, yesterday. But customers couldn't care less. They're in love with what connects with them. They're tuned to station WIIFM - What's In It For Me? So, if white replacement candles, or polishing cloths, or poster putty are selling, so be it. They may be boring service items that you wouldn't and shouldn't change. Pay attention to them. The convenience, or the simple functionality of your old products, may define your brand to some consumers.

Zen: A basic tenet of Zen thought is mindfulness - being aware and awake to the present moment. Here's a present-tense moment for us to contemplate in the catalog business: We should be grateful for every order we receive. Look around you. We're in the most over-marketed, over-merchandised, over-advertised society. Out of all these offers, your customer chose you. What a gift they have given you. In addition to their order, they have given you their full attention. n


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