Whose Customer Am I Anyway?  Amazon is a Utility- Not a Retailer

I bought something from a brand. I bought it on their Amazon store. Amazon shipped it to me. I decided not to keep it. I returned it to a Kohl’s.  I don’t remember who actually delivered it.

When I returned it, I didn’t buy anything at Kohl’s. But I had to walk through the store and down the aisles and through various products to get to the Amazon return counter. I’m sure nobody set it up like that on purpose.

The return receipt I got from Kohl’s offered me a 25% discount on anything I bought at the store.  Kohl’s hopes that I’ll become a customer because I’m in the store doing an Amazon return.

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The Evolution of Sustainability and Implications for your Business Model

Concern with sustainability is hardly new to us.  As an industry, active outdoor has increased its focus on the environment and the impact of climate change for years.  I think it’s in our DNA to believe that’s the right thing to do.  That doesn’t mean we aren’t aware of the impact on what we sell and where we sell it.  Sustainability is changing our business model.

Originally sustainability meant things like using less, recycling what we could, and choosing environmentally friendly materials.  Those things are still important but awareness of the sheer amount of textiles that are being discarded rather than recycled and their impact has caused the way we try to be sustainable to morph.

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Maybe Not Being a Brand Is a Brand

We believe in the power of brands.  We have to.  In action sports/active outdoor, there are very few “moats” around products.  That is, there are few distinguishing product features not based on marketing that are sustainable and even long-established brand names run into difficulties holding onto their market positions.  Witness Nike’s current struggles.

Years ago, I asked if maybe brands weren’t going to be as important as they had been.  I was wrong- and right.

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The Potential Downside of Successful Brand Building in an Online World?

Branding, they tell me, is all about building a relationship between a customer and a brand.  That customer, theoretically, will have a bias towards your brand that encourages less consideration of alternatives, more purchases and, hopefully, less price sensitivity.  That’s the theory anyway.

It was, most of us would probably agree, a pretty good theory.  It was true for most brands to a greater or lesser extent at least some of the time.  Still is.

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Camp Chairs as a Game Changer; Supporting Your Customer’s Experiences

So, in a market where your customer may value the experience more than the product, how do you know that your product improves their experience? How do they find out it will? Why should they associate your product with the experience? What, exactly, is the experience you are improving?

Let me tell you a story

Every summer, a local winery (Chateau St. Michelle) holds a series of concerts.   Various combinations of my friends and family go to see, typically, one to three concerts there.

You can reserve some really uncomfortable plastic chairs a little closer to the stage, but we always buy cheaper tickets for the festival seating. Below is a picture of what it looks like at a typical concert.  The picture below is taken from the back of the festival seating area. You can see the stage and the uncomfortable, white plastic chairs in front.

Camp Chairs as a Game Changer 10-15


Now, it might be that you don’t want to be this far from the stage. If that’s the case it’s either the higher priced, uncomfortable plastic chairs or getting there early. The gates open at 5PM for a 7PM show start. But people start lining up at, well, I don’t know, noon. They bring their chairs, food and drink, blankets, and various other picnicking accouterments, some of which are profoundly clever. The closer to the front of the line you are, the better your space can be when you’re let in. I think the correct strategy is to give a blanket to mark out your spot to whoever is youngest and quickest and send them sprinting as soon as their ticket is taken.

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Trade Shows, My Mother, and Generational Cycles; Ideas About Your Customer

Okay, I’m back from Agenda and Surf Expo. I feel bad I didn’t go to the Zumiez 100K event even though it’s not, exactly, a trade show.  I’ll make it to Denver for SIA, but am not going to OR, though I should. They wanted me to pay to get in, but in the best industry tradition, I found a company already attending that would get me a badge.

Still, I just decided there wasn’t time. I had some god awful viral infection that lasted from Christmas Eve to sometime at Agenda and I’ve got clients that won’t pay me unless I do some stuff for them.

Unfortunately, I’ve never found a client who will pay me for doing nothing. Oh well.

I made a presentation at Surf Expo, and will make a related one at SIA, that actually related my mother to generational cycles and am going to try my hardest to relate that to trade shows. I think I can do it by talking about what drives long term buying habits, something we should all be interested in.

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$800 Sneakers

My research department sent me “The Key to Selling an $800 Sneaker” from the Wall Street Journal.  Personally, I’m not in the market for any of those, but I thought the article said a few interesting things.

