Special Offer For Readers: An Amazon / PLA / Search / Paid Social Customer/Product Evaluation

Yesterday's posting about where the catalog industry has been and where it's likely to head was about as popular as anything I've written in the past three years (click here). Yes, a little LinkedIn promotion didn't hurt.

Non-vendors have a very different set of questions/comments from what the service provider community has to say. Non-vendors want to know about the customers who buy from digital channels and the products purchased from digital channels ... specifically, "are the products purchased in, say, paid social, different than the projects purchased through print"? Yeah, that's a good question, because it speaks to how a brand might merchandise a "future world". Good question, smart readers!

Let's do something, given what is happening to so many of you right now, and what so many of you are asking about.

I'll create a new product just for my readers (that's you), people who have been loyal for as long as nearly twenty years now ... and offer it at a highly significant discount for a short period of time to help you out. I won't publish it on my pricing page, it's something just for you.

I will produce a special analysis of customers who shop what I'll call "alternate channels" ... channels that are not really within your control or who buy from email marketing.

• Amazon.
• Other Marketplaces.
• PLA Customers.
• Search Customers.
• Paid Social Customers.
• Email Marketing Buyers.

I will measure how much "less loyal" these customers are, moving forward.

More importantly, I will evaluate the products these customers purchase, comparing them to your core e-commerce shopper or email buyer. In most of my projects, these customers buy "something different" and it impacts how these customers behave in the future when you present them with your full assortment. This will include a portion of my Merchandise Dynamics work ($15,000).

Finally, I will take a modest slice of my Marketing Budget Experiments work ($20,000) to see how these customers evolve and change over time compared to your core buyer.

As long as you respond by May 24, I will only charge you $9,900 for this analysis. If we have demand, I will build this into a full-fledged project, potentially including a new booklet to pair with the project. And yes, if it becomes a full-fledged project, it's going to cost close to double what I'm offering here. 

So act, now.

You have until May 24 to take me up on this $9,900 offer. Click here for other projects and file layouts. Contact me immediately (kevinh@minethatdata.com / 206-853-8278) and secure your spot before my bandwidth is consumed, because I expect this offer to be VERY POPULAR given what you're all telling me right now. My legacy clients simply cannot sustain the paper / printing / postage inflation they've experienced in recent years, going forward.

The Catalog Industry: A Thirty Year View And Then Looking Forward

This article was forwarded to me this weekend by one of our intrepid and now retired advocates (click here).

Plow & Hearth going away (old news) should cause catalog professionals to go ... hmmm?

Let's step back for a moment. Here's what an awful lot of you in the catalog world are experiencing. This is what net sales look like over time.

Click on the image for a bit more resolution. Notice the COVID bump in 2020, and the dramatic deflation of the COVID bump in 2021-2022. On October 29, 2020, I told you to SELL (click here), to take full advantage of that gigantic peak in the image. Remember that?

Did you listen?

On August 2, 2021, I told you about the evaporation of your COVID bump via my forecasting methodology (click here). I told you what was coming ... and did so repeatedly since. 

Did you listen?

Look at the image above ... notice that sales generally stalled after 2014, and if you remove the COVID bump from the image you see a general trend happening ... and it isn't positive.

Now let's adjust the image above for inflation. Tell me what you observe.

You see constant decline from 2006 forward. Remember 2006? 2006-2007 was when the list industry consolidated. The trend, after factoring inflation into the mix, is a consistent downturn ... from 2006 forward. A mature industry hit "retirement age" in 2006, and has been contracting ever since.

Since then, you handed the keys over to the co-ops, who squeezed your data for every penny they could and optimized their algorithm to the point where the algorithm shoveled every 70 year old name they could at you at the very time when you needed 35 year old customers. This further accelerated the inflation-adjusted demise.

Behind the scenes, your trusted partners ... paper folks and printers ... they were contracting in response to declining demand for their products. Sure, publicly, they told you all was well. They demanded you continue to put paper in the mail as part of a vibrant "omnichannel" strategy. They had to tell you this. They had to stay in business. As a paper rep told me in 2019 ... "I'm not going to let you take food off of my table, even if you are right."

