MARKET WATCH: Why Retailers Book a Brand
ADMIN
- February 16 2009
- 1,369 views
- 18 comments
What we have here is the most incredible blinding glimpse of the obvious I’ve ever seen. Snowboard Canada Business, in their latest issue, did what I guess is their annual survey of 65 tastemaker independent leading Canadian specialty snowboard and skate shops (no surf shops surveyed- I’m thinking there might not be many in Canada). One of the questions they asked was, “When determining your bookings, what is the leading factor in your decision?”
83.9% of the snowboard shops said “Last year’s sell-through.” 0% said pricing was the leading factor. Other choices were relationship with the rep (3.2%), product quality (6.5%), and hype (customer requests), also 6.5%.
on the skate shop side, things weren’t quite so overwhelming, with “only” 43.8% picking last year’s sell-through. Pricing came in at 9.4%. Relationship with the rep was 12.5% and product quality, 3.1%. Hype was 31.3%.
The term “last year’s sell-through” has a different meaning in snow than in skate retailing and I believe that explains why the skate number isn’t higher. Still, if you accept the results of the survey and believe, especially in snow, that sell through is far and away the key factor in a retailer’s brand selection, then there are some obvious conclusions and action items for brands that flow from that.
• Except in the very short run, you’re better off not forcing growth on a retailer that they can’t manage.
• At some point in the expansion of your distribution, you are making an explicit decision to lose some sales or sales opportunities in specialty shops. Maybe that’s the right decision for you, but understand that you are making it.
• Your sale force’s job isn’t so much as to sell as to make sure there’s sell through. Then the selling will take care of itself.
• If sell through sucks, all the advertising and promotion in the world won’t matter. If sell through is good, you won’t have to do near as much of it.
• If there is a sell through problem, deal with it early, quickly and cooperatively if the account matters to you.
• Consider focusing on gross profit rather than sales- yours and the shop’s.
• Be cautious in designing programs that encourage shops to buy more than they can sell well.
There shouldn’t be anything particularly surprising to any of this, but that 87.9% number caught my attention. I thought there might be some value in stating what should be obvious.
Jeff Harbaugh is a consultant for the action sports industry and works with companies to identify and focus on critical business issues and opportunities fundamental to the bottom line. For more information, visit www.jeffharbaugh.com.
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February 16th, 2009 at 8:33 am
Jeff, can you explain more about what you mean when you say, “If sell through sucks, all the advertising and promotion in the world won’t matter.” Advertising and other promotional efforts are generally considered activities that have the ability to increase sell through by affecting the demand side of the equation.
February 16th, 2009 at 9:11 am
I’d believe that. I would be interested in who the 89 stores were, which like almost all the core shops in Canada, Actually I didn’t even think we had 89. Ya and surf probably like 10 shops.
I know big shops on the snow side almost always go by sell thru. This makes it very hard to open up new price points and categories because they are so reliant on the facts that they don’t want to take a chance, combine that with a Rep that is on auto pilot and it gets to be kind of repetitive year after year a make it very hard to grow a brand.
February 16th, 2009 at 9:13 am
Jeff,
Another solid hit, thanks. I’ll be passing this article on to my clients for sure, as it reiterates my position.
In regards to “sell-through” Snow vs Skate: Do you take that to be based on the fact that Retailers have to pre-book /commit to inventory with a finite selling window, vs Skate with a smaller buy in/longer sell through period?
Hype in Skate v Snow, I completely understand, but what is most interesting is the impact the rep has. I would have thought it would have been much higher importance in Snow. To what do you attribute to this?
February 16th, 2009 at 9:18 am
Cary,
Who was it that said, “Half of my advertising budget is wasted- I just don’t know which half.”
I mean a couple of things.
First, if sell through sucks and you’re doing a pile of advertising and promotion, you’re probably wasting a bunch of money and your programs need revamping at best.
Second, you advertise to creat some awareness and points of differention (whether they really exist or not) for your product. If the product is distributed everywhere, is heavily discounted, your retailers can’t make money on it, and it is really more or less the same as your competitors product, then advertising and promotion can be no more than a temporary salve on an open wound.
Third, I believe that if key retailers are behind your product and it is moving well for them at good margins, then you don’t have to advertise and promote as much and what you do will be more effective. Essentially, the retailers will do some of it for you.
Fourth, in this environment, I would be focused more on margin and sell through than on total sales (though of course how you do this would vary by company and the devil, as always, is in the details). Billabong says they have decided not to participate *(too much) in the ongoing discounting and to try and preserve brand equity. That will cost them some sales. But it may help them preserve their brand equity and perhaps some loyalty from retailers if they are also cautious with distribution. How will it work out for their bottom line? I don’t know. And we really won’t know for a couple of years.
Thanks for a good question.
J.