The first interesting thing is that there is such a thing as an $800 pair of sneakers. Even more interesting is that Saks Fifth Avenue, according to the article, will have 200 sneaker models priced above $700 this fall.
Now what do I do? I mean, part of me is laughing hysterically at the fact that this product exists and that somebody is apparently, actually, buying it. But part of me respects the guy (Jon Buscemi) who created and figured out how to market it. Jon, 39, started out as a stockbroker and along the way spent some time at DC Shoes. I doubt he has any plans to sell his sneaks at JC Penney.
In fact, he barely plans to sell them at all and is specifically creating a brand known for its scarcity. 400 pairs a year ago lead to 4,000 pairs in January and currently 8,000 pairs are being sent to 50 retailers.

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The Economy, Value of Brands, and Relationship between Brick and Mortar and Online

I went to the Snowboard Industry Conference. I had fun. I learned stuff. I talked to people. I drank beer. I made a speech. Uh, I made the speech before I drank the beer just to be clear.

During that speech there were three pieces of information I want to pass on to you. It’s not that the rest of the speech wasn’t worthy of your consideration, but these are the three things from it that I really want you to think about because they apply to the whole industry- not just snowboarding. All have been stolen from other sources to which I give full credit.
The Value of Brand Heritage?
The question mark is intentional. The people at Trendwatching.com create a free, more or less monthly, publication on brands and trends. You should sign up for it. It makes you think. Anyway, in one they sent me a couple of months ago, they said the following:
“The reality for many brands is that the needs and wants of the new consumer often don’t align with the narrative that they’ve labored to build. For rising numbers of consumers, brand heritage and story has become at best irrelevant, and at worst an active barrier: one which prevents brands they might engage with from offering a product or service that’s right for them, today.”
I added the red. I think you’d agree with me that it’s a pretty significant statement. I’ve written that some older brands may have the issue of aging out, where they keep their traditional customers (who tend to start buying less as they age) but have trouble attracting new, younger customers. I’ve also said that as distribution expands, you may have trouble attracting customers in that broader distribution because they may know your brand, but not your story.
The issue if you’re a heritage brand is that you need both the existing customers and the new ones. Trendwatching.com talked about heritage brands doing unexpected things that were contrary to what their traditional brand positioning would call for. “Unthinkable” is the word they use. One example I remember is the venerable champagne brand Moet Chandon selling small bottles of their champagne in vending machines.
Conventional branding wisdom would say, “Don’t do that! You’ll confuse your customers and damage your market position.” Heritage brands don’t want to damage their market positions (no kidding) but they do have to change it. Because if all they have is the customers they grew up with, someday they won’t have any customers left.
I may have said a time or two, “The biggest risk is not taking any risk at all,” and that applies here. Follow the Trendwatching.com logic. What I think they are saying is that stepping outside of your brand’s comfort zone and doing some things unexpected and taking some apparently inappropriate actions for your traditional market position has the potential to attract those new customers you have to find. But if done well, it won’t be noticed by your traditional customers. Maybe that’s wrong. Maybe it will be noticed, but they won’t care. The goal is to have the best of both worlds.
I can’t do this justice in 500 words. Here’s the link to the Trendwatching.com report.
Lessons from Walmart
Probably not where you were expecting me to get my inspiration from. Let’s start with a quote from Mr. Gibu Thomas, SVP for Mobile and Digital at Walmart.
“With mobile, we can make a small store feel like a big store and a big store feel like the Internet. We can combine the breadth of online and the immediacy of offline to create an experience that means we can be a one-stop shop for you.”
In this interview in the Atlantic, he talks about how online and brick and mortar are being made to work together. Basically, what he says is selling stuff online is fine and dandy.   But what’s a lot more important are mobile influenced offline (brick and mortar) sales. He thinks that by 2016, ecommerce sales will be about $345 billion in the U.S. and that online sales through mobile devices will be 10% of that. But he thinks that mobile influenced offline sales will be (drum roll please) $700 billion. He notes that two years ago, less than 10% of the traffic at Walmart.com came from mobile devices. This last holiday season, it was more than half.
In my presentation, I concluded that how mobile influences brick and mortar sales may be more important than what you sell online. Think about that. Online and mobile doesn’t preclude or replace brick and mortar. It enables it. I’ve mentioned this article before. Go read it if you haven’t already.
One thing I thought about was the impact on specialty retailers. One of the implications is that there won’t be any reason to have a store where one third of the square footage is devoted to back stock. Inventory will move between stores and/or the customer’s home as they demand. The trouble, of course, is that there’s no benefit to be had if you’re just one or two stores. I’m wondering if that isn’t becoming another advantage of larger retailers, making the financial model of core stores more difficult.
Government Numbers
And finally, from the Bureau of Labor Statistics, I want to bring you the unemployment rate for 16-19 year olds as of February: 21.4%. For 20 to 24 year olds, it was “only” 12.7%. And I’ve reviewed a study showing that in 2000 45% of teens age 16-19 had jobs of some sort. At the end of 2011, when the study ended, that number was down to 26%. Perhaps it’s improved since then.
There’s not much you can do about that (well, maybe hire some kids) but clearly many of our target customers have less money to spend than they used to. That exacerbates our already over branded and over retailed situation. As always, the flexible, open minded companies with the strong balance sheets will be the ones who do well. Go read some of the stuff I’ve pointed you to and consider taking some risks.  You might be surprised how well they work out.


A Quart of Paint

If you’re a homeowner, you know that you can never complete your project list. All you can do is try to keep it from getting longer. At our house, outside projects are my job and in the Northwest, that means get them done in the summer.

In the spirit of shortening the list, I stopped by a Sears yesterday to pick up a quart of exterior primer paint for one such job.
And found that Sears no longer sells paint. HOW IS THAT POSSIBLE!?
When we first moved up here from the Los Angeles area north of 20 years ago (Yes, I do appreciate the irony of my having found my way into action sports by moving from SoCal to Seattle), there was a chain of home stores called Ernst. It was obvious they were struggling, but when they started to carry furniture and all kinds of other stuff basically, in my view, desperately putting on the floor whatever they thought might possibly sell, I knew they were toast. Shortly thereafter, they were out of business.
It’s no secret Sears has been struggling. But when I saw they were no longer carrying paint I said, “Okay, that’s it.”
Tactically, I’m sure their carefully conducted analysis showed that paint was a money loser for Sears. So they got out of it.
But it’s way more than a financial decision. It’s a decision about who their customers are and what they expect from Sears. Truth is, I mostly go to Home Depot and Lowes now because I know that whatever I want for home repair, maintenance, or remodeling they are likely to have it. But Sears was convenient, and I had a residual affinity for it as a home store. But somehow their not having paint flipped a switch in my fontal lobe and what was clearly a delusion on my part is gone.
Sears used to be the place where you could get everything. If not in the stores then through the catalog. For certain items, it could be the only choice for people in parts of the country, and they were happy with Sears even if it took weeks to get the product. It’s way easier to be a retailer when your customers have no choices and love you anyway.
Sears has a hangover from the party it threw while selling almost everything to everybody. Now, why would you choose Sears? It sells hardware, home improvement, clothing, shoes, appliances, electronics, towels and bedding and probably some categories I’m forgetting. Oh yeah- auto repair. Is it your first choice for any of those? Can you think of anybody else that tries to compete in all those categories? To make it worse, we can all think of places with better selection, prices, and/or service in any of those categories.
Sears competes with everybody. Which is impossible and maybe means they are not very relevant as a competitor. I’d also note that the chains I consider the closest overall competitors to Sears (Walmart, Fred Meyers, Target, etc.) are also carrying food; the one thing Sears seems to have stayed away from.
Sears is a hodge podge of unrelated categories no longer connected by a defined consumer need and I don’t think they do any of the categories particularly well. It’s a bad place to be. And, as we all know, it’s made worse by an economy where sales increases are harder to come by.
I’m not writing about Sears because I’m worried about them leaping into the youth culture business (though, hell, everybody else has). They are a poster child for two business conditions. The first is owning a market niche (a damnably big one in Sear’s case) and having the market evolve away from you. Markets, of course, always change, so you have to expect that. I also expect you aren’t going to be able to predict how they change.
The second, said before but worth saying again, is that when you try to be meaningful to everybody, you can end up being meaningful to nobody.
It’s certainly an old story to us. Credible, successful brand tries to leap beyond its customer franchise alienating existing customers, never really distinguishing itself with the new target customers, and finding the competition from the whales in the new ocean overwhelming. Or credible, successful, brand just continues to do what it’s always done and ends up screwed as the market changes and it doesn’t.
It has, I think, always been true that you couldn’t just sit in your niche. Neither could you infinitely extend your brand. But cash flow, I’ve said, covers up a host of problems and it was easier to do nothing, or do the wrong thing, in the old economy and get away with it for a while.
In our competitive thinking, we used to be over focused on what our competitors were doing. It was way easier than really figuring out who your customers were and why they were buying from you- that’s hard work. That really didn’t work and certainly doesn’t now.
To over simplify, you probably have to grow, but not too much. “Not too much” is different for every brand or retailer. Every product you decide to carry, every distribution decision you make has to be based on what your customer is doing and what they want from you.
Create a process to help you make those decisions. If you don’t, they will be overwhelming and you’ll find yourself wallowing around like Sears. Don’t stop carrying paint if your customers expect you to have it.



