Five Thoughts for a Gilt-Free Future

 

Several outdoor brands tested sales at online retailer Giltman.com. This members-only site offers brief (twelve to thirty-six hour) sales of high-end, typically fashion-forward product, at a deep discount. That the site ventured into the outdoor space naturally drew a response. One industry buying group in particular hit this head-on with a round of e-mail newsletters to their members. Giltman.com is neither the start nor the end of efforts like this. For years, many outdoor brands have been selling close-out merchandise in liquidation specialists across the country.

 

Given the current manufacturing model, vendors must do this. The supply chain is broken, and until its fixed were going to be dealing with these issues. Its painfully simple: In a two-season buy/sell cycle, whatevers left at the end of season one has to go away before season two starts to ship. So, with this in mind, here are five things to think about if youre interested in a Gilt-free future:

 

1) Know The Math: Margins for both vendors and retailers are really similar. Most vendors need to make a minimum of 30% to 40% to make ends meet. The product that appeared at giltman.com last week was excess current-season (F09/W10) merchandise that had already been offered at closeout to existing retailers at up to 50% off. For most vendors, this means that they were already losing money on it. After two straight months (or more) of closeout offerings, its going to show up wherever somebody can buy it in bulk.

If youre a small retailer and want to make money on this stuff, buy it during the early close-out offerings when the discount gets to be attractive. Remember that anything at or below 40% is likely rock-bottom for the vendor, so at that point be prepared to buy in bulk or see it appear somewhere else. And know that youve had your chance and-hopefully-youre out of the product at a higher margin, already.

 

2) Do You Mind If I Dance With Your Date?: Youre at the Sock-Hop, the musics howling, and if youre just sitting in a booth sipping on a milk-shake while everybody else is shaking it. You will probably go home alone.

 

Heres how it works: Preseason commitments from retailers are declining and manufacturers need to take more risks, accordingly. If retailers dont pre-book it, and dont take the close-outs, then wheres it going to go?

 

If youre a retailer and youve had two or more opportunities to own this product, accept that-in the end-its going go home with someone. So what if your shop brought this brand to the ball in the first place? You didnt dance, and its going to go home with somebody whos willing to dance. It could be with your best friend, or somebody you dont like.

 

3) New York City?!?: The old Pace Picante Salsa ads had this punch line: This salsas made in NEW YORK CITY?!? And maybe thats where excess outdoor inventories are going to go, too – or to Bentonville, Arkansas, or somewhere else. Why? Because thats where people are creating different distribution channels that can move large inventories of product, quickly.

 

So, youre a brick-and-mortar at the end of a dirt road at the base of a famous crag? Great, but wheres your e-commerce site? Multi-channel is not optional anymore. Any distribution channel that you leave on the table will be filled by somebody else. And that someone else may be in New York City.

 

4) I Dreamed A Little Dream About The Future, And None Of Us Were In It. At the recent Unconference gathering at OR Winter Market, Malcolm Daly stopped the room with this statement: If youre a middleman in this economy, youre dead. And guess what? Were all middlemen. We all knew that this was true the moment we heard him say it.

 

Were seeing and experiencing disruptive change in a number of industries. Media, advertising, and related fields are the first in line (450+ specialty magazines closed in 2009), and retail is not far behind. Whats driving this? Its simple – changes to the way that people communicate are shortening the distance between producers and consumers.

 

Does this mean that retail is dead? No, far from it. But we need to build our businesses around something other than exclusive product. Doing things as weve always done is not going to work in the very near future. Just ask National Geographic Adventure.

 

5) The Most Important Brand You Sell: There seems to be a collective memory that Specialty at one point meant we have brands that nobody else has. Whether this was ever true or not is-at this point-not relevant. It will never be that way, again.

 

The most dominant vendors in our little industry also have the broadest distribution. They sell to every retailer; they have their own retail stores, catalog, and internet direct distribution. The truth is, its not about the stuff, and its not about the brand.

 

Its about you, and your store. You are your most important brand.

 

How do I know this is true? Thirty years ago we sold tents from Black Ice, and fleece from Forrest. EB was the best climbing shoe out there, and Fabiano and Pivetta were the two best hiking boots in the world. And we bought this stuff-stuff you cant get anymore from brands that dont exist-at places like Midwest Mountaineering and Rutabaga. Guess what? Thirty years later the stores are still around and the brands they sold are mostly long gone. The best specialty stores long ago realized that the only exclusive that they had was on their own brand, and have built that from the ground up and never given it away. Own your own brand, and you dont have to worry about whats sold elsewhere, and for how much. Just worry about how to get your customers to engage with your brand, and nothing else will ever matter.

 

Brad Werntz is the owner of Pemba Serves, a full service sales rep agency based in Madison, WI.