Category Killers 2- BootDaddy beats Macy’s (and so do others)

‘Tis the Season! Thanksgiving means the traditional beginning of the Christmas season, the Macy’s Parade, and Black Friday. Let’s go shopping!

Hey Macy’s—Take a look at what this store in Springfield, Mo did to enhance the customer experience:

To promote their brand of boots, BootDaddy, as well as their single unit store, PFI, * engaged the Texas Tenors (who BTW are fabulous) to sing a super song about the product. Not only does the great song make me interested in the product, I want to make a trip to Springfield (which would only be to visit this store). Watch this:

https://www.youtube.com/watch?v=T6T34XK-Oss&utm_campaign=976458_20171107+BootDaddy+Video+Premiere&utm_medium=email&utm_source=PFI+Western+Store

If you don’t want to go to this shop after watching that, there is always Macy’s.

This store is a Category Killer- laser focus on product AND the customer experience.  On a smaller scale than Inditex or Lidl, but just as valid. What you got to answer this, Macy’s? Other than discounts (the overwhelming focus of their advertising, even their job posts).  If you want to see the future of brick and mortar, this is it. Product and customer experience trumps discounts every time!

The same beautiful thing is going on in ecommerce. Small startup companies get the chance to compete on a (almost) level playing field with the big ones. Here are some more examples of Category Killers who have absolutely killed with great product and superb, customer-centric merchandising:

1.     Everlane (https://www.everlane.com/about)-

This small San Francisco startup has figured out fashion basics and the online experience:

a.     A commitment to product and color story which is bold and unafraid. The last half dozen (at least) emails I have gotten from them are all different, RELATED products, and all in OLIVE DRAB GREEN.  This is their statement, commitment. As Category Killers will do. Macy’s would NEVER take a risk of committing to a style, much less a color story.

b.     Product selection is spot on for the season-Cashmere sweaters, heavy overshirts, scarves, heavy weight denim.

c.      A focus on sustainability-while everyone else is talking about it, they are committed to it and doing it (per their website)

d.     “Radical Transparency” which shows not only WHERE the goods are made (with pictures and description of the factory), but the costing (which, to their credit, is intended more to show how others are ripping you off more than what it actually cost-which, BTW, I am not buying totally but a great marketing tool!)

e.     They send emails almost daily, each one focused on ONE product that will enhance your life this season. It is just frikkin brave- and smart. Oh, and the product looks really nice…

Here is their latest item, the “heavy overshirt”. What you see below is the whole image sent to me by email:

If I wanted to put together an outfit which I can buy in minutes at Everlane (that all matched in quality, style and colour) at Macy’s, it would take HOURS (chances of failure to complete about 90%). The website opens with information about Everlane’s “Mission.” With all due respect, their “mission” is to sell more product—the rest is great marketing.

What you got to compete with this, Macy’s? What is your “Mission?”

2.     Tommy John https://www.tommyjohn.com

This local NY company has found a niche in the underwear business that begged to be occupied, through:

a.     great fabric- most of their fabrics have a very high amount of spandex, usually 16% or natural stretch

b.     great fit- due to the fabric and great patternmaking

c.      absolute focus on functionality-such as their tee shirts where they lengthened and tapered them so they “stay in.” (You may see their commercials on YouTube, which are hysterical). Boxer brief have a pouch front which solves the where-is-it-in-a-hurry problem.

Here is their product description for the cotton tee shirt:

Cool Cotton Undershirts

• Stays Tucked

Patented design never comes untucked

• No EFG®

Longer, tapered design eliminates "excess fabric gut"

• Streamlined Fit

Hugs the body but is never restrictive

• Memory Collar

Prevents bacon neck

Height: 6'1", Waist: 32", Chest: 41"
Model is wearing a size Medium.

Fabric: 86% Pima Cotton, 14% Spandex

And their boxer brief:

Cool Cotton Underwear

• Breathable Fabric

Wicks away moisture to keep you cool and dry 

• Contour Pouch

Nestles the boys, no adjustment needed

• Quick Draw® Fly

Horizontal fly for quick access when nature calls

• Stay Put Waistband

Won't roll or leave marks

*Not recommended for exercise. For gym-ready underwear, shop our 360 Sport Collection

Height: 6'1", Waist: 32", Chest: 41"
Model is wearing a size Medium.

Fabric: 86% Pima Cotton, 14% Spandex

Have enough information to buy? I do.

Here is Macy’s description of their Lacoste Boxer Brief:

Enjoy luxurious softness all day long when you start with these comfy stretch boxer briefs from Lacoste.

