<i>Multichannel Merchant</i> convened a diverse group of 10 presidents and CEOs for a roundtable discussion at the NEMOA Conference, held in Boston on March 14. The list of topics included the economy, the potential impact of a presidential election year, viral videos, the role of the catalog, Amazon, mobile and tablet strategies, corrugated packaging, the need for speed, discounting, and building online communities.
Our roundtable participants were Chris Bradley, CEO of Cuddledown; Paal Gisholt, CEO of SmartPak; Guy van Rooyen, president of Donna Salyers Fabulous Furs; Susan Landay, president and CEO of Trainers Warehouse; Matt Glerum, president of TravelSmith Outfitters; Phyliss Mosca, president of Ulla Popken; Steve Voigt, CEO of King Arthur Flour Co.; Vicki Updike, president of Miles Kimball Co.; Margot Murphy Moore, CEO of 1-800-HOMEOPATHY; and Russ Gaitskill, president and CEO of Garnet Hill.
<i>Multichannel Merchant</i> publisher and chief content director Ellen Shannon and senior writer Jim Tierney moderated this insightful, revelatory and highly entertaining discussion in which participants opened up on a number of critical topics facing the industry.
Challenges in 2012
Top anticipated challenges for this year included the economy, the “paralysis effect” from the presidential election, the need to deliver faster while consumers become less willing to pay shipping charges, fuel prices driving higher costs, and the need for agility and flexibility.
Bradley identified customer acquisition as a continuing challenge: “We have an older, affluent customer. She stopped buying for a couple years and she came back last year. Now it seems like she’s even more sensitive to promotions. We need to offer something to get her to pull the trigger. When we offer something, we get a great response. When we don’t have an offer out there, maybe it’s ho-hum.”
Gaitskill said the multichannel industry is dealing with a tremendous amount of economic uncertainty. “People just don’t know whether to re-engage. If the message is not strong, the response is lukewarm.”
Election Year Impact
With this being a presidential election year, merchants are bracing for the media distraction that, typically, has a negative impact on merchant sales.
“In terms of a challenge for this year, it’s one of those things that, unfortunately, happen every four years, in the second and third quarters. With the media distraction of the election … it makes for a very tough September/October and early November. No matter who wins the election, there’s a nice uptick, but it’s a distraction,” Gaitskill said.
The Amazon Factor
Many merchants are conflicted about their relationship with Amazon, and some wonder what it should be. Merchants tend to pick and choose which products to sell on Amazon, selecting the most distinctive, unique products so as not to lose on any pricing battles.
Gisholt said he heard that about one-third of online purchases start with Amazon. “So that’s tough. They have the Prime (which, among other things, offers customers free two-day shipping on all their orders for $79 a year) going for them. It forces you into a proprietary mode as opposed to just being an online retailer.”
Van Rooyen doesn’t worry about Amazon’s influence, just his own company’s. “The way we deal with it is just owning the product, being innovative, owning the design, being vertical, creating that niche and defending that niche. Amazon is about distribution. Our model is making sure your product is why your customer is coming to you.”
Free Shipping Expectations
Free shipping used to be a special incentive for consumers. Increasingly, it’s nearly become an ordained right in the minds of consumers.
“Last year seemed like the tipping point,” Glerum said of the pressure to offer free shipping.
Updike added that free shipping is definitely a challenge. “We saw the free shipping thing coming for a while. This year it was free shipping plus a discount on the online offers that was the expectation. Free shipping is losing its lift, and you just have to be there.”
Gisholt said his company offers threshold free shipping as its standard business practice, as opposed to an offer. “They’re holding us accountable to say, ‘Figure out a way to make your model work without these shipping fees.’ We decided we’d rather have our prices be honest prices for what the goods cost to make and deliver. We think consumers feel much better paying about $100 for an item and getting free shipping than paying $93 for the item and paying $7 for shipping. They’d rather feel good about getting a product to the extent that your price says something about the quality in the brand.”