Trying to Think About the Junction of Retail, Brands and the Internet.

The more I think about it, the less I feel I know for sure. I know the internet and brick and mortar are changing each other, that brands are becoming retailers and retailers brands, that easy information and product availability is making most products commodities at some level, that brands are really pushing product extensions, and that consumers are making long term changes in their purchasing behavior. But stirring this soup of change just makes it cloudy. 

Yet we all have to be thinking about it, and I’ve had a few experiences in recent months that are at least helping with the thinking and, to my surprise, are turning out to be related. Why don’t I tell you about them and we’ll see if they turn out to be related for you too.
At the Mall
Bellevue Square is a large regional mall here in the Northwest. It’s anchored by a Nordstrom, Penney, and Macy.   I’m in it occasionally and usually take the time to walk through some of the retailers firmly in our industry to see if I can learn anything. For some reason, at my last visit I determined to make a list of those retailers and see just how long it was. Here’s the list I came up with:
7 For All Mankind
Abercrombie & Fitch
American Eagle
Forever 21
Helly Hansen
Lucky Brand
The North Face
True Religion
I didn’t include Nordstrom or Sketchers. Maybe I shouldn’t include Lululemon. There are a few other fashion retailers I might have added. I know the list is shorter if I include only committed action sports brands. Yet I think that would be deluding ourselves. Every store on this list tries to get at least some of the dollars from customers of the core action sports/youth culture market. And I’m sure they all sell on line.
That’s a lot of stores for one mall. Bluntly, I’m not sure there are enough market niches to go around especially given that there’s nobody on this list whose niche isn’t determined largely by advertising and promotion.
Buckle, headquartered in Kearney, Nebraska (don’t ask me), has about 430 stores in 43 states and had revenue of $949 million in the fiscal year ended January 29, 2011. The first time I walked into a Buckle store, it had the action sports/youth culture vibe I was familiar with from various other industry stores. But there was something different, and I literally walked around for a minute or two trying to figure out what it was.
You know how most action sports retailers have fixtures, posters, and other promotional aids representing the brands they carry? Buckle, I realized, didn’t have as much of that as most retailers. If you look at the list of brands they carry at their web site, you’ll recognize many of the brands, but those brands don’t overwhelm the merchandising of the store. They kind of get equal billing with Buckle’s owned brands, which are not named Buckle.
PacSun carried and promoted the brands we’re all familiar with. Then they added their store brands as a way to generate some more margin dollars and to offer more price conscious customers a choice. The way they handled their private label felt tactical and financial- almost like an afterthought- rather than being part of a strategy. I think that choice, along with over expansion, poor merchandising, and a weak economy, was what got PacSun in trouble.
Now, PacSun is being more thoughtful in how they handle their mix of brands.  We learn in their recent filings that their mix is about 50/50 between private label and brands owned by others.
Buckle, on the other hand, has what I take to be a deliberate strategy of building its image based on all its brands combined- owned and bought from other brands. In their merchandising, there almost isn’t a distinction made between the two. Buckle is a retailer making itself into a brand (or maybe creating brands?) through this approach.
I have often thought of store label brands in terms of what percentage of revenues they could safely represent. Perhaps that was short sighted. Buckle’s premise seems to be that it’s the mix and merchandising of the brands that matters given the target customer; there’s no percentage that’s “too much” or “too little.”
I wonder if the day will ever come when we see a retailer that has created brands get enough traction with those owned brands to sell them to other retailers. Maybe internationally.
I’d characterize Kohl’s as a discount department store with quite a broad array of merchandise (Here’s a link to their investor relations site, which is full of all kinds of good information). Among the brands they carry are Vans, Hawk, and Zoo York. I was struck by the good selection and attractive pricing. Interestingly, they’ve moved from 75% national brands and 25% “private and exclusive brands” in 2004 to 52% national brands and 48% “private and exclusive brands in 2010.” I guess Buckle isn’t the only store that has the idea of melding owned with national brands.