The contraction of the paper/printing world was revealed in late 2020 and 2021 when catalogers suddenly had twelve-month buyer files that were anywhere between 20% and 100% bigger than they were a year prior. Catalogers needed paper. Paper didn't exist. Printers couldn't handle the increase in workload even if paper did exist. From a customer standpoint, being locked in your home for two months will fundamentally disrupt an industry. Supply exceeded Demand. 

Paper/Printing costs increased, paper availability decreased. Tack the USPS increase on top of that, and yeah, there's trouble brewing.

Subsequent inflation and industry dynamics yield a world where paper/printing/postage costs are +15% per year, every year, for several years. This doesn't work in a contracting industry with old (70 year old) customers.

It doesn't take a rocket scientist to correlate contracting businesses with increasing costs and a very old customer base ... you correlate it and you get Plow & Hearth. They said it to you, using actual words, in the link above. Read it.

Unless you are a strong digital marketer catering to a 35 - 55 year old customer (which many of you are, fortunately), your future may well include an exit strategy or becoming a third-party seller on various marketplaces. It's survival, yes, but it is a lot less work than figuring out how to get a Google customer to click through a PLA and trust your website via multiple visits to finally purchase and then send catalogs or emails or SMS messages to beg the customer to come back and buy again before finally paying Google/Facebook another set of tolls so you can get another customer.

Think carefully, folks. This is a major inflection point in the trajectory of your brand. I advised you for (literally) decades at no cost. I wouldn't say what I'm saying if this weren't a major inflection point. And I wouldn't lead you astray.

There's nothing wrong with adapting, changing, and moving forward. Get busy moving forward. I have faith in you to move your brand forward. Let's go!

WLS - Chicago

My wife told me about the history of WLS in Chicago following attendance at a quilting retreat, which I didn't know about (the history of WLS - I knew about the quilting retreat), so I had to look it up. Now you get to look it up as well (click here).

Wow.

WLS = World's Largest Store (which was Sears in 1924). By creating a radio station, Sears could sell radios in the catalog, providing "engaging content" for people to listen to on their new radio. 

They were doing Amazon Prime stuff a hundred years ago.

Then Sears sold the station and moved on. What might have happened had they taken a different direction?

My Dad would try to pull in WLS from a 140 miles away on his radio, and often had success ... he liked to listen to Larry Lujack (click here). Wow. Radio changed from 1924 to 1982 ... and changed from 1982 to today, don't you think?

Sears also did other quilting stuff ... setting records that still haven't been beaten (click here).

Side Note:  WGN came from "World's Greatest Newspaper" (click here). Those folks in Chicago had a high opinion of themselves, didn't they?

What's the point of this?

Sears was Amazon a hundred years ago ... bringing us to Ecclesiastes 3:1-8 ... everything has a season. How in the heck could Sears be so innovative, so ahead of the curve ... and end up like ... well ... Sears? I mean, will somebody look back in 30 years and say "I remember when Amazon Prime broadcast original programming, NFL games, NASCAR, and Pickleball.tv? Yeah, probably.

Which brings me to your business.

All of our businesses are in a constant state of dying. Mine too. If there isn't something new, clever, innovative ... something that gives the existing audience a reason to continue while attracting a new (and younger) audience, then you know where we're headed, right?

It might seem inconceivable that Amazon could end up like Sears. But Sears ended up like Sears. It's coming for all of us unless we find ways to resonate with the customer in new and interesting ways.

Late Stages Of Omnichannelism

Retail Dive really derives pleasure/clicks out of bankruptcies.

Over 45,000 retail stores may close in the next five years?

There have been many stages of omnichannel theory.

• 2000 - 2005:  You had to send catalogs to grow your e-commerce business and drive customers to the store.
• 2005 - 2010:  You had to align every product and promotion and price across all channels, no exceptions.
• 2010 - 2015:  40% of catalog circulation disappeared because, it turns out, older technology bolted on to newer technology does not protect older technology ... while at the same time the experts promoted that the way you compete with Amazon is to bolt your stores on to e-commerce and use digital to drive customers into stores.
• 2015 - 2020:  Stores begin closing.
• 2020 - 2025:  Stores keep on closing ... catalog marketing is eaten alive by cost increases passed on by the paper / printing / postage industry after a nasty combination of consolidation and increased demand due to customers shopping at home during COVID.
• 2025 - 2030:  45,000 stores close, turned into indoor pickleball courts and server farms designed to mine bitcoin.

We're in the late stages of omnichannelism. Oh, retail will be fine once all that mall and strip mall square footage is converted into warehouses, pickleball courts, and server farms. There will be innovation. But the concept of bolting old technology on to new technology to protect old technology ... that concept will find a new host to attach to.

Meanwhile - how are you looking at what you sell (instead of looking at how you sell it)?

Lifestage ... or LFS

In my Merchandise Dynamics projects, I tag every order with the Life Stage the customer is at on that order. If it is the 4th order for the customer, then LFS = 4.

Your items do not distribute equally across your customer base. Some items are preferred by first-time buyers. Some items are liked by Google/Facebook. Other items are time-tested, preferred by your best customers.

It is important to tag each item in your merchandising database ... you can make this easy for your merchandising team.

• Very Early in Customer Life Stage.
• Early in Customer Life Stage.
• Middle of Customer Life Stage.
• Late in Customer Life Stage.
• Very Late in Customer Life Stage.

Load this information for your merchandising team, so they can actually see "who" buys the products they work so hard to make available for customers.

Pushing a Rock Up a Hill

I once spoke with a CEO who suggested he was going to "reinvent the brand".

It's not easy to reinvent a brand. Sometimes, your customer won't let you reinvent the brand.

Before you make the decision to blow things up, look at the percentage of sales that come from winning items by customer life stage.

• 1x Buyers = 33% from winning items.
• 2x Buyers = 37% from winning items.
• 3x - 5x Buyers = 42% from winning items.
• 6x - 10x Buyers = 46% from winning items.
• 11x+ Buyers = 55% from winning items.

This analysis tells you that your best-selling items are preferred by your very best customers.

If your winning items are preferred by your very best customers AND your winning items tend to be items introduced 3+ years ago ... well ... your customers won't let you reinvent the brand.

Now, if half of your sales come from new buyers AND a below-average amount of sales come from winning items, then you have freedom to reinvent your brand. Your customer will let you change who you are.

The same issue holds true for discounting. If you use email marketing to convey the best discounts possible to your best customers, your best customers will rebel when 50% off becomes 20% off. You'll be pushing a rock up a hill.

Carryover of Winning Items

In general, a small number of high-performing items account for the top 20% of your sales. Then a small number of good-performing items account for the next 20% of your sales. Eventually, a large number of low-performing items account for the bottom 20% of your sales.

Using this segmentation strategy, you can produce a quick query that will help you understand if your merchandising team is killing off high-performing items.

Step 1:  Select last year's winning items (top 20% for sales).

Step 2:  Calculate the percentage of last year's winning items that are in the top 20% for sales this year or are in the next 20% of sales this year.

Step 3:  Repeat the analysis one year earlier.

Step 4:  Compare results.

For instance, this is a common outcome when the merchandising team is prematurely killing off items.

• This Year:  55% of winning items remain winning items, 20% of winning items are at the second level, 75% remain in the top 40% of item performance the following year.
• Last Year:  75% of winning items remain winning items, 15% of winning items are at the second level, 90% remain in the top 40% of item performance the following year.

We went from 90% of items "holding their own" to 75% of items "holding their own".

In other words, the merchandising team is doing something wrong.

From here, you dig in by category and price point to figure out what is going on. Sometimes it's an inventory situation. Sometimes the merchants have contempt for items from the prior regime. Regardless, they're harming the business.