In last week’s blog, I recapped several pivotal comments that Pat Connolly
from Williams Sonoma made in a NEMOA speech 20 years ago. Pat did not
disappoint with his presentation this past week at NEMOA – he offered several
simple business truths, which are often overlooked, about the Williams Sonoma
business that will stand the test of time for another 20 years.
I’m not a reporter, and I’m not going to provide you with a full recap of
his presentation, which in my opinion, set a new high water mark for great
NEMOA presentations. Instead I’m going to focus on just two key things he
offered.
First, let me put a few things into context about Williams Sonoma . Pat
stated that WS is a $5 billion business, with 50% of their revenue coming from
the catalogs, and 50% from their 600 stores. The amazing thing is that they
have a 24% operating income. How many of you have sustained an OI of just half
that amount (12%) for the past three years in a row? I’m confident that not
many of you are raising your hand right now. Second, WS has 150 people in
product development, along with 250 merchants. That focus on merchandise allows
them to have 85% to 90% of proprietary products. How many of you have even half
that amount (40%) as proprietary products? Again, I doubt many of you are
raising your hands.
So, in comparison to the rest of the catalog industry, they are wickedly
profitable, and growing. Accolades to Williams Sonoma.
The primary thing that I found remarkable in his presentation was that WS
had reduced catalog circulation from 400 million in 2007 to 250 million in
2014. Although that is a 60% decrease in 7 years, the fact that they are still
mailing a quarter of a billion catalogs is nothing to sneeze at. I suspect that
much like many other companies, much of the circulation that was eliminated was
unprofitable to begin with. The recession helped clean out a great deal of
unprofitable circulation.
Moreover, Pat stated that nothing can drive company revenue like a catalog –
not social, not email alone, not search alone. But he also said that their
merchandise is their brand – and that is the key.
WS does not waste tons of space in there catalogs on
aspirational branding, like many of you do. Instead, they let their product,
with the help of some great photography, be the brand. As Pat said to one
attendee who questioned why WS is not more promotional, “We don’t offer free
shipping because we don’t have to”. They don’t have to because they have that
army of merchants that are focused on the product, and the product is the brand.
Think about that the next time you want to add non-selling spreads in order to
“build your brand”.
However, the most significant comment Pat made was this – “No one cares
about your business as much as you do”. He offered this remark in context to the
reason that WS had recently made the decision to bring the management of their
PPC advertising back in house.
Wow. That comment hit home for me. When I was the marketing
guy at Brookstone, I always did our own house file and prospect circulation
planning. But when I joined Millard Group in the late 1990s, I was amazed to
discover that many of our clients had Millard prepare their prospecting
circulation plans. I simply could not imagine that a company would give up
something so important.
Sure, most companies have turned over many of the back office functions to
outside vendors, such as payroll. There’s much to be gained in efficiencies
like that. But when you start to turn everything over to outsiders,
things start to slip.
They start to slip, not because the consultant or vendor is doing a lousy
job, or is not talented. There are many talented consultants in the industry
covering a wide range of disciplines. No, things “slip” because the mailer goes
on auto-pilot.
In my role at Datamann, I do the catalog circulation planning and merge
administration for a number of clients. I’ve been doing this for almost 20
years. But one of the problems I have seen is that when companies farm that
responsibility out to a consultant, they stop paying attention to the importance
of it. The client gets distracted by other things, and it is tough to get their
attention back. They trust you – the consultant – to do what’s right. But when
you can’t get and keep the client’s attention to point out how their business
is evolving, or how their circulation is impacting their merchandise, you take
the path of least resistance.
I’m sure many consultants are saying right now “No, that’s not me, and
that’s not what I would do for my clients.” And it isn’t the case in most
client/consultant relationships for the first few years. But the reason the
client turned this important aspect of their business over to you was because
they didn’t want to bother with it in the first place.
I’m not referring to those that are under $2 million in sales, and that just
don’t have the time to do most things. I’m also not referring to those of you
whose primary business is not catalogs, and therefore don’t have any expertise
in-house, and have to rely on consultants. Finally, I’m not referring to those
of you that are launching new enterprises – such as mailing internationally –
that need a consultant’s help to do the things in which you have absolutely no
experience.
I am referring to those you who have turned vital parts of your primary
domestic business over to consultants and vendors, and who never check up on
them. You are on auto-pilot, and it shows in your results. As Pat Connolly
in-toned, “no one cares about your business as much as you do.” You have
to be the one responsible for the important stuff.
Yes, some of you might be wondering why a consultant would say this – isn’t
this counterproductive to my responsibility at Datamann of getting and keeping
clients? Well, think about this – think about the amount of time you spend
vetting out new hires – those new employees that fill an important role in your
company.
Then think about how you select vendors. In 1963, when he was sitting atop
that Atlas rocket on the launch pad at Cape Canaveral getting ready to go into
orbit, John Glenn said the only thought going through his head was “I’m sitting
atop a pile of low bids”. Well, in his case, the low bids worked out, and he
made it safely into space and back – twice. But it does not always work out the
way.
Your consultants and vendors are good and they are conscientious. But, when
you ignore or don’t want to be bothered with the basics of your business, don’t
be surprised if your business starts to slip.
Author: Bill LaPierre
VP – Business Intelligence and Analytics
Datamann
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