• Contrast logo at seamless waistband
• Soft stretch fabric
• Logo at right hip
• Pima cotton/modal/cotton/elastane
• Machine washable
• Imported
• Savings Based On Offering Prices, Not Actual Sales
• Web ID: 4382785

Good news, the item is on sale for $20.99, bad news, only size S is left. But seriously, men, which boxer brief do you feel comfortable buying online? What exactly is the fabric? Oh, and I can see the logo…

IF you find a suitable item, it is only after sifting through hundreds (just mens underwear items) at all prices starting <$10.  Tommy John has less than a half dozen styles to offer. Laser focus. (BTW, I tried the Tommy John and I would never buy anything else).

d.     value pricing- an 86% cotton, 14% spandex boxer brief is $31. If you search Macys.com underwear for men and filter “stretch”, there are 36 items at all different prices, none of which tell you what the fabric is. Prices start at <$10. Most are discounted. Think any can match the fabric and comfort of the Tommy John item?

$31 a little expensive? Hanro, the famous Swiss company, offers a mens cotton boxer brief which is 88 mercerized cotton/12% spandex for $67.

Give Macy’s credit for trying- if you go to their website, there are little letters on the top right that direct you to The Edit, a “curated” collection of stuff you are supposed to want. Click on “Men” and you get “Party Season.” (https://www.macys.com/social/the-edit/fashion/menpartyseason)

Need your comments? Did you find anything that you must have for Christmas on “the edit?”

I know what I want for Christmas. And it comes from the Category Killers.

*(Thanks to Ric L. Anderson https://www.linkedin.com/in/ricanderson11/ for sharing the BootDaddy info)

Presentation given to International Trade and Marketing Advisory Board of FIT, 9 November 2017-Sourcing in the World of Amazon and the Category Killers

To begin, let me set the scene of today’s world of retail- Here’s an image:

Godzilla rises above Tokyo Bay.  People scream and run helter skelter, in total panic. How did this happen? Surely we are dead now….

The name of this horror movie is “Amazon and the Category Killers.” By Category Killers, I refer to breakthrough companies like Inditex, Uniqlo, H&M, Lidl. They are commonly referred to as “disruptive.”

Actually, they didn’t disrupt anything; they just EVOLVED. And others didn’t.

The state of retail today follows Darwin’s theory of “Survival of the Fittest.” Per Darwin, those who figured out a new tool or technology better than others survived. Those that slept, ignored, or were ignorant, didn’t.

The rise of these companies who will doubtless dominate retail in the future has followed a clearly predictable pattern of evolution. And they themselves have evolved into their present state over as much as 40-50 years time. Let’s take a brief tour through the recent evolution of commerce that brought us to where we are today:

Today, with enabling technology, it is no longer necessary to run to the shopping mall to buy what you need; You can sit at home, just as people did more than 100 years ago with the Sears Catalogue. If you want to go out shopping for the entertainment or experience, you also have choices. Simply put, brick and mortar shopping with the department store as anchor has EVOLVED to, “ I can get what I NEED online. For my store shopping experience, I only have time for a laser-focused, clear, concise and pleasant presentation of what I should want now or this season.” No more boring trips to the department store sifting through too much inventory at too many prices. Solution: Amazon and the Category Killers.

People shopping remotely is not new.

Sears, enabled by Rural Free Delivery, mailed its first catalog in 1896, almost 30 years before it opened its first store. Sears even sold houses through their Modern Homes catalog starting in 1908. JC Penney produced its first catalog in 1925.

Quick-when did Ecommerce first appear? How many of you said 1983?

AT&T produced and distributed Viewtron, beginning with a test in Florida, from 1983-1986. Viewtron was a remote terminal on which you could order merchandise, book flights etc. based on NAPLPS graphics language and sent over phone lines.  The idea failed, as people were not accustomed to using technology and did not want to spend the $600 cost.

From there, we can clearly see the EVOLUTION of what we know today as ecommerce. Here are a few key dates and events:

1984- Tesco First B2C online shopping platform in UK and Compuserve Electronic Mall debuts in US.

1990- Berners-Lee introduces the first web browser, World Wide Web.

1994- Netscape Mozilla, first secure transaction.

2016- Amazon aided more than 10,000 sellers to generate more than $1million in sales on the Amazon Marketplace.

Wait- How did we get to 2016? When did Amazon start? Answer: In 1994. So Amazon has been EVOLVING along with the enabling technology for almost 24 years. 

So where was everyone else? Why does Amazon account for almost half of online sales today? Jeff Bezos even said, “There is nothing about our model that can’t be copied over time.” Yet today, 24 years later, there is only ONE Amazon.

Inditex, corporate home of Zara, Massimo Dutti, etc. started in 1963. More than 50 years ago. The first Zara store in US opened in 1989. Almost 30 years ago. By 2010 Zara had 5000 stores worldwide. Today Inditex operates in more than 90 markets. However, only very recently is there frantic talk about “fast fashion” as a force in the retail business. Inditex did not get to where they are in a magic burst. They EVOLVED over time. And those that are frantic now-didn’t.

Other category killers such as Uniqlo, H&M, Lidl also evolved; those department stores that are closing daily-didn’t.

It can be clearly seen that the phenomena that are Amazon and Inditex did not suddenly appear over Tokyo Bay-they EVOLVED over time with enabling technology.  Everyone else had the same opportunity to evolve-but they didn’t.

As we follow Darwin’s principles, those who adapt best to the changes and challenges over time, survive. Those who do not, don’t.

My conclusion is: Amazon and Inditex are NOT the problem. They are the SOLUTION-the EVOLUTION SOLUTION.

But what is Amazon today?

Amazon is much more than the monolithic force it appears to be. Let’s take a look:

Of the whole of $135.99 billion in global revenues in 2016, about $91 billion is from Amazon itself, selling its own or other brand products directly; 22.99 billion was generated by the Amazon Marketplace, third party sellers selling THROUGH (not TO) Amazon; most of the balance of revenue was generated by Amazon Web Services and Amazon fulfillment.

The Marketplace segment is comprised of more than 2 million sellers worldwide, selling their product THROUGH the website. While some reached as high as $10 million volume, the raw number is $22.9 billion volume/2million sellers-$11,450 average volume per seller.

So this “monolith” now looks like a community where even the smallest sellers can market their product. Compare that to the world of Walmart, where a half million square feet store presents “everything”, to the detriment of local and neighborhood business; Amazon has offered the opportunity to more than 2million entrepreneurs, family businesses, and small enterprises worldwide (in more than 100 countries) to be successful; one cannot imagine another affordable route to success for them if not for this Marketplace.

What is more, a whole new industry has evolved strictly devoted to facilitating these 2 million sellers manage their business- Repricers, SEOs, 3PL, and more.

Other companies recently have, in fact, copied the Amazon model, and their numbers are growing.

Oh, and Amazon Smile has given more than $62million to various charities based on subscriber purchases.

All of a sudden the Evil Empire looks like the Happy Kingdom. Not to those who slept or failed to evolve while it was growing, but to those who have or have had the sense and foresight to benefit from the Amazon business model, and all of those who benefit from the beneficiaries.

But how about sourcing? The $22.9 billion and growing of Amazon Marketplace 3^rd party sellers is composed of products that need to be made and delivered. Gone are the days when sourcing was about a few big companies making lots of the same thing in the same color and telling the consumer what to buy. Now we face sourcing, for Amazon alone, $22.9 billion from millions of different sellers. How many SKUs do you figure that amounts to?

So the Amazon Effect, as well as the effect of fast fashion like Inditex, is MORE SKU and LESS QUANTITY/SKU. So how does a factory or those in the business of sourcing for others, like Li&Fung, deal with this? It is not easy to switch the sourcing of entire industries or portions thereof from a volume-based model to a style-based model.

The entire supply chain and sourcing process has been turned on its ear. What remains is a huge challenge and a huge opportunity. EVERYTHING needs to be renewed-people, procedures, systems, factories and factory business models, logistics, transportation. The paradigm now is to get a product that the consumer wants quickly, and likes to see (in fashion) renewed every couple of weeks, without any compromises to quality, for the right price. Hmmm..

Again, this is a huge challenge and a huge opportunity for anyone who boldly embraces the sourcing requirements of this business model. And for those who wish to catch up with evolution or face a dim future.

Amazon itself could doubtless open a new business segment to support this new world, completing and controlling their own business model. But I dare say even Amazon has no solid processes or organization in place to deal with this new world of sourcing.

BTW—Inditex has already figured this out. But they’re not telling us how.

It CAN be done. But it will take a major reorientation, reorganization, and a true overhaul of processes at the sourcerers and factory level. Creative destruction-kill what needs to be killed, leave the past and your ego at the door. Build something new. Evolve…

                                                                                                                       

Amazon Universe: The Evil Empire or a Brave New World of Opportunity? (And an Upside Down Sourcing World)

1. Brave New World

The Evil Empire. The 800 pound gorilla. The elephant in the room. These are but a few of the phrases used lately, to refer to Amazon, by the many who have been left to eat its dust.

