IT’S NOT THE PRODUCT, IT’S THE THINKING

Einstein-FrameIt’s been another challenging year for retailers, department stores, and brands. Mall traffic was down 10.7% this holiday season according to RetailNext. That decrease is on top of the high-single digit decrease last year, and mid-single digits decrease the year before that. But hey, digital is up. And guess what–all told, sales this holiday season were ok.

Macy’s reported comp store sales down almost 5% November and December and attributed 80% of that decrease to unseasonable weather conditions. According to a WSJ article, Macy’s CEO Terry Lundgren said “although consumer spending seemed healthy, people were buying items that department stores don’t sell, such as cars, electronic gadgets and home improvement projects.”

So fewer people are going to malls and department stores, and more consumers are buying items not available in those stores. Is this a matter of people not wanting those products or is it more a matter of brands not adapting to the new consumer?

A lot of effort is being done to try to figure out how to better utilize digital tools and fuse them with brick-and-mortar businesses. Brands are trying out Snapchat, jumping all over Instagram, and ultimately trying every promotion possible to get people to buy their goods.

So in this regard, it appears new ideas are being attempted. But aren’t these all really just iterations of the same? Aren’t they all just repackaged push-marketing strategies designed to sell consumers products already bought, made, and delivered into thousands of stores across the country?

The truth is the industry still produces products with long lead-times and then pushes those products to consumers. No one has yet come to the realization that maybe the problem isn’t the creativity, marketing, and product, but rather the massive amounts of inventory being bought and produced with virtually no involvement from the customer before hand. Maybe it’s not a problem of WHAT, but rather of problem of HOW MUCH to WHOM.

In 2010 the global apparel industry produced over 150 billion garments. Should I say that again? More than 150 BILLION GARMENTS ARE PRODUCED EACH YEAR, and it’s growing. The question we need to ask is FOR WHOM ARE THESE 150 BILLION GARMENTS BEING MADE?

There are only around 7 billion people on this planet now, which is more than 20 garments for every man, woman and child on Earth. Seems like a lot to me! But lets also keep in mind that roughly two-thirds of the population isn’t a consuming class of people. Fewer than 2.5 billion people do virtually all the consumption on this planet. There are 1 billion people still not able to get good drinking water. Let’s face it, most people don’t have the means, wants, or needs to consume anywhere near the amount you and I do.

So who’s buying 150 billion garments each year? The answer surely is not all the people on planet earth. And whether one wants to argue about the impact of this excess production in terms of what goes into landfills, how much is lost in profits, or how this destroys brands, it’s a clear indicator of how saturated the industry is with inventory. It’s not the product, it’s the thinking.

I think most brands and retailers would find similarly startling results if they were to look at UNITS PRODUCED COMPARED TO UNITS BOUGHT BY CUSTOMERS at viable margin.

Retailers, department store, fashion and specialty store businesses have to pivot their thinking. It’s what we’re doing at PreeLine by building a platform that engages modern consumers so we can learn what they want, when they want it, and how to get it to them efficiently. We think the solution to building a brand isn’t more products, higher inventory levels, and deeper discounts. It’s not more stores, more advertising, and more messaging. Those efforts have been done over and over again. And to Einstein’s point on insanity, the results aren’t even staying the same—they’re getting worse. We’re past being insane, doing these things over and over again is delusional at best and criminal at worst.

Product differentiation at this point is negligible. Literally all the products at stores like Macy’s are iterations of what is, was, or has been. Marketing through new social media channels is a given–you’re supposed to do that. The pivot is how you approach managing the millions or billions of dollars in inventory.

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