Mavens of merchandise

Nov 01, 2006 10:30 PM  By

The real guts and glory of a multichannel commerce business lies in its merchandising mix. Whether a company sells computer software or industrial hardware, flowers or furniture, merchants have the same goal in mind: to find the optimal mix of distinctive products at the best price. Multichannel Merchant’s Heather Retzlaff caught up with executives at several multichannel firms to get their take on the challenges, hows, and whys of merchandising.

NATHALIE TURNER is director of marketing and vendor relations for Wayside Technology Group, a Shrewsbury, NJ-based distributor of software for engineers and other computer professionals.

How far in advance do you source product? Sourcing new products is a continuous process here. We have a pretty quick turnaround when it comes to reseller contracts and SKU building, so the process, depending on the vendor, takes anywhere between two weeks and two months on average.

How much new product do you usually aim for? We are continuously looking to add innovative products to our offerings. We do not have a specific goal for adding a certain amount of new product in any given month.

What would you say are some of your better sources for merchandising? And have your sourcing methods changed because of the Internet? We use a number of methods to source new products. We use trade publications (both print and electronic) and recommendations from our technical staff, and we review sales reports to see what types of products are selling well. Then we look for more products in that category and develop partnerships with the vendors that produce that type of software product. We also use a keyword search engine report that identifies search terms [entered by Website visitors for which results were] not found. Also, we typically get many vendors seeking us out for representation and partnership.

The Internet has greatly assisted us not only in identifying potential vendors but also in researching their respective tools to determine whether their product offering would fit our business model.

What sort of analysis do you use to gauge merchandise performance and to decide which new products and categories to pursue? Revenue by product and by category is the way we measure merchandise performance. If there’s a trend toward more sales [of a particular product], we tend to focus on products within that same category to pursue.

What percentage of your product is exclusive? A small percentage is exclusive. Where we get more exclusivity is through special promotions that we are able to offer to our customer base.

What is your most pressing merchandising-related concern? I think it would be to find the next big product line first — before the competition. Our customer base is very in tune with new technology — they are pioneers and early adopters. We want to offer them what they want/need as soon as they realize they want/need it!

What would you say is your best merchandising success? One of the top successes is the partnership we have with publishers like [visualization software supplier] VMware — a discovery made and a partnership forged before the technology was well known. We were an early partner and continued to work with them as they grew.

We began by selling VMware Workstation to our developer customer base. Then we would go back into the buyer database and offer higher-level enterprise products and offerings to build on the initial workstation sale. As a result, it’s our top product line, and we’ve added VMware services to our growing VMware product offerings.

MATTHEW K. SMITH is president/chief operating officer of West Palm Beach, FL-based Shoes for Crews, a manufacturer/marketer of slip-resistant footwear for food-service, healthcare, hospitality, and industrial workers.

How do you determine initial forecasting for new products? We survey our key corporate customers with photos or samples of new footwear styles and designs. We also monitor the footwear styling trends in the industry by visiting shopping centers all over the country and looking at a lot of feet. Another thing we do is survey our 200 corporate employees to gauge their reactions to new styles. When there’s an upsurge in excitement from all of these sources, we’re pretty sure that we have a winner. But nothing’s a sure thing.

How much new product do you usually aim for? We aim to introduce about three or four new footwear styles every four to five months. Since we target different industries, we have many different audiences. But we pride ourselves in making attractive slip-resistant footwear styles that reduce employee slips and falls in the workplace and can be worn on the weekends as well. Fresh product is important to keep the corporate programs exciting.

What sort of analysis do you use to gauge merchandise performance and decide which new products and categories to pursue? We have a dedicated inventory specialist who monitors product performance and industry levels daily. We use square-inch analysis for catalogs and industry-specific sales trends to decide the mix for our many customized, company-specific mailing pieces and intranet sites.

What would you say are some of your better sources for merchandising? We manufacture all of our own exclusive slip-resistant footwear styles overseas, and our sources have been consistent for the last 20 years.

What percentage of your product is exclusive? All of it. Shoes for Crews’ slip-resistant footwear utilizes exclusive outsole technology to grip wet and greasy floors with amazing traction. No other footwear company has this patented technology. Plus, if any corporate customer’s employee has a slip-and-fall accident, Shoes for Crews offers an exclusive $5,000 slip-and-fall accident warranty that reimburses a company for the cost of the accident. These factors ensure that our exclusive product line is our brand.

How do you deal with vendors creating knock-offs? Our technology is “a secret recipe.” Our competitors have been trying to knock it off for years, but to no avail. We can just try to keep improving our slip-resistant performance.

