Creators of the board game The Contender: The Game of Presidential Debate raised $140k on Kickstarter but ended up $40k in debt due to inaccurately predicting future sales. This caused them to order more games than they could sell and ultimately caused them to go into the red for some time.
So how do you predict sales? Forecasting is as much art as it is science, finding a right method that is accurate will greatly enhance the efficiency and profitability of any business: over-ordering materials, under-allocating resources, etc. all undermine a company’s operations.
The selection of a method depends on many factors—the context of the forecast, the relevance and availability of historical data, the degree of accuracy desirable, the time period to be forecast, the cost/ benefit (or value) of the forecast to the company, and the time available for making the analysis.
When a company forecasts for a particular product, it must consider the stage of the product’s life cycle for which it is forecasting. The availability of data and the possibility of establishing relationships between the factors depend directly on the maturity of a product, and hence the life-cycle stage is a prime determinant of the forecasting method to be used.
All my business plans come with projected financial statements. I use a combination of industry growth data, historical sales data (if my client has any), seasonal adjustments, advertising expenditures, and other factors pertinent to my specific clients.
Which method is right for you? Send me an email and let’s figure out how to plan for your company’s future.
This is what allowed Zara founder, Amancio Ortega to become the richest man in the world (for at least a couple days).
Fast fashion: Customers wanted the latest fashion, yesterday. Zara’s competitors were taking too long bringing the latest designs to market. Other retailers try to decide what to make, then produce it. A push-model of product development. For example, GAP and H&M will take 5 months to make, design, and distribute new products. Zara listens to what their customers are asking and buying. A pull-model of product development that takes Zara 3 weeks.
Of course it’s not as easy as just asking what each customer wants. Lots of times, people don’t know what they want until it’s shown them. Henry Ford once said if he asked what his customers want, they would’ve responded with, “a faster horse.” Also, changing from a push-model to a pull-model requires overhauling a company’s supply-chain. Raw materials purchases buy 6 months out or more. Trying to get a refund on 100 gallons of dye is not as easy as it sounds.
Although Zara is not considered inexpensive, lower-market competitor Forever 21 has taken it to the next level.
Cheap: In addition to fully embracing fast fashion, Forever 21 offers their products at very low prices. This has allowed Forever 21 to have revenues of $4.4 billion in 2015.
So how do you incorporate market feedback in your business? Generally, smaller companies have an easier time making adjustments because it is a more agile company with more one-on-one contact with vendors and customers. In business school I asked billionaire Leonard Lavin, founder of Alberto-Culver (maker of Alberto VO5 hair products) about his education background. He said he had an MBWA. Master By Walking Around. This meant, he walked around his business and talked to his employees, his customers, his vendors. He conducted market and industry research everyday. If you don’t take the time to talk to your customers, it might be detrimental to your company’s success further on down the road.
Last week a client asked me about the Lean Startup. As a small independent baker, the did not Learn Startup methodology didn’t really meet his needs. Actually for many small businesses, they’re already utilizing some of the Lean Startup’s principles: split testing (e.g. which new cupcake idea is selling better), pivoting (e.g. advertise better selling new cupcake), build-measure-learn (e.g. ask customers what they like about each cupcake, why, etc. then adjust the recipe if needed).
The Learn Startup is more applicable to large/new & complex products and/or services. When you have hundreds of ideas, tweaks, iterations, it can very easy to get caught-up in the labyrinth of product/service development. Essentially, it comes down to starting with a minimum viable product (MVP), have users play around with it, gather data on (i.e. with actionable metrics, interviews, use studies, etc.), decide on which steps to go next. This measured, calculated, and insightful process prevents over-developed products/services that do not necessarily have a market/meed a need.
As mentioned, the Learn Startup method might not be useful for all entrepreneurs but if you are in the processes of developing a large/complex product or even a brand new/novel product, it might be worth your time to check out this book and install some informational gathering and pivoting processes to make sure that it closely meets a market need.
With Sport Chalet closing and even Walmart showing losses, Amazon is the clear competitor to beat.
So far no one has a clear winning strategy: click and mortar, brick and mortar, online, no one is safe when it comes to retail. However, there are some that are surviving and thriving by offering something online purchasing cannot match, a visceral shopping experience.
