Inventory Management and Customer Conversion/Retention in the Snow Sliding Business
SIA was kind enough to feed me a nice breakfast this (Friday) morning before the show opened. While I ate and drank coffee, people from the various industry organizations that are and have been involved in the industry’s programs to convert first time snow sliders talked to us about what they’ve accomplished and what more needs to happen.
I guess the headline number was that conversion of first timers has increased 2% over ten years to 18%. There was a sense of “that’s not so good and we can do better” in how it was presented. I am sure we can do better, but I’m not quite sure that’s such a bad result. When you talk about trying to change people’s fundamental behavior, ten years isn’t very long and I’m not quite sure that 2% is so bad. We’ve learned a lot over the last ten years (both about what to do and what not to do) and I expect more progress over the next ten.
One thing that didn’t come up was how our inventory management can contribute to conversion. One of the stories in the Snow Show Daily for Friday is called Sold Out and Stoked. It’s about how hard goods inventories have reached equilibrium.
If there’s one thing every retailer, resort, and brand has learned over the last couple of years it’s that having leftover snowsliding inventory at the end of the season sucks. When you’ve got to carry over or close out a bunch of inventory, it can easily mean you make no money on your snow business for the year. Not to mention the impact on your cash flow and balance sheet.
I’ve been arguing for years that you might be better off focusing on your inventory management and gross margin dollar generation than on getting every last sale you could. Now, in the midst of our little ongoing economic inconvenience, I feel even more strongly about that and I want to discuss how it ties into the conversion issue.
Every brand I talked to yesterday told me they were managing their inventories tightly and had next to nothing left. I’ve heard a couple of stories about retailers exchanging product with each other to meet customer requests because they couldn’t get any product from suppliers. This morning at breakfast one long time industry participant I chatted with bemoaned not being able to get a pair of boots he needed for himself.
I’m in favor of tight inventory management, but I sure hope it doesn’t come to us all having to pay retail for product.
So what does this have to do with conversion and retention? Suddenly, the harder to find product looks special to the consumer and finding whatever they need at a discount isn’t something they can take for granted. Under conditions of uncertain supply, price can’t always be the driving factor in a purchase. Retailers are making a good margin, which means they are better positioned to service their customers. Price increases are more likely to stick. The money the retailer would like to have to pay his suppliers isn’t tied up in inventory. There won’t be excess inventory that will keep him from ordering for next season and he won’t go out of business.
Brands will have happy, solvent retailers. I’d even suggest they might be in a position to spend a bit less on advertising and promotion because there’s no better marketing than customers and retailers who want more of a product and can’t always get it.
Want more people to go snowsliding? Or to do almost anything for that matter? Make the product just a bit hard to find and require that the consumer make a conscious, active decision to seek it out because if they don’t, it won’t be there. I think that’s an important step in creating commitment.
And now what’s happened? We go and have all this great snow (unless you’re from the Northwest like me where we have floods instead of powder) and I know that somewhere out there some management team at some brand is planning for next year. And they’re going, “Wow! We had a great year! We’re great managers [We always are when it snows]. We could have sold more if we’d had it!”
And some retailer is thinking, “Damn! I have got to make sure I don’t run out of product next year! I’m boosting the hell out of my preseason orders.”
Well, you can see where this is going. Not for a minute am I suggesting that “the industry” should control inventory levels. It won’t happen and isn’t legal. Every business will and should do what they perceive to be in their own best interest.
I know. If you’re a retailer that it just felt awful when you didn’t have the product your customer wanted, though hopefully you sold them something else. But forget that bad feeling. Think of the good feeling when you had great margins and less discounting and closing out to manage. And look at your bottom line and balance sheet. What I’m suggesting is that it’s not in your best interest to boost those orders too much. Clean inventory and high margins may well give you a better bottom line result than a boost in sales. I talked about that a while ago in an article you can see here.
As a brand, when that wild eyed retailer comes to you with a greedy look in their eye and wants to books their order for next season 58%, try and calm them down. And you calm down too. Talk about how much it sucked when they couldn’t pay their bill, and you had to either take product back or they had to sell it for cost or through some ugly distribution channels you’d rather have stayed away from.
Both of you try to remember how nice it feels when inventory is clean, margins are high, and customers are clamoring for product they see as special. You just don’t want to return to the days of overbuilding and overstocking for hoped for incremental sales.
If we can maintain the mentality that has led to just a bit of product scarcity we just might contribute to getting more people snowsliding. And we could make some more money besides.
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