The Incredible Discount Mentality
Not unlike free shipping, discount items seem to be something else consumers are almost demanding. And it seems that, for many companies, discount offers are necessary to stimulate initial response to promotions—especially for certain products.
Is it here to stay?
“It’s completely here to say,” Bradley said. “I’m shocked that J.C. Penney would just change and try to say it’s going to move to everyday low prices. I resisted it for 20 years and finally caved and realized they think it’s a deal when it’s on sale. I don’t see that it’s going anywhere.”
Voigt is unsure of the discount mentality: “It’s not clear that a discount off of a high retail always works.”
Gaitkskill noted that if you don’t have compelling product, own a market or have a product that’s distinctive, “you’re forced into competing on price. We’ve found there are products that drive response rates. There’s a way to win on this thing. The way to win is the value story. If you’ve got a brand where quality has always been the hallmark of what you do, as you long as you play up the aspect that you’re not going to reduce the quality of your product in order to do pricing, people kind of get it.”
What Will 2012 Look Like?
It’s no longer possible to make one accurate projection for a full year. Companies need to consider an uncertain economic environment, and fast changing, real-time customer expectations and desires. Many companies are projecting several scenarios and revising those scenarios each quarter.
“I’m not sure asking for a single answer makes sense,” Voigt said. “Maybe two or three scenarios and the likelihood of each of those. Should we be spending any time not being caught flatfooted on too little inventory? What’s the rebound scenario?
Updike said a company’s agility will be very important this year because of the economic uncertainties. “We’re working on that agility—to have it when the customer needs it or change it when something’s not working.”
For Landay, this year could see another avenue opening for her company. “For us, I’m seeing the international market as an opportunity. We’re a small b-to-b company and a niche company. We haven’t saturated our niche, but we’re becoming more known—and I feel like that’s a way to expand more exponentially, especially given the increasing costs of mailing. If we can ship more effectively, I think that can expand our market.”
The Role of the Catalog
The catalog is viewed as a crucial web driver that offers a brand’s voice.
Glerum said, “The role of the catalog is, clearly, extremely important for us. Put the book in the mail. Sales come in. The uncertainty for us is in-home dates. This year we’re experiencing lightning-fast in-home deliveries, which has added some further uncertainty and less productivity.”
Gisholt offered his assessment: “I used to feel that we had to present a more full representation of our offerings in the catalog. Now we’re just trying to go for maximum signal with really exciting, cool product—and we’re being much more explicit about there being a lot more online. I used to worry that that would paralyze the customer—trying to make a decision. But because there’s so much online activity taking place, we’ve sort of made our peace with that, and we’re trying to market the tools we have online in our catalog. We’re trying to use it as a branding piece, an excitement-driving piece.”
Landay pointed to Shutterfly, which had always been “all about online. Now they’re mailing catalogs and they’re working. The catalog is alive and well.”
Murphy Moore said consumers use catalogs as a framework for their relationship: “It’s their talking points before purchasing.”
Mobile and Tablet Strategy
Roundtable participants agreed that tablets offer a tantalizing opportunity because of the excellent customer experience that’s possible when tablets are done right, and because of the engagement level and income levels of the users. How will this play a role for merchants this year and beyond?
Gaitskill said the results of what he considers nontraditional digital media are “very, very good and very intriguing. The engagement, the value. It’s going to be something. We look at the tablet as a desktop replacement. Having a couple of glasses of wine watching television changes the dynamic of purchasing something.”
For the U.S. Postal Service QR code discount that has been offered in the summer, “you really need a mobile optimized site,” Gaitskill added.
Murphy Moore noted one thing that hasn’t been navigated well—the ship-to-alternative-address option. “You can only ship it to yourself.”
Van Rooyen knows the mobile and tablet ambush is coming: “I have an iPad 2 and I already want an iPad3. That generation coming up will be so comfortable with it. It’s going to be fully interactive, part desktop, part mobile. Everything in one, like the magic bullet.”
