kevin hillstrom - how the future of retail is like professional sports

How Retail And E-Commerce Will Become More Like Professional Sports

Kevin HillstromPresident, MineThatData

Why Listen To Kevin?

Analyzed 200+ Retail, E-Commerce, and Catalog Brands In The Past 10 Years.

Wrote Approximately 1,000,000 Lines Of Computer Code To Analyze Customer Behavior.

Processed About 10,000,000,000 Purchase Transactions.

Why Listen To Kevin?

The data I analyze, actual customer transactions (billions of transactions), suggest that all of the

gains in channels and optimal marketing strategies and the introduction of social media and mobile are

not causing customers to spend more.

This is disappointing. We’ve been sold a bill of goods.

Let’s Compare How Professional Sports Generate Success To How Commerce Brands

Plod Along!

Sports

The best customers pay the most for the best seats. They pay in advance.

Commerce

The best customers are given discounts and promotions and savings via loyalty programs. Customers are not generally asked to pay in

advance (though Amazon Prime gets customers to pay in advance).

Sports

The biggest events have expensive tickets and limited seats. Few can participate.

Commerce

The biggest events (Thanksgiving, Cyber Monday, Christmas in the United States) have the biggest discounts and promotions. Huge inventory levels

mean that everybody can participate.

Sports

In the English Premier League, there is a big match each week. This generates anticipation and

excitement and buildup to the match.

Commerce

Here’s a quote from an Executive I work with: “It is July, and we’ve been saying the same thing for five months. We have nothing left to say until the new

merchandise assortment is available in September.”

Nordstrom

Anniversary Event = The Big Annual Event!

Customers who spent $750+ in the past year earned special benefits.

Sports / Promotions

The Seattle Mariners played seven home games in seven days in September. Six of the games aligned with special promotions.

September 2 = Girls Night Out!September 3 = Guys Night Out!September 4 = Run Around The Bases After The Game.September 5 = Family Day.September 6 = Bring Your Dog To The Ballpark Day.September 7 = Grand Slam Family Package Day.September 8 = No Promotion.

E-Commerce: Promotions

Sports

Teams practice frequently. As a result, the players are well trained and their performance is optimized.

Commerce

When is the last time you practiced anything at work? Do you practice? Do you have a simulation environment? Or are you asked to “do your job”?

Sports

Players are developed across many different leagues. By the time a player is signed by Sparta

Prague or the Czech National Team, the player has performed in hundreds of games.

Commerce

What is the development process you employ with new merchandise? Do you leverage email

marketing to identify new items that have potential, or do new items just go up on the website and then

you simply hope for the best?

Sports

Many matches are broadcast on television, for free. Television networks pay to televise the matches. Advertisers pay Television networks. Customers

pay Advertisers (in theory).

Commerce

Your store or website are open, and you are paying the bills!

Sports

Free broadcasts do not hurt in-stadium attendance. If anything, free broadcasts help generate interest.

Commerce

Your free-to-view website generally cannibalizes in-store sales, making it hard to run a profitable retail

channel.

Sports

Analytics are designed to measure how players (merchandise) perform. Values are assigned to

each player, so that the team knows how much to pay each player.

Commerce

Analytics are generally designed to measure how marketing campaigns perform. Values are assigned to each marketing campaign, so that the marketer

knows how much to spend on each campaign.

Commerce = Uncertainty

You acquire a customer from paid search. You lose $4 profit acquiring the customer. You generate $20 of long-term profit. Do you acquire this customer?

You acquire a customer from Facebook. You lose $15 profit acquiring the customer. You generate

$20 of long-term profit. Do you acquire this customer?

Sports

Each team has a philosophy on how to build a winning team. Each team applies different

strategies to out-compete other teams.

Commerce

“Brands” are told to follow “Best Practices” and are encouraged to perform the same promotions the

same way.

Sports

Content is designed to create interest, interest drives customers to purchase from an expensive

and limited ticket assortment in-stadium.

Commerce

Content is generally designed to “engage” the customer, keeping the customer sitting on his/her

couch. Outside of “Fast Fashion”, there is no urgency or need to visit a store.

Sports

The in-stadium experience couldn’t be more different than watching a match at home.

Commerce

The in-store experience is designed to “integrate” with the online experience (called ‘omnichannel’), eliminating excitement and unique points of view.

Omnichannel = Boring.

This Is Not Boring – Or “Omnichannel”

Why Will Commerce Become More Like Sports?

A dire need for new customers (fans).

A dire need for new merchandise (new players) to better compete with Amazon.

A need for entertainment, especially in stores, which creates a reason for the customer to visit a

store (to better compete with Amazon).

For My Average Client …

The annual repurchase rate (% of those who purchased last year buying again this year) is …

37%.

For My Average Client …

If 100 customers purchased last year, we have to find this quantity of new + reactivated buyers just to keep the customer file flat:

63.

If My Average Client Has To Replace 63 Out Of Every 100 Customers Every Year, Where Should The Vast Majority Of Your Energy,

Effort, And Marketing Spend Occur?

Customer Acquisition!

For Most Businesses, New Customers Matter

Point of View = Customer Acquisition Strategy

Inventory = Customer Acquisition Strategy

Merch/Offer = Customer Acquisition Strategy

Odd Merch = Customer Acquisition Strategy

Merchandise = Customer Acquisition Strategy

Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’.Speed and disposability are the new black.

