Timing, Placing, Pricing – Sustainable Distribution and Retail Strategies
For this year’s OutDoor we were very honoured to be asked to host one of the main crowd-drawing industry panel discussions during the show. Run in association with Outdoor Conferences and the European Outdoor Group (EOG), we were joined by some of the key figures in the industry, to discuss and explore the ever-changing and dynamic relationship that exists between brands, retailers and consumers.
Hosted by our Commercial Director, Vicky Stickland, with an even divide of retailers and brands, the panel was formed of:
– Jørgen Jørgenson, CEO of Norrøna
– Matt Gowar, CEO of Equip
– Henrik Hoffman, CEO of Naturkompaniet
– Thomas Rouault CEO of Snowleader
For those of you who were unable to join us over in Friedrichshafen, here is our round-up of what evolved into an insightful and invaluable first-hand look into one of the hot topics facing our industry.
How has this relationship changed over the past five years?
Henrik – Due to an increase in outlets and retailers, alongside the fact that retailers are stocking more and more brands, Henrik noted that customer loyalty has become much harder to capture and retain. This has primarily been one of the largest changes for retailers. Whilst an increased environment to trade in opens opportunities, this naturally leads to an investment in time and money to remain competitive across the retail landscape. In addition, Henrik suggested that it is very rare for brands to tell the retailers what is selling well, and where they are seeing strong sales.
Ultimately, the retailers want to offer the hot products. Henrik also commented that a sharing of information between retailers and brands would lead to a stronger and a more mutually beneficial relationship.
Thomas – To add value and enhance the consumer experience and loyalty, Snowleader is moving from e-commerce to a “click and mortar” retail model, in order to facilitate a differentiated in-store experience, and one that people will talk about. Their improved ski boot customisation service is a prime example of this. Thomas commented that they want to be alongside the consumer throughout the whole purchasing journey, to be of more credit and to provide an improved, all-encompassing service. The brand experience in-store is entirely different to online, and sometimes consumers prefer to compare and analyse the different products in-store.
Jørgen – Brands have to choose distribution channels carefully, selecting those retailers who will give them the in-store space. In agreement with Henrik, Jørgen also commented that working together more collaboratively, and sharing information, is crucial to maintaining a strong relationship. On the topic of direct to consumer, Jørgen noted; “Norrøna first started their direct e-commerce channel back in 2009, in close proximity to some of their biggest retailers, and these retailers are still the most loyal.” The key to achieving a positive relationship is to enforce a transparent pricing structure. If going direct to consumer, brands should never discount, and must maintain a very tight distribution model. Naturally, brands cannot steal from retailers, and it has to work hand-in-hand.
Matt – Building upon the words of Jørgen, Matt continued to explain that Equip started both brands (Rab & Lowe Alpine) direct to consumer. The total number of their SKUs is almost four times the amount stocked by their largest retailer. Therefore, Equip need to sell direct to consumer, otherwise some SKUs wouldn’t be available for purchase. The key focus for Equip is to sell the higher end technical SKUs, but continue to channel consumer loyalty through their retailers.
– Direct e-commerce activity from brands cannot be stopped. Brands and retailers should work together to form a mutually beneficial sales channel.
– A firm and transparent pricing structure should be adopted and implemented by brands to achieve a successful relationship. For example, brands should not discount via direct e-commerce.
– Both brands and retailers need to continually share more information, working collaboratively for mutual benefits.
– Constant feedback between retailers and brands regarding trends, best sellers and colourways is key to forming an open communication platform.
How are the changing lead-times of stock ordering affecting you?
Matt – The real challenge facing brands at present is in aligning order deadlines so that they are inline with retail cycles. Matt commented that the sales seasons across Europe vary considerably; for example, the start of the summer season in Scandinavia is very different in comparison to southern Europe. To combat this, Matt suggested that a pan-European tradeshow for the varying seasons might be an approach to consider. In support of previous notions of working more closely together, compromise and communication is key. Develop flexible ordering systems and find a balance between what the retailers need, what the brands can provide, and when they can provide it. Matt continued to mention that oversupply in the industry is also a big challenge, and is something that the industry should work on collaboratively to resolve.
Jørgen – Jørgen opened up to state that bread-and-butter products are key. Continuing to build upon this point, Jørgen commented that segmenting some products to run across seasons is an approach that has proved successful for Norrøna, and as a result, they have seen sales rise by 300% since 2013. Offering consistent colourways is safer for the retailer, helps against oversupply, and eases the ordering cycle. Increasing the length of the cycle and managing new to carry-over products is a hard ratio to balance, however, when finely tuned, this can result in increased sales in the long-term, and improved relationships all round. Jørgen also noted that OutDoor should be moved to earlier in the season, as 77% of Norrøna’s orders have already been placed ahead of this year’s show.
Thomas – From an e-tailer perspective, Thomas noted that a longer product life cycle means that he is able to invest further into a product, and achieve stronger SEO results. A shorter, three month, product life cycle is not enough time to achieve and sustain a strong position on Google. For Snowleader, it’s easier to place pre-orders with carry-over, and they believe that keeping new products to a minimum will enhance innovation.
Henrik – In concurrence with Thomas, Henrik also declared that the best brands that he stocks are the ones in favour of carry-over. Naturally, they are still looking for innovative products, and it is better to do so on fewer, more fun new products that he can offer consumers. Henrik also noted on the theme of new products that, “New colourways are not new products.” Brands need to find the balance between new and carry-over. In agreement with Jørgen, OutDoor needs to be earlier to kick-off the buying season, suggesting that the show is more of a meet and greet.
Matt – It would seem that carry-over products are favoured amongst retailers and brands, however, consumer behaviour points towards change and new products. Thus leading buyers to frequently pose brands the question; ‘what’s new?’ Some retailers of the Equip brand have also requested minor product name changes to clear any product ambiguity. On the theme of innovation, Matt raised the extremely valid point that innovation in the Outdoor industry is heavily reliant on textile and material manufacturers to develop new ‘wonder’ fabrics. If there are no new innovative fabrics, it is simply change for the sake of change. It was also suggested that implementing a two track ordering system, and working with retailers to put smaller orders in would help tackle oversupply. Consolidating product ranges where necessary, to support retailers in placing more accurate orders, and meet minimum quantity requirements.
– All panel members in concurrence suggested that the OutDoor show should be earlier in the season to better compliment the sales cycle.
– Retailers and brands should work on developing a compromised order cycle.
– A finely tuned ratio of new to carry-over products is key. Brands should continue to innovate new products to satisfy anticipated consumer behaviour.
– