Ledyard, CT – Boosting profitability was the theme of the session, “Putting the Odds in Your Favor: Measuring to Manage; Measuring to Make Money,” here at the New England Mail Order Association Fall Conference at the Foxwoods Resort Casino on Sept. 17.
Larry Shaw, CEO of Lancelot Direct, hosted the session accompanied by Curt Barry, president of F. Curtis Barry & Co., a consultancy specializing in multichannel operations and fulfillment; Nick Parrinelli, senior vice president of multititle mailer Potpourri Group; and Chris Topping, general manager of the Uno Alla Volta and Cooking Enthusiast brands.
On the merchandising side, Parrinelli spoke about the “fully loaded item profitability” approach to gauging key metrics. Items to watch include product demand, landing costs, returns, shipping and handling, and fulfillment costs. “This is not meant to be a financial calculation,” Parrinelli said. “It’s meant to create a ranking for your products.”
Returns need to be considered, Parrinelli added, with return rates ranging from 3%-5% for gifts and as high as 35% for apparel. Fulfillment costs – such as pick and pack labor, packaging, and call center service — have to be figured because “very often merchants ignore this point.”
Other costs to be figured include freight out costs and variable marketing costs such as printing and paper. Potpourri creates reports based on all of these metrics based on season, contribution amount, exclusive items vs. market, and import vs. export.
On the marketing side, Topping discussed variable profit contribution and used the same metrics from the merchandising. List your segments, he explained, and understand where you’re “generating your best production from. Have a diligent matchback program. That’s absolutely critical.”
What’s more, Topping said to examine long-term value. Diligent LTV reporting, he said, looks at different points of a marketing campaign across all channels. “You really want to manage your business through contribution,” he said.
Barry talked about the “fully loaded cost-per-order” approach, including aspects such as direct and indirect labor, occupancy, and packaging materials. “It used to be a much smaller cost,” Barry said. He doesn’t compute shipping costs in cost per order because those costs are distorted for different businesses.
Executing a comparative segment performance of your business is critical, Shaw said. When doing this, he said, exclude circulation levels and include cross channel matchbacks. “Do an average performance trend between like for like segments over the same period of time,” he explained.
The quality of metrics matters, Shaw said. “Less is more.” Tie metrics to profitability whenever possible, he said. “Good metrics and identifying trends that span seasons lead to actions. Don’t wait for perfection to get started.”