Nearly 2,000 stores in 77 countries.

Staff churn out 30,000 designs per year – near carbon copies of fashion’s big names.

Lightning fast, locally targeted designs.

Vertically integrated business model limits outsourcing, making most of carbon copy merchandise in-house, guaranteeing quality levels.

Garments hit floors within three weeks of design, vs. six month industry average.

Fashion used to be sold in four seasons. Zara wants you to buy in 104 seasons (2x per week).

Styles arrive in stores twice a week, days known by customers as “Z” days, or “zed days”. This fuels the need to turn over your wardrobe.

Merchandise = Customer Acquisition Strategy

Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’.

Items are ironed, and price tags are affixed prior to shipping to a store, saving store staff time so that they can sell.

Records are kept of any item tried on but not purchased.

Customers visit the store six times as often as customers visit competing brand stores.

When Zara opened a store in Sidney AU last April, 80% of the stock was snapped up within three minutes.

“We spend a fortune researching and working up ideas, and then Zara comes along and walks off with them for nothing.”

Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’.

A business built for speed, designed for addiction.

http://kottke.org/15/11/the-secret-to-zaras-success

http://kottke.org/15/11/the-secret-to-zaras-success

Social = Customer Acquisition Strategy

Think of social as your “prospecting list” … you expect to convert a tiny percentage of your prospects over time. This list is not monetized in the short term (if ever).

Send More = Customer Acquisition Strategy

Ariana Bee ♥ @amosborneHow does @EvilSupplyCo make any money I just got twice as much as I ordered AND maybe a friendly ghost houseguest.

https://twitter.com/amosborne




https://twitter.com/EvilSupplyCo/

https://twitter.com/EvilSupplyCo/

Software = Customer Acquisition Strategy

Personalization of merchandise typically leads to 15% - 50% increases in sales per visit / conversion, and consequently, more new customers. And it isn’t hard – vendors are ready to help. Just do it!!

Personalization = Customer Acquisition Strategy

Personalization = Customer Acquisition StrategyThe question of how to provide personalized shopping experiences to consumers is one that has long puzzled digital retailers. But Stitch Fix, an online personal styling service for women, thinks it has the answer.According to Chief Operating Officer Julie Bornstein, “the founder of Stitch Fix, Katrina Lake, had the theory that there is probably someone out there better at shopping for me” than me.

So how do they do it? A new client fills out an online quiz where she provides her “size, her fit, her budget and her style preferences.” Stitch Fix then looks to its team of personal stylists — assisted by an algorithm — to select five items that will fit the client’s needs. Once the client receives her stylist’s picks, she keeps the things she likes and returns the rest, along with feedback explaining why she did or didn’t like the items.

As the company comes to fully understand the client’s style and needs, Stitch Fix becomes an indispensable part of the client’s shopping experience. And it shows: “80 percent of our first-time clients come back within 90 days to have a second fix,” Bornstein said.

https://www.stitchfix.com/

Ship Something = Customer Acquisition StrategySure, your return rates might be 65% … but that also means that 35% of the folks you shipped something to became new customers … that’s a bit higher than the 0.4% response rate on a co-op mailed catalog, don’t you think?

Annual Report = Customer Acquisition Strategy

60 Data Scientists = Customer Acquisition Strategy

Employees = Customer Acquisition Strategy

Nordstrom pays retail employees a commission, often close to 7% of the sale. The most successful employees earn in excess of $100,000 per year.

Competing retailers pay employees $10.00 per hour.

Which business model is going to attract highly motivated employees who love to “sell” merchandise, and consequently, which business model is able to

generate new customers easier?

Pop Up Store = Customer Acquisition Strategy

Source = Shopify Blog

Secret Menu = Customer Acquisition Strategy

Creativity = Customer Acquisition Strategy

Stickers = Customer Acquisition Strategy

Source = Shopify Blog

Stickers = Customer Acquisition Strategy

What Do New Customers Purchase?

Merchandise!!!!

And How Do We End Up With Great Merchandise?

By Constantly Searching For New Merchandise That Eventually Becomes Best-Selling

Merchandise!

Excluding Fashion, it typically takes 18-24 months for new merchandise productivity to

peak.

This means we must have a program in place to give new merchandise a chance to succeed.

E-Commerce: Developing New Items

Amazon Uses Merchandise To Attract Visitors

Where Is The New Merchandise?

Focus on New Merchandise

Linking Merchandise To New CustomersCompany = Speakaboos

Linking Merchandise To New CustomersCompany = Lime Crime

Sponsorship at MailChimp

Employee Development at MailChimp

L.L. Bean Outdoor Discovery School

Thuggies

Rapha - Cycling

Linking Merchandise To New Customers

Betabrand

Linking Merchandise To New Customers

Tillys

Retail brand.

90% of sales happen in stores.

Marketing activities must be calibrated to motivate a customer to purchase in a store.

Sales challenges (I find that the best companies and desperate companies try hardest in Customer Acquisition and New Merchandise Development.

Tillys

Process

Focus on finding low-cost or no-cost tactics that generate first-time buyers.

Focus on promoting new items, moving the new items to winning item status.

Fuse customer acquisition, new items, and events/fun … much like a sports franchise does.

Questions

Kevin HillstromPresident, MineThatData

http://[email protected] = @minethatdata

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