Everyone agreed that speed and the quality of fulfillment and customer service drive their operations today. It seems that every part of the operations process is being scrutinized for time efficiencies—dock to stock, pick and pack, returns processing, etc. Quality of product, service, packaging, delivery—they are always being reviewed as customer expectations continue to move upward.
“Speed of fulfillment has gotten to be a really big deal,” Gisholt said. “Looking at how late your shipping cutoff can be and how late you’re willing to promise. How you communicate delivery promise online. Deciding which products have an urgent consumer requirement and making sure you don’t sit on orders.”
Van Rooyen’s company has an average order of $185, and he wants all of his shipments to have that “wow” factor when a customer opens it. “How the packages arrive is very important. There’s a certain level of corrugated material, but you see the guys in the fulfillment house trying to stuff as much in this box as possible. You spend all this time and we don’t want to …”
Gisholt interjected, completing van Rooyen’s thought: “… fumble on the 1-yard line!”
He added that his company wants to be fun and friendly and maybe a little weird. “We can’t accept pharmaceuticals for return, by law. So we use fun copy like, ‘As much as we love you, we’re not sure we want to do time for you.’ ’’
Given today’s sophisticated levels of web analytics, customization and personalization, there is an abundance of new and improved choices and opportunities online.
Gisholt pointed to how viral videos can impact a brand. He used the DollarShaveClub.com video as an example. “Four days, 3 million views. They took a pretty damn boring category and created the most brilliant viral video I’ve ever seen.”
Murphy Moore has her own viral video example. Three months ago, NASCAR driver Morgan Shepherd, who at 71 is the oldest driver on the circuit, called 1-800-HOMEOPATHY and said he uses her company’s Leg Cramps products. No one at her company knew who he was. Well, Shepherd created his own YouTube video and now Murphy Moore says people are using the products because Morgan Shepherd does.
“It’s a matter of supporting your consumer and creating your relevance,” Murphy Moore said.
According to Gaitskill, online, in the past two years, has taken on a completely different definition.
“It isn’t just more products online, it’s more content, it’s more community online, it’s more information that helps me with my purchase,” he said. “We really never gave the customers a compelling reason to go online. And we’re trying to redo all our web drivers.”
Adding content online is great, but dedicated customers appear to be keeping up with it as well, Voigt said. “Our generation used to make fun of the kids getting to levels 4 and 5 in video games, but our customers are looking at these websites and they’ve gotten to level 5. They’ve explored all the contents and they’ve gotten there.”
The industry can’t categorize shoppers anymore and, with mobile and tablet technology taking positive steps each day, consumers want it—and they want it now.
Murphy Moore said she’s seen a trend away from preparatory buying: “I looked at it today and I’d like it tomorrow, please. Consumers have a need for instant gratification. There’s no longer that definitive segment where it’s only direct-to-consumer. At this point you’re not a catalog buyer, or only an online buyer, or only an instore buyer. You’re an everything buyer where the price is right, you get the customer service you want and the product you’re searching for.”
Innovative, Unique Merchandise
Competition in the multichannel world can be daunting at times, but Gaitskill is optimistic because it boils down to one major theme: Proficient merchandising.
“Newness helps you on the price thing, trying to drive response,” he said. “Having a product development engine and keeping it running regardless of what’s going on with the level of sales is important and hard to do.”
Building, monitoring and maintaining online communities is fast becoming one of the differentiating factors among multichannel merchants. Video and social media are just two ways merchants can create communities.
Mosca fully supports this, since her company has a constant dialogue with its customers: “There’s something unique about your customers. Every brand has a reason to have a community.”
Bradley, however, said he can’t yet monetize social media for his company: “I’ve pulled some of my people back. I don’t want to focus the company around Facebook.”
Gisholt added that people have a propensity to create communities: “We have an immense opportunity to engage customers really deeply and to have long-term relationships where they will be buying for 10, 15 years.”
Murphy Moore noted that online communities start with the customer. “We can’t build the community. The customers have to build the community. It’s them and not you. It’s all about them. You have to be amenable. You have to listen, you have to adapt, and you have to respond.”