Retailers have to make their stores into a destination. Funky decoration, unique customer experience, seminars/lectures, a sense of community, etc. This is really where the personality of the business (the “brand”) is shown.
One example is The Last Bookstore, a bookstore in Los Angeles. The photos below show a stark difference from Barnes & Nobles. These aren’t Bookstore temporary holiday decorations but long-term attractions that draw crowds.
The current version of The Last Bookstore is actually its 3rd stage. First opened in 2005 in a loft, it quickly expanded into the former Citizens National Bank’s 22,0000 sq. ft. downtown space (an insane space for any retailer let alone an independent one).
Experiential shopping obviously has a bunch of challenges; you may need a unique space, maintenance of store fixtures, uniquely trained staff, only local reach (for the time being which I will get into at the bottom of the article), possible higher insurance, and other differentiating factors which all can result in tighter margins. However, having a challenging strategy is better than having none at all.
The Last Bookstore: They are known as the largest independent bookstore in Los Angeles. They have a crazy interior. They also sell used books for $1. This price point is important because buying a used book online will not be cheaper after shipping is factored in. Also, books offer a fundamentally different tactile experience from eBooks. So customers walk in to check it out. They wander the vast selection, and take pictures of the funky decor. They wander through the store they touch items, a psychological factor in sales.
Now they’re are not just a consumer. Now they’re a consumer at a super hip, independent, small business. They feel good about themselves. They tweet to their friends about it. Repeat.
Clothing Retailers: Using my client Maitri Yoga as an example, a yoga clothing retailer; don’t sell too many existing/famous brands. About 40-60 (name/unknown) mix. You’re not going to be able to compete on price and there are also covenants on discount pricing for name brands. People already know the sizing for these brands so they will use your store as a showroom (like Best Buy used to be before offering price matching). Sizing and other factors are not uniform throughout clothing, so the product needs to be felt and tried on. Therefore you have to offer goods that aren’t known and aren’t sold on Amazon. They come in for a Prana top but see a new unknown brand. Now you’re the hip store that sells up and coming brands that aren’t offered on Amazon. In order to do this, you and your purchaser/procurement officer has to know market trends, know which brands have good quality, nice design, etc.
The work doesn’t stop there. The store has to be laid out in a manner that draws in the customer. New items in the front. Focal decor near the front and in the center/back. You’re going to have to go to estate sales, yard sales, furniture store liquidation sales, etc. to purchase furniture, decorations, accent pieces that fit the company’s brand.
Additionally, you have to build community engagement. If you’re a Williams Sonoma, you have to offer cooking events. If you’re a Nike, you have run Clubs to build engagement. Potential customers will come in for the event but may purchase something that caught their eye. The costs for holding public relations activities such as events can grow beyond the return on investment so keep an eye on public awareness expenses.
The good news for small business owners is that the unique, boutique atmosphere each independent retailer has cannot easily be matched by larger companies.
Every industry is different so I would have to consult with you on an individual basis; then look at industry & market trends, the culture of the brand, the company’s financials (look at its performing items and overhead), etc. This is all under my strategy consulting services.
One of the services I offer is strategy consulting. However, the name is quite vague so what is strategy consulting? It is a lot of things. It varies by the needs of the client. Some clients need help developing an overall strategy for the business.
Say they have a product but not much else. So they need everything from naming of their product, research on where to sell their product, team building, etc. Naming might require a psychographic analysis of branding.
If they are a little farther along, it can be an audit of what they’re already doing, or analysis of where to go next. A business might be looking at weighing the pros and cons of expanding to a new market, introducing a new product, do a product overhaul, etc. Product overhaul might require a net present value calculation of multiple alternatives.
Every situation is unique so let’s talk and figure out what you need.
Here’s an interesting article from Inc. Magazine about businesses that almost anyone can start. The reason why many people can do these is that they can have low barriers to entry (e.g. startup costs, regulatory hurdles, etc.), moderate competition, and decent industry growth potential. The list is:
1. Meditation studio
3. QA testing
4. Online research
5. Virtual assistant
6. Corporate cleaning service
7. Dog walking
8. Lawn care and snow removal
9. Homemade gourmet foods
10. Green consulting
11. Assembling Ikea furniture
12. Personal organizer
The article misses the most important thing: Passion. That is why entrepreneurship is NOT for everyone. If you’re going to start a business you have to be willing to work very very hard at it. So if dog walking is a calling for you, go out there and make some money!
