Move That Merch!

If your business is struggling, you're thinking ahead to January, that glorious month of off-price bliss.

You can move excess merchandise when everybody else is moving it.

You can also use the Christmas shopping season as a proxy-clearance season.

Sit down with a finance representative, and somebody from your inventory management team, and run some numbers.

For instance, how much of a lift do you get on free shipping with a hurdle? How much additional lift do you get on free shipping with no hurdle? Expedited shipping? You name it, run the numbers, and see if it is more cost-effective to move merchandise with incentives now, or if it is better to recover pennies on the dollar in January.

This is another place where Multichannel Forensics come into play. You can run a three channel simulation, where your channels are "Christmas/Promo", "Post-Holiday-Sale", and all other time periods. If the long-term value of a Christmas shopper using a promo is greater than a post-holiday-sale customer, use promotions now to clear excess merchandise.

Using E-Mail For Sale And Clearance

When business misses expectations, catalogers have long enjoyed printing additional "clearance" catalogs ... 48 or 72 or 96 page offerings with significantly marked-down merchandise.



For instance, if business is missing expectations by 15%, a clearance catalog will quickly make up much of the business shortfall.



So here's a question for my loyal e-mail marketers. If you don't have access to print advertising, and your business is missing expectations by 15% (across all of your product lines), how would you use e-mail to make up the kind of volume that a 72 page catalog, with 420 items, typically moves?

Sale!

Please click on the image to enlarge it (and you'll need to enlarge it!).

Who doesn't love a sale?

Customers love a sale.

When executed properly, management loves a sale --- profit could increase, sales likely increase, inventory is moved.

But then the sale ends. And a cohort of customers purchased because they got a "deal". These customers, in many instances, are less likely to repurchase, and if they want to repurchase, they want to get a "deal"!

Couple that with a management team that is forced to grow top line sales. Sure, bloggers, management consultants and marketing experts will tell management to "sell great products", and everything will take care of itself. That's a theoretical argument. Management has to move what sits on the shelves today, regardless whether it is great or not.

So, management adds additional sale periods. Management mixes promotions, free shipping, 20% off your order, 40% off selected merchandise. Sales grow! All is good!

Eventually, the mix of the customer file is irrevocably changed. A large chunk of the customer file loves sale merchandise. Even if you have great full-price merchandise, it will take a few years to acquire the kind of customer who loves full-price merchandise.

The image at the start of this post looks at three scenarios, played out over a five year period of time. The scenario in the upper-left portion of the image is a full-price business. The scenario in the lower-right portion of the image demonstrates how many discount-based customers must be acquired each year, in order to keep gross margin dollars and EBIT growing. The scenario in the lower-left portion of the image shows the profit impact of not acquiring enough sale customers to offset the loss in gross margin.

The business must get twenty-five percent to thirty percent more new customers, each year, in order to offset the loss of gross margin dollars, in order to offset the reduction in annual repurchase rate.

With Multichannel Forensics, a management team can analyze various business scenarios, understanding the long-term consequences of decisions made today. This illustration demonstrates how quickly the customer file is overrun by sale customers. Fundamentally, the business is changed, because it has attracted a different customer demographic, one that loves a deal.