February 16th, 2009 at 9:25 am
bhawk,
There’s never a survey where I’m completely satisfied with the methodology and who they include or don’t, and I’m sure this one is no exception. I don’t know exactly which stores they surveyed. No surf shops as far as I know. The survey was only snow and skate.
I wish next year they’d measure somehow not just sell through, but margin. Anybody can sell everything if they discount it enough. Reps on auto-pilot- yep. I’ve always thought that a smart person could build themselves a really good business as a rep in a few years if they had some patience and put in the hours.
Thanks,
J.
February 16th, 2009 at 9:32 am
Beau,
Yes, I think the difference is that snow has the single selling season and skate, while it may change with weather, is not quite so single season. Though more in Canada than the US I’d guess.
I would expect the rep to be more important in snow because of only one season and one order cycle. Also, theoretically at least, there’s more product change from year to year in snow and that requires some retailer education. I expect to see some more product change in skate as well, but skate is never in the “now or never” selling mode. And as I understand it, most skate decks are sold either directly by the company or by retailers anyway. So the role of the rep is just smaller.
Thanks,
J.
February 16th, 2009 at 9:33 am
Cary,
For unknown reasons, my reply to you is further down this page. Didn’t want you to feel ignored.
J.
February 16th, 2009 at 9:52 am
Hi JEFF
There is surf shop’s I am one of them http://www.dacanesurfshop.com you gave me some good advice about write downs , just to get ride of them and guess what
it worked , allot of the times the answers are right in front of us but we are to blind to see it, thanks for help
enjoy the writing
I am thinking about writing a book about retail in Canada
February 16th, 2009 at 10:04 am
It’s frustrating from the product development side, because the product ends up being more about price then style. So the rep doesn’t want to push the higher end stuff, because it might take away from their bread and butter. The buyers never want to see it because they only want to see the price points based on their sell thru. So either the rep never wants to take the higher end stuff out of the bag or they never even gets the chance to. Seems like the sell thru report takes the work out of selling. So that’s why I found it interesting that the rep relationship was low on the list. That was something I was always very curious about, hint, hint.
February 16th, 2009 at 10:05 am
Lance,
Thought there must be a few surf shops ups there.
It’s much easier for me to tell you to get rid of your old inventory when it isn’t MY old inventory and isn’t looking me in the face. Glad it worked out.
J.
February 16th, 2009 at 1:40 pm
I think sbcsurf.com is doing research on this there is around 10 but they would know better
good info enjoy it
thanks
February 16th, 2009 at 5:13 pm
bhawk,
Give a lack of meaningful product differentiation, I guess the sell through report might tend to be a major determinant of what’s bought. But then you have to ask why that high end product isn’t of interest. The answer is that the consumer doesn’t see any reason to buy it. I can imagine in a given shop they don’t see it, but overall if there’s a real reason to buy it and spend the money, they’ll find it. Look at the Mervin product this year.
I have never spent any time calling on shops with a rep and I’d love to do that some time.
thanks,
J.
February 17th, 2009 at 9:21 am
Hi Jeff , Love your insights as always. Thought you should know before you quote them (too much) that Billabong must not count S.M.U. product as part of their line price hold . Tiffany just reported on her website that she found 9.99 jkts from Billabong reg . 49.99 in Pac Sun Value stores. Interesting !
February 17th, 2009 at 9:45 am
Well I’m talking soft goods. The high price points are budgeted from the brands that had good sell thru in the previous season. You could have the best style that kills it, but if your brand was not at the price point in the previous season and the rep isn’t willing to fight to put it their well then ur screwed.
February 17th, 2009 at 9:50 am
Also in Canada u have to play with the majors to stay alive and in soft goods and accessories, there are two selling features big box shops look for, either the price sell it or the brand. Because they don’t want staff wasting time selling accessoires when they got hardgoods to push on a busy Saturday. Ya sure, the small mom/pop shop would be all over it but there just isn’t enough players to meet the mins. So unless you can get the majors in the game everybody loses. Oh Canada, u can suck my ****.
February 17th, 2009 at 3:49 pm
Erin,
Let’s be careful and not generalize too much from one piece of anecdotal evidence. I didn’t say Billabong wasn’t doing any discounting or creative moving of slow inventory. Just that they were trying to do less of it than others. Maybe what I should have made clear is that I was reporting what they said they would do- I don’t know what they are actually doing. But I’m guessing there’s no brand that hasn’t done some level of discounting in this environment.
Thanks for the info!
J.
February 17th, 2009 at 6:00 pm
Jeff ; Your’s is my favorite column here , just did not want you to get caught with your “foot in mouth” by the haters here . My concern was with your facts not Billabong or their pricing. Don’t care about that. Cool girls stuff though , really cute.
February 18th, 2009 at 1:00 pm
Erin,
Okay, thanks for the clarification. I don’t mind having my foot in my mouth from time to time if it generates a good discussion on the relevant business issues. Most of the time, there’s not one “right” answer and as long as the comments are well thought out, we all win.
J.