Does the merchandising strategy for your Website differ from that of your print catalog? We sell the same styles on our Website and in our print catalogs. We merchandise our best-sellers on the home page of the site, much like we use the best page spreads for these styles in our catalog.

What is your most pressing merchandising-related concern? The main concern is the pressure to always create new and exciting styles in time for the scheduled catalog drop. We don’t like to hold up the catalog drops for a new style.

What would you say is your greatest merchandising success? I would say it was our MightyMat Slip-Resistant Floor Mat. It was actually a suggestion from one of our supermarket customers, who said, “Wow, we absolutely love your slip-resistant shoes. Why don’t you make a really big shoe outsole that we could use as a slip-resistant floor mat for the delis and bakeries?” This ended up being a huge success, and we’re just now rolling out MightyMats to every single Starbucks in the U.S.

SHERYL GOLDFEDER is director of marketing and vendor relations of Torrance, CA-based Promo Direct, which sells promotional products.

How do you determine initial forecasting for new products? We base it on revenue for similar items that are doing well and if we have several requests from our customers for a certain item or items. Supplier feedback is also crucial in knowing the success they have had with a new item. We don’t add items without a proven sales history.

How much new product do you usually aim for? Fifteen percent to 20%.

What would you say are some of your better sources for merchandising? I source based on customer demand, feedback from my preferred suppliers on their hot-selling items, and watching various TV programs geared toward our diversified customer clientele. I stay aware of the trends and also follow my instincts. If I am looking for an item and have exhausted all other possibilities, I will then look to the Internet.

What sort of analysis do you use to gauge merchandise performance and decide which new products and categories to pursue? I follow our monthly sales reports and gauge sales performance that way, as well as track how many repeat orders we receive on the item. We have our core categories that consistently do well for us, and we enhance those with new products.

What do you expect from your vendors in terms of discounts and advertising allowances? We have a unique paid-placement program with catalog slots that suppliers buy and own for the entire year. Our catalog has been sold out for the last two years and is sold out for 2007. Pricing must always be discounted along with rebate incentives. Other suppliers work with us on additional advertising projects such as specialized catalogs and fliers that showcase their product line.

How do you decide what goes in the catalog vs. the Website? All items in our catalog are featured on our Website and vice versa.

What is your most pressing merchandising-related concern? Out-of-stock issues with suppliers. Once our catalogs are published, they are mailed across the United States to our customer database. We can easily lose a customer, and especially a first-time customer, if they call in for the item and our supplier is out of stock on the item or a specific color.

What would you say has been your greatest merchandising success? Our custom awareness bracelets. I had been trying to find the bracelets for a couple of months and requesting samples from different suppliers. Their lead times were too long, or I did not like the quality. I then utilized the Internet for sourcing. I refined my search several times, and an ASI [Advertising Specialty Institute] supplier I was not familiar with came up. I called and spoke to the marketing director, and we developed an instant rapport over the phone. I had samples sent overnight, and it was a home run! The bracelets are made of 100% silicone rubber, and the customer’s personalized message is debossed into the rubber so that it’s permanent. Specific colors are worn for different themes such as supporting our troops, cancer awareness, charity events, advertising a company name, or whatever the customer wants to convey.

STACEY EDGAR is founder/president of Littleton, CO-based Global Girlfriend, which sells handcrafted fair-trade gifts.

How far in advance do you source? Because all of our items are handmade by women’s nonprofit cooperatives, the process can take longer than what I imagine other retailers deal with. We place orders as much as nine months ahead, depending on the product and the group making the product. We are small, so our quantities are less than 500 units per item — sometimes as low as 40 per item if we are worried it may not sell well. We do have to be careful forecasting our annual budget for inventory because with all of our groups we pay half of the purchase price at the time of the order so that they are able to afford material. These lead times also mean that when we run out, it’s usually out for the season. Our average production time for most products is shorter, though, about 12-14 weeks, and the fastest comes from our U.S. women’s nonprofit enterprise partners, whose products we can restock in a week’s time.

How do you determine initial forecasting for new products? I wish I could tell you we use some really brilliant matrix, but honestly we buy according to what we like, tailoring our ideas according to what our customers have purchased before, and sometimes we buy a little more from a group we know needs the help at that point.

How much new product do you usually aim for? Up to this point, too much. We are learning to keep a constant core and rotate in some new styles seasonally. In the past we felt that we needed to bring almost all new product each season to keep our customers’ interest. We’re learning to find what sells well, what our groups make well, and what can be a classic Global Girlfriend item. We do love to change up most of our handbags, though, as our customers ask us for new styles, and we find they buy them.