According to the National Retail Federation, American consumers will have spent $6.9 Billion USD on Halloween costumes, decorations and related items this year. This includes haunted houses, and candy.
So, wow did it go from a niche holiday to the 2nd most lucrative holiday behind Christmas?
Halloween used to be only popular among school aged children because they get candy. Now, the holiday is not just for kids. Adults are embracing it full-on. Some 13% of Americans ages 18-44 say Halloween is their favorite holiday, reports DDB Worldwide. There are just as many adults costumes are here are children’s costumes in the stores. Including “Sexy Pizza Rat“.
It probably started like most trends: Organically. A small bunch of young adults in relatively isolated enclaves throughout the nation that wanted to partake in costuming. Then other people saw how fun it was and then the number of participants grew into a measurable amount.
Slate has a pretty interesting article theorizing about its beginnings at the Halloween parade in New York City’s Greenwich Village. This parade for all-ages, first started in the early-70’s, began as a neighborhood event organized by a local puppeteer and mask-maker. Its fun and popularity then spread to San Francisco and Los Angeles.
The appeal to adults is not a difficult concept to grasp. “There are several reasons [for its adult popularity],” says Denise Delahorne of DDB Worldwide, a global marketing communications network in a recent 2012 Forbes article, “There’s no stress to it. You don’t have to travel or deal with relatives. There’s not the holiday pressure to find a date if you are single. You can wear whatever you want and not be judged. There’s the fantasy, role-play element.”
Businesses saw this trend (the power of market research!!) and seized this market opportunity. Voila! Halloween as we currently know it came to being.
Not Just Halloween
Because of these reasons, ancillary (niche) markets have begun reaping the benefits of costuming. Now, dressing-up has gone from beyond Oct. 31 to dates throughout the year at comic book conventions, anime expos, etc. and throughout across the United States and beyond.
The commercialization of Halloween isn’t unique though. In fact, Christmas wasn’t always about retail. An event that might have happened in the Spring over two millennia ago eventually became linked to a 4th-century Greek bishop known for gift giving. This act of gifting, over centuries, became more commercialized. In even in the 1800’s letters were written lamenting that “Christmas wasn’t the same as it used to be.”
We also did it with Valentine’s Day. For better or for worse, the next step might be commercializing Thanksgiving. Then we can have 5 uninterrupted months of “holiday” spending. If I were commissioned to do a marketing/PR campaign to commercialize Thanksgiving, I would investigate the underlying psychology that differentiates Thanksgiving from the other holidays (see the Denise Delahorne quote above). Maybe a little DIY, a little up-cycling/repurposing, gluttonous eating, etc. Then craft an activity/event that addresses these elements. Next craft the marketing communications that implies the psychological elements in the advertising of the product/service I’m selling.
Last week I highlighted aspects about Quiksilver’s bankruptcy. So this is what Quiksilver and other surf brands do should to save themselves.
Looks like the other big surf brand, Billabong is also hurting too with diminishing revenues and net losses from 2012 to 2014.
Recently Billabong also sold its other assets: DaKine, Swell.com and Surfstitch to enhance liquidity.
Billabong also thought about selling RVCA but didn’t. I’ll get to that in a bit.
As I discussed in my previous post, Quiksilver bankruptcy is partly due to surfing not being as cool as it used to be.
So what is cool?
If extreme sports was cool in the ’90s and ’00s, extreme athletics is cool now. MMA and CrossFit is cool.
In March 2015 WWE announced a 50/50 joint venture partnership with MMA brand, TapOut. Founded in 1997, the brand had $200 million in revenues in 2010. Later that year the founders sold it to Canadian company Authentic Brands Group LLC for an undisclosed sum.
CrossFit had 8,000 affiliates in October 2013. As of January 2014 the company had 9,000. In May 2014 it hit 10,000 affiliates.