“Private” and “exclusive” brands are not the same thing, and it’s important to understand the difference. A private brand is just what you expect; created, owned and controlled by Kohl’s. An exclusive brand is not owned by Kohl’s, but is available exclusively in Kohl’s stores. The Hawk brand is such a brand for Kohl’s.
I noticed a poster in the store advertising the Hawk brand, but featuring a skater who was not Tony Hawk. Makes sense to me. That’s what you do when you’re trying to give a brand credibility and longevity beyond an individual.
Target has the same kind of deal with Shaun White. Say, I’m going to have to rush right out a nd get me some of those Shaun White window curtains at Target. There are 237 Shaun White items on Target’s web site. Well, good for him. I would have made the same deal even though at some level I hated to see it happen. But I wouldn’t have minded if they’d not done the curtains.
Kohl’s has revenues of almost $19 billion generated from over 1,100 stores plus their web site.
Reaching Everybody, Everywhere, All the Time with Everything
I noted after SIA that everybody who was selling hard goods was making apparel, and apparel makers were making hard goods. I recently commented on Quiksilver’s foray into board shorts for NBA teams and suggested that just because a market extension was possible didn’t mean it was a good idea. Referring to the trends in online shopping, I’ve suggested that consumers no longer feel compelled to have a product they want the same day, so one perceived barrier to internet shopping is falling. About 2008 I started to point out that it was going to be tough to get sales increases, and it was years before that I suggested that perhaps a focus on gross margin dollars was appropriate since that was what you paid your bills with. Even earlier than that, I noted that where to sell or not sell your product was something brand managers focused on every day.
It’s just interesting how all this is coming together, at least in my mind. In a weak (though slowly improving) economy with cautious consumers and an environment most companies describe as “highly promotional,” many companies are trying to reach new consumers through product extensions that may or may not widen distribution. And it’s funny, because I see this as the hardest kind of economy to do that in. Almost by definition, you’re moving into a space where other brands are stronger than you are.
This trend is driven partly by a need to find sales growth somewhere, especially for public companies. It’s facilitated by technology and the internet, improved logistics and information systems, and a sense, I think, that the distribution cat is already out of the bag so what the hell.
Just to be clear, product extensions and distribution expansion aren’t by definition bad. Nike can sell some product at Costco without crippling their brand. Think about what Sanuk did. I expect to see Nixon do some interesting stuff once Billabong’s deal to sell half of Nixon closes and I think they will succeed because of how Nixon is already positioned with their customers.
These Days, What is “Positioning?”
If you ask me what “we” should do about this, I’d say, “nothing.” It is, as usual, up to individual companies and brands. The first question in the everybody, everything, everywhere all the time chaos is, “Has positioning changed and is it still meaningful.”
I’ve thought about that a bunch, which is why this article was actually started before Christmas but is just being finished. I hope it’s being finished. I’ll know in a couple of paragraphs.
The tools you use to build your market position have changed in ways we all know. But the concept is still valid and maybe more valid than ever. You build and defend your market position by doing what you do well and communicating that to your customers.
When I wrote about companies in snowboarding pushing into apparel from hard goods and hard goods from apparel, I suggested that companies that didn’t do that might find themselves with an advantage. I want to expand on that a little.
Maybe effective market positioning is now at least partly a matter of doing less. That is, let other companies pursue dubious product extensions. To exaggerate a bit to make the point, let them try to sell everything to everybody everywhere all the time. I wasn’t even born the first time somebody said, “If you think everybody is your customer, nobody is your customer.”
That doesn’t mean never do a product extension. But, more than ever, come at it from a solid foundation of knowing who your customer is and why they buy from you. Never go after a new market because, “We need more sales!” And don’t over simplify the analysis by going, “Well, we’re in business X, and all our competitors in business X make product Y, so we should make product Y too.” That ain’t analysis.
If you take the time to really understand how customers perceive you and why they buy your products, you won’t ever be tempted by the wrong growth opportunity, and you’ll immediately recognize the good ones when they come along.
I guess that at the junction of retail, brands, and the internet what we find is a slightly different way to think about old, still valid concepts.