Kevin Hillstrom: MineThatData

Yesterday we took a step back, looking at the business from a 30,000 foot view. We clearly observed that there was a new merchandise problem over the past two years.

I drilled down one level ... there are four categories that the Merchandising Team appear to have faith in.

Apparel Tops / Apparel Bottoms / Outside / Decorations were less than half the business three years ago ... today they're more than 60% of the business. Demand isn't necessarily stable, but it isn't bad. Existing items are stable, new items are down about $900,000 from two years ago.

Everything else?

Wow.

New items are down 45% from just two years ago. New item demand is down a whopping 70% from two years ago!!!!! In the past year, existing item demand is down a million dollars.

Tomorrow we'll apply this 15,000 foot level view of the business to customer response. It's obvious the Merchandising Team is doing something on purpose ... are customers impacted (hint - yes, they're impacted).

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It's common to run across a Marketing Team that is persecuted. "They don't know what they're doing!!" And yes, there are a ton of marketing teams that have absolutely no clue what they're doing ... that's life.

But there are marketing teams that are being persecuted ... they're blamed for problems that they have nothing to do with. Maybe the website has a 2.8% conversion rate and it was 3.3% last year ... "the marketing team is sending us terrible traffic". The Marketing Team blames Google & Facebook. Everybody is pointing at somebody.

Somebody should be pointing at the data. Here's the high level view of Beans ... at 30,000 feet, it is easy to see this isn't a marketing problem.

The business was at $27.4 million two years ago ... it is at $20.8 million today. Yes, there is a problem.

A simple cut of the data by new item sales vs. existing item sales shows us there is a merchandising problem.

• New Items: Decreased by $6.5 million.
• Existing Items: Decreased by $0.1 million.

        

If a business discontinues too many existing items (or fails to introduce sufficient quantities of new items), we should be able to see the problem manifest via sales declines. Right?

Here is a scatter plot of number of items sold each year (>= $1,000) on the x-axis ... the y-axis shows us annual sales per item.

The three outliers on the bottom left of the chart? Those represent the past three months when this brand also decided to not spend money acquiring new customers, compounding their own challenges.

Otherwise, there's a clear relationship. Every additional item offered yields an ever-decreasing rate of demand/sales.

Is this good or bad? It almost looks bad.

Let's perform a multiplication.

• "Beans" generates $9,800 per item when it sells 2,700 items = $26.5 million.
• "Beans" generates $12,750 per item when it sells 1,900 items = $24.2 million.

        

The following bar chart clearly illustrates a problem.

I depicted the number of styles (i.e. t-shirt, not white t-shirt, not XL white t-shirt, just the style level) with annual sales >= $1,000.

There are two dates that are problematic in the image.

• End of December 2023.
• End of December 2024.

        

I'll receive an email from one of you ... my first thought is "here comes a new project!".

More often than not, it's an email about a fictional character in a months-long case study. A character named Sloane Montgomery. She's the Chief Merchandising Officer at the fictional company being analyzed. She doesn't hold back. She says what she wants to say, nobody in Human Resources is going to restrain her.

It seems like some of you work with this individual.

Spend any amount of time on LinkedIn and you'll read dozens of hopelessly simple stories about how "brands" can improve. Read the comments ... professionals saying that something Bed Bath & Beyond did is a "cautionary tale". Sure it is.

Have you ever tried to change something that a company does, only to have an individual get in your way, and the individual is somebody you cannot control? The person doesn't report to you. The person is lawless, arrogant, craves power, has power.

The person has power.

Often, the person is not the CEO. I once worked with a Manager-level individual who could stop any initiative cold dead. He'd just say "we're not working on that" and that was it, nobody worked on it. When the person retired, progress happened.

I once worked with the President of a Merchandise Division. This person was not smart. This person was powerful. This person posted substandard results for years, but was a golden child, adored by Leadership. This person used up staff. This person stole ideas.

Most of you work at "brands" that know what to do, that know what must be done. I've yet to work with a catalog brand that knows the brand should have moved into the future twenty years ago but failed to do so ... and is now trapped by the customer who shops the catalog, the merchandise preferred by a customer who bought from catalogs in 1989, and the vendors who are dependent on the brand to keep spending money on catalogs. The employees know they need to change. And yet? Change doesn't happen. Because somebody like Sloane Montgomery has power, and won't let change happen.

Your job, of course, is to make change happen.

What does Sloane Montgomery (or your version of Sloane Montgomery) need to look good?

What is Sloane Montgomery afraid of?

What motivates Sloane Montgomery?

What motivates you?

Is there an intersection between what motivates Sloane Montgomery and what motivates you?

Is the person simply corrupt / corrupted? If so, it might be time for you to work somewhere else.

Does the person have morals? If so, there is a solution. It will be your job to identify the solution.

You won't find the solution on LinkedIn. Your problem is a local problem (a unique individual with unique personality traits) ... the stuff people share on LinkedIn are global problems with pithy solutions.

There's a reason many of you email me about this fictional individual.

Do you work with somebody comparable to Sloane Montgomery? If so, email me your story (kevinh@minethatdata.com) ... how did you get break down the barrier between you and the individual?