As shown by strategyandanalytics.com’s graph featured in Fast Company’s article, CrossFit’s popularity growth is amazing.
Of course, most people don’t actually want to do WODs and armbars. They only want to dress like they do, much like surfing and snowboarding.
This is why it’s no coincidence that Reebok (doing well financially with 5% growth in 2014 and seven consecutive quarters of growth) has its hand in the UFC and CrossFit.
Under Armour is so popular. Under Armour which also makes products for MMA and CrossFit enthusiasts were named as one of the most valuable American brands by Fashionista and as one of the top 10 MMA brands by FightState.
Heck, even Adidas (Reebok’s parent company) makes judo gis!
But Reebok isn’t a surf brand!! Quiksilver isn’t an MMA/CrossFit brand!!!
So going back to RVCA. RVCA, is a popular surf brand that is also popular amongst the brazilian jiujitsu crowd with its sponsored athletes such as MMA star BJ Penn amongst BJJ stars. RVCA recently did a collaboration gi with uber popular gi brand Shoyoroll. Billabong decided to keep this brand.
As RVCA has shown, it is possible for a surf brand to do a brand extension into other lifestyle activities.
So what should Quiksilver do?
Change their marketing communications. Surf ads right now are blondes in exotic tropical locations. Unfortunately for Quiksilver and other surf brands is that demographics are changing: wealth discrepancy is large also Hispanics and Asians are the fastest-growing minorities in the US. This growing market segment might not have the money or time to travel to exotic destinations nor do they even look like a pro surfer such as Alana Blanchard.
So abandon their existing surf model? No, look at the other elements of surf. The aspects of the lifestyle that are more relatable to this large, young, and growing market segment:
Surf spots: Urban surf spots such as old Huntington Beach (it wasn’t always the gentrified “Surf City USA” it is now), Long Beach, Rockaway Beach NY, San Pedro, etc. Even urban Honolulu can be a little edgy.
Embrace their connections with the skate world.
Athletes: Add famous MMA and/or CrossFit athletes that also surf. Especially with the Reebok-UFC deal, lots of MMA fighters are looking for more sponsorship money. UFC middleweight contender Luke Rockhold surfs in Santa Cruz.
Other lifestyle images: Tattoos and asphalt instead of sunsets and palm trees, turntables instead of ukeleles.
Diversify: Buy or strategic partnership with boxing/muay Thai brand Fairtex/etc. or Brazilian jiujitsu brand Gameness/etc.
When you are asked what is your “competitive advantage” what do you think? Processes? Patents/Intellectual property? Cutting-edge algorithms and data-analytics?
Those are all valid ways to have a leg-up on your competition. However, not all competitive advantages are high-tech and modern. Some are old-school. Tried-and-true methods for (in this case) building customer loyalty/satisfaction/based and making the sale. There are many areas in which a company can improve effectiveness, but that is for another post.
One of 7-Eleven’s competitive advantages allows one location to sell over 2,500 cups of coffee a day. 2,500 cups. A. Day. This location sells the most coffee out of any other 7-Eleven location in the world. Think of every single 7-Eleven you’ve ever driven by in your life. This 7-Eleven sells more coffee than that one.
Store manager Delores Bisagni. Delores, who is on kidney dialysis, has been working at her location in Shirley, NY 7-Eleven for 18 years. Delores’s secret is knowing virtually every single customer’s name. That’s it. You go there, she greets you (by name if you’re a regular) sometimes with a hug, you get your coffee and get on your way. If you’re new, she greets you asks your name. Overtime, she’ll remember you, make you feel welcome for coming to her store, and causes you to come back. That is it!!! That is how she sells 2,500 cups of coffee a day! No traffic flow algorithm, CRM software, etc.
Delores might have profound name memorization skills and whatnot. However, I believe it’s more that she cares about her customers. “Care for our customers” is a slogan most businesses don’t understand and/or believe in. However, if you can truly understand and apply that concept, I think it will help you. Maybe not make you the #1 seller in your field, but will help you nonetheless. That is why I offer my services at a deep discount, give free editing for the life of your business, often give free advice, will work with clients that can’t pay right away, and follow-up on how your start-up is doing. So far it’s been working very well!