Kevin Hillstrom: MineThatData

Yes, You Need To Experiment With Merchandise

Here's what I frequently see. A client launches new items in 2019 ... a class of items. I then measure the sales of these items by year thereafter.

2019: $25,000,000.
2020: $40,000,000.
2021: $31,000,000.
2022: $23,000,000.
2023: $16,000,000.
2024: $10,000,000.
2025: $7,000,000.

Not only is this what I frequently see, this is just the way things work for the vast majority of clients. It's just how business works.

This is why you have to constantly replenish your assortment with newness ... why you must constantly experiment with new product lines or extensions within your existing product categories. You have no choice.

Put on your lab coat, grab a beaker, and start experimenting.

Two things.

1 - It's ok to have no idea what you're doing. You're experimenting. Try things. Something is going to work. In no way am I saying you should be reckless. Don't discontinue stuff that works great to fund your experiments. Nope. I see it all the time in my work. Be smart about keeping the stuff that works and squeezing every last penny of profit from it.

2 - For the marketers in the audience, it's your job to amplify the experiments performed by your merchants. Support your co-workers. Give their new items exposure in email, on the socials, on your home page.

It's time to start experimenting.

Now What?

Years ago, an ecommerce client stopped growing.

Of course, I could see it coming. For years I told them that they were growing because they could acquire customers at a reasonable cost. For years I told them that growth would end in a few years.

I'm not sure this client believed my words, my analyses, my forecasts. They were growing.

Months before the forecasts suggested the end of growth was near, their merchandise productivity dipped marginally ... just 5% (+/-). That was it. Growth stopped.

The Executive asked me a question.

"Now what?"

Yeah, now what?

The time to perform your lab experiments is when your business is thriving. That's when you introduce a new product line. That's when you create a new brand out of thin air. That's when you attempt to sell in a marketplace to see what happens. That's when you personalize your email marketing campaigns. That's when you explore AI and Influencers and TikTok, you name it. You experiment. You try things knowing that the majority of what you try will fail ... it's an experiment, it's ok to fail.

But you do that when you have a multi-year cushion before growth stops.

The second best time to begin your lab experiments is tomorrow. Maybe business is awful. So what? If you don't start your experiments tomorrow, how are you ever going to dig out of a challenging situation.

The second half of 2026 requires experimentation. If you want to thrive in 2027-2028, you have to identify tactics that work today so you can capitalize on them tomorrow.

Also - it's ok to fail. You'll need to fail a lot to identify a handful of successes. Don't listen to those who paralyze you with ROAS metrics and dashboards with little red stop signs next to your experiments.

Reminded Of This Grumpy Gem From 2015 And The Forced Transition To Loyal Buyers

I looked at the data.

Prospecting Response Down Significantly Post-COVID.
Ad-Costs Up 25% In The Past Three Years.
Huge Circulation Cuts Among Lapsed Buyers and Prospects.
Dire New/Reactivated Buyer Counts After The Circulation Cuts.

The response to this problem is obvious (digital marketing). It was obvious in 2005. It was obvious back in 2015. It's obvious today. Doesn't matter. I'll hop on a video conference and it is clear that to the people on the other end of the computer the answer is not obvious.

During a particularly moody time as a Consultant (2015) I wrote this grumpy treatise (click here). As Millennials might say, it was "hella-popular" back in the day.

2015 was an interesting time ... the structural element of old-school cataloging (i.e. dying co-ops) altered the business model. Smart catalogers were well into their move into digital marketing at that time ... structural changes did not mean much to them. For others? Private Equity came calling.

2026 is so darn similar, but for different reasons. Now it is paper / printing / postage that represent the existential threat. Your own business partners are the ones that are converting the marketing channel to one that will only apply to loyal buyers in the future. This time Private Equity isn't nearly as interested in this business model. You can guess why.

Loyal Buyers

An acquaintance told me that his business was supporting the bankrupt/resurrected Saks empire with catalogs. Retail Dive boldly proclaimed that Nordstrom has their biggest Anniversary catalog ever. Amazon mails a catalog.

What are the common threads across that paragraph?

Huge Brands.
Big Budgets.
Loyal Buyers.

Catalog marketing certainly works among Baby Boomers, a well documented fact. If it works at all among younger customers (not documented at all for good reason), it works among the most loyal buyers.

If there is a future in catalog marketing, it is with Loyal Buyers. They will be the only segment of customers who produce enough revenue to overcome the prohibitive costs imposed upon you by the paper / printing / postage folks.

Perform a little thought experiment for me. Pretend your productivity improves by 5% over the next three years. Assume that your ad costs increase by another 25%. Run a p&l on each segment. Which segments "work"? Which segments need to be cut?

Works = Loyal Buyers.
Doesn't Work = Everybody Else.

In 2015 structural problems with response (i.e. co-ops) led to a catalog crisis that Private Equity capitalized on.

In 2026 structural problems with ad costs (paper / printing / postage) are leading to a crisis and Private Equity isn't as interested as in the past. This means catalog marketing will shift to a Loyal Buyer marketing channel to overcome high ad costs. Your job is to have a plan for how you will acquire new customers in this framework.

I realize many readers don't want to hear that message, especially readers in the vendor world. You're in paper, you've been contracting for a decade or more, you need to feed your family. You need to convince your current customer base to spend more for the exact same product they've always purchased. If your current customer base doesn't spend more? Bad for you. If your current customer base spends more? Bad for your current customer base.

This is a different structural problem than the one in 2015 (when co-ops were failing to produce responsive names and clients began to struggle to acquire new customers). The 2015 structural problem could easily be overcome with digital marketing for new customers and catalog marketing (as part of a portfolio - big for some, small for most) for existing customers.

The 2026 structural problem? Much worse. We're not going to beat it.

Dover Saddlery

There are plenty of articles and obituaries ... this is just one of them ... and here is a video from Reddit.

Do you remember? Dover Saddlery was a publicly traded brand in 2015 with annual sales at or around $100,000,000 (likely 40% or 50% larger today). From there, some believe it became more a financial vehicle and less an equestrian brand within the private equity world.

From 2013 through about 2019, I did A TON of work for Private Equity, evaluating catalog brands. I have not performed one single catalog project for Private Equity post-COVID. There's a reason for that. Following the COVID-bump (mid-2021), this asset class contracted and suffered. A scan of the internet suggests intense anger toward Private Equity. Warranted. There needs to be balance. "Traditional" brands with a catalog heritage simply have not changed fast enough, and when they do (cough cough Orvis) they're beaten to a pulp by an incandescent and struggling former industry. Seriously ... ask a long-term catalog professional to describe feelings toward Orvis ... be ready to receive some serious vibes.

A few weeks ago I reviewed a list of former clients from 2007 - 2025. At least a third are out of business! Gone. My God. I get it ... #capitalism ... but it doesn't have to be this way.

I have so many clients with catalog heritage that have come out the other end. They've taken risks, they've thrown away elements of the past, they've accepted the future. They persist. They realized they sell something customers want/need, and they focused on what they sell, not "how" they sell it.

They have a story to tell, and they do a fabulous job of telling the story.

Private Equity tells a financial story. Big difference from a merchandise/brand story. Load up a brand with debt, fail to tell a compelling enough merchandise/brand story to cover the cost of the debt, and adhere to tradition ... that's trouble. Ask Eddie Bauer.

I can only imagine the competitive advantage some are exploring because of this outcome.

"I Just Don't Believe You"

That's how an Executive once responded when discussing the results of a mail/holdout test.

The results were really straightforward. Take an average of the twelve-month buyer file, select 50,000 customers randomly, then resample the group of 50,000 into two groups ... one receives the catalog, one does not receive it. In the six weeks the catalog was active, I measured total demand spent by the mailed group, I measured total demand spent by the control group.

$6.00 spent by the mailed group.
$4.00 spent by the control group.
$6.00 - $4.00 = $2.00 of incremental demand.
Organic Percentage = $4.00 / $6.00 = 67%.
Profit = $2.00 * 0.40 - $0.90 = ($0.10).
To The Twelve-Month Buyer File, On Average, The Mailing Was Unprofitable.

It was the last bullet-point that shook the Executive. The very thought that the heart and soul of his customer base was being managed in an unprofitable manner by ... the Executive himself ... the fact that the Executive was actually harming his business ... was unacceptable.

So he told the room ... "I just don't believe you".

The room moved forward, harming the business.

If you are unwilling to believe the most simple level of scientific inquiry, I'm sorry, you need to reflect inward.

Do you want to hear a story about a room deciding that they finally believed "facts"?

It's 2006 at Nordstrom. When we executed a mail/holdout test, we could measure sales on our proprietary credit card within Nordstrom ... and at other brands. We could see if customers used the Nordstrom card to spend more at Neiman Marcus, or Saks, or Amazon. Was our catalog taking business from Neiman Marcus or Saks? No. It didn't impact those brands, brands we believed we competed with.

Amazon? In 2006?

$10.00 spent at Amazon in the Mailed Group.
$7.00 spent at Amazon in the Control Group.
$3.00 per customer incrementally driven to Amazon.
15,000 credit customers per mail and holdout group.
Results were easily statistically significant.

Want to know something even worse? Within the mail and holdout groups.

$25.00 spent at Nordstrom in the Mailed Group.
$23.00 spent at Nordstrom in the Control Group.
$2.00 per customer incrementally driven to Nordstrom.
15,000 credit customers per mail and holdout group.
Results were easily statistically significant.

Do you see what happened there?

Our brand-centric catalog at Nordstrom, in 2006 (we ended the ecommerce catalog program in mid-2005), DROVE MORE BUSINESS TO AMAZON THAN TO NORDSTROM. Imagine if that was happening to most catalog-centric brands (hint - it probably was)?

In the my early consulting days (2007 - 2012), I'd share this fact with catalog clients. The Executives would just sit there, dumbfounded, thinking about the consequences of driving more business to Amazon than to their own brand. Then they'd move on, pretending they never heard what I shared, because having to face the data was just a bit too much for the recipient of the message to accept.

However, when I shared this fact at Nordstrom in 2006, the data was immediately embraced. Nobody questioned it (though they frequently questioned mail/holdout results). They immediately understood the strategic implications illustrated by the data.

Nordstrom is still here.

Most catalog brands went out of business or were gobbled up by parent companies, thereby losing their identity.

I understand why you don't want to believe mail/holdout results. It's an outcome that requires sober reflection.

I understand why your paper rep doesn't believe the results. They "can't" be allowed to believe them.

I understand why your printer doesn't believe the results. They "can't" be allowed to believe them.

I understand why your boutique agency doesn't believe the results. They "can't" be allowed to believe them.

I understand why so many consultants don't believe the results.

But it doesn't mean the results are wrong.

There's always a group of individuals who chose to not believe data. Modern politics comes to mind. You don't convince people with "more data". You work around them. Because you are reading this, you're willing to accept what your customers are telling you - that's a good thing!