Some Interesting Numbers

Remember when the economy went off the cliff in 2008 and the snow was none too good? Look what happened between the 2007/2008 and 2008/2009 seasons. Pretty much everything went south, except unsold inventory which went north. Not a pretty picture.

Then, in a completely expected and quite reasonable fear induced panic, the entire industry got rid of all that inventory. And to say they were cautious in ordering for next season is a bit of an understatement.

A funny thing happened. In the fall of 2009, when snow sliders walked into their favorite retailer to take advantage of the anticipated fall sales they found, well, nothing. It became very apparent that if they wanted the product, they needed to buy it now at full price. And that’s what they did.

Look at the numbers in the 2009/2010 column. Unit sales were down, but dollars sold, gross margin, and gross margin dollars earned all rose. That happened while year-end inventory fell 13%.

With product not quite so widely distributed and in short supply, and with limited left over product from the previous season, customers were willing to pay more and buy sooner.

Let me just say it once more. More gross margins dollars were earned on lower unit sales. With any luck at all, customers learned not to expect discounts all the time, to value the brand a bit more, and that they couldn’t wait until the last minute and expect to get what they wanted.

What I conclude from these kinds of numbers, and what I said at the conference, was that as long as the economy was weak and sales increases harder to come by, maybe you could strengthen your brand and bottom line by taking a different approach than you had in the past.

I’m all for sales increases, but don’t focus on getting them exclusively. Looks carefully at your distribution and who you are selling too. Distribution is no longer “core” or “not core.” Each new account needs to be reviewed separately for its fit with your customer base and brand positioning. You want to avoid the broad fashion industry, where you’re a small fish in a huge pond and where the customers, even if they know your brand, won’t know your story and what makes you legitimate. They may not even care.

Change your thinking a bit so you feel it’s okay for a retailer to sell out of your product and you have to tell him there’s no more right now. There’s nothing a retailer wants more than a product that sold well at full margin that he can’t get any more of. Let the consumers discover that your product is kind of exclusive and communicate that at the speed of light to their friends. Bet you won’t have to spend quite so much on advertising and promotion, your brand will be stronger, your gross margin higher, and disputes between brand and retailer fewer. There are other benefits as well.

This isn’t as easy as I make it sound in a couple of paragraphs, but I’m pretty certain it’s worth your consideration in a week economy and highly competitive market where most of your competitive advantage comes from a brand story and positioning rather than product differentiation.

I’m suggesting you could make more money with less risk. That has to be at least worth thinking about.

If you want a copy of the power point I presented at the IASC conference, let me know.