What would you say are some of your better sources for merchandising? We are so different in that our sources aren’t everyone’s dream sources: women’s co-ops in third-world countries. Our groups are wonderful, but at times they need a lot of support and technical assistance to bring their goods to market. We spend a lot of time teaching some of the women about quality control especially. We have groups that are easy and others that are challenging for us. But it’s not about which source is the easiest; their development is really our end goal — though we can’t help them unless we can sell goods!

Our sourcing couldn’t happen without the Internet. While we didn’t find our initial artisan partners online when we started four years ago, more and more we find that new groups find us online. We do almost all of our purchasing online, though we do require that samples be shipped to us before we buy; we don’t buy from photos.

What sort of analysis do you use to gauge merchandise performance and decide which new products and categories to pursue? We run monthly and semiannual reports on our best-sellers in each category, best-sellers overall, and net revenue based on categories and individual products. We try to follow those trends in our future orders. We’ve grown our wholesale of organic cotton clothing considerably this year by partnering with Whole Foods Market, so they are a really large driver in molding our apparel into a core product for us.

We are limited somewhat in what our women’s cooperatives have the skills and/or materials to make. We’ll try most anything they make that we think people will like, but what we won’t do is go outside of our mission or groups just to add a category. Apparel, jewelry, and accessories are our best-selling categories by far. Home decor and handmade paper don’t do as well.

What percentage of your product is exclusive? Seventy percent is exclusive and designed by us or for us exclusively by our women artisans. The other 30% are styles or products the groups make and sell to all their customers.

Do you use exclusivity as a branding tool? And what are you doing to ensure that you have exclusive product? Yes, we use exclusivity as a branding tool. It is especially crucial to our wholesale business. But even if someone were to knock off, say, our T-shirt, you could copy the style and even the color, but we are selling the story of the women who make our products and their efforts to escape poverty. That’s what the Global Girlfriend brand says.

How do you deal with vendors creating knock-offs? Again, if all other vendors started practicing fair trade and women didn’t need the help anymore, then our company would have succeeded in a huge way. You can knock off our product and it will be just that, a product. And we’d love to see more large national retailers knock off our concept — or better yet, buy wholesale from us.

Does the merchandising strategy for your Website differ from that of your print catalog? Our catalog is only 24 pages, so it is just a seasonal highlight of what is on the Website. Our Website contains all of our in-stock items, and we use the catalog specifically to drive our customers back to our site. The catalog also gives us a place to give more in-depth stories of our producers, which helps compel people to come back and take a look.

What is your most pressing merchandising-related concern? Learning how to merchandise! As a social worker, not a marketing guru, we do a lot of our merchandising just by feel. We’re still learning. Our biggest concern is usually, will the actual shipment make it before the catalog drops!

MICHAEL KASPROWITZ is senior vice president of Westbury, NY-based flowers and gifts merchant 1-800-Flowers.com.

How far in advance do you source merchandise? Currently we source our products about 9-12 months out. But we are able to quickly react and incorporate new items into our assortments if special opportunities present themselves.

How do you determine initial forecasting for new products? We do our best to compare a similar item at a similar retail price. We then factor in trending and potential marketing support that will help drive sales to finalize our forecast.

How much new product do you usually aim for? Creativity and innovation drive our sales, and we always aim for 25%-30% of our product line to be new.

What would you say are some of your better sources for merchandising? We continuously shop the market and work with our vendors to understand what the new hot trends are and how we might be able to apply them to our business. We also monitor competitors regularly, as well as fashion, colors, etc.

What sort of analysis do you use to gauge merchandise performance and decide which new products and categories to pursue? When we are looking at new products and categories for our business, we analyze the product’s revenue potential and margin performance as well as current trends in the marketplace.

In terms of exclusivity and using it as a branding tool, what are you doing to ensure that you have exclusive product? On internal designs, those that do not involve hard goods such as vases, we file for design patents and trademarks to ensure that they are exclusive to 1-800-Flowers.com. We will often offer exclusive floral varieties, in which a farm actually grows the floral just for us. We also have exclusivity agreements with some of our vendor partners. For our bundled products, those in which we pair flowers with a branded vase from one of our merchandise partners such as Lenox or Waterford, we know that the combined items are exclusive to us.

What is your merchandising strategy for your Website? We merchandise the Website based on profit per pixel. Every image has a value and needs to produce revenue and hit certain margin targets. We sell the same products on the Web and in the catalog.

How do you decide what goes in the catalog vs. the Website? As space in our catalog is limited, we work closely with the marketing team on the messaging and themes. We then select products for the catalog that are best-sellers and that will also support the theme or specific holiday.

What is your most pressing merchandising-related concern? Our most pressing merchandising concern is maintaining an “always in stock” position on hot items. Sometimes on brand-new items like our expert floral designer products, it’s hard to predict the demand and maintain that in-stock position.