So is that it? Amazon is some evil conspiracy to take everybody’s business for themselves, leaving nothing but a barren wasteland for those who fell behind.

What we commonly refer to as “Amazon” was worth $135.99 billion in revenue in 2016. Compare this to Walmart at $482.1 billion and Costco at $118.72 billion.

So what is this creature that took over our world and why did it happen?

AS proven in my last article, from an evolutionary business standpoint, Amazon did not just appear; it EVOLVED with the enabling technology. It is not the problem-it is the most successfully evolved company- THE EVOLUTION SOLUTION.

Amazon is much more than the monolithic force it appears to be. WE always use the collective “Amazon”, but there are many elements to this business. Let’s take a look:

Of the whole of global revenues in 2016, about $91 billion is from Amazon itself, selling its products directly (whether Amazon private label, or other brands selling TO Amazon); 22.99 billion was generated by the Amazon Marketplace, third party sellers selling THROUGH (not TO) Amazon; most of the balance of revenue was generated by AWS (Amazon Web Services) including Amazon fulfillment.

The Marketplace segment was comprised of more than 2 million sellers worldwide, selling their product THROUGH the website. While some reached $10 million, the raw number is $22.9 billion volume/2million sellers-$11,450 average per seller.

So this “monolith” now looks like a community where even the smallest sellers can market their product. Conversely to the world of Walmart, where a half million square feet store presents “everything”, to the detriment of local and neighborhood business, Amazon has offered the opportunity to more than 2million entrepreneurs, family businesses, small enterprises worldwide (more than 100 countries) to be successful; one cannot imagine another affordable route to success for them if not for this Marketplace.

Amazon will even warehouse and ship the goods for these small sellers (FBA-Fullfilment by Amazon).

Then, a whole new industry has evolved strictly devoted to helping these 2 million sellers manage their business- Repricers, SEOs, 3PL, even sourcing the product itself.

Not to mention the nascent industry and opportunity for other companies to copy Amazon and to build web sites based on the Amazon model just to handle overload and growing business.

Oh, and Amazon Smile has given more than $62million to various charities based on subscriber purchases.

All of a sudden the Evil Empire looks like the Happy Kingdom. Not to those who slept or failed to evolve while it was growing. Happyness is to those who have or have had the sense and foresight to benefit from this model, and all of those who benefit from the beneficiaries.

2. And An Upside Down Sourcing World

But how about sourcing? The $22.9 billion and growing of marketplace 3^rd party sellers is composed of products that need to be made and delivered. Gone are the days where sourcing was about a few big companies making lots of the same thing in the same color and that was about all she wrote for the sourcing market. Now we face sourcing $22.9 billion, literally hundreds of thousands of SKUs, from 2 million different sellers (just Amazon sellers, there are more). How many SKUs do you figure that amounts to?

So the Amazon effect, as well as the effect of fast fashion like Inditex (we will deal with that in a later piece) is MORE SKU and LESS QUANTITY/SKU. So how does a factory or those in the business of sourcing for others, like Li&Fung, deal with this? Take as a given that most of these small sellers have little idea how to source and manage a product. It is not easy to switch entire industries or portions thereof from a volume-based model to a style-based model.

In a recent article in Sourcing Journal, Rick Darling, Executive Director of Li & Fung, was candid:

“Amazon quantities, Kohl’s quantities, Macy’s quantities, are all coming down per style and their SKU counts are all broadening, some more extreme than others. And that’s not being driven by their choice to control inventory, it’s being driven by consumers’ demand to get things faster, quicker and more unique than they ever had in the past,” Darling said. “And the reality is, while that’s happening and retailers buy less product and they need to do it faster and they need to do it in smaller quantities, none of us, and I will say none of us—including Li & Fung, who’s supposed to be the supply chain leader—really has a supply chain that’s been built for that.”

Clear. And True. The entire supply chain and sourcing process has been turned on its ear. EVERYTHING needs to be renewed-people, procedures, systems, factories and factory business models, transportation (less full containers for sure), logistics. All to get a product that the consumer wants quickly, and likes to see (in fashion) renewed every couple of weeks, without any compromises to quality, for the right price. Ummm..

That is a huge challenge and a huge opportunity for Amazon, especially its marketplace sellers. Amazon would be wise to open multiple sourcing offices around the globe based on the processes and technology needed to support this new world. But I dare say even Amazon has no solid processes in place to deal with this new world of sourcing.

BTW—Inditex has already figured this out. But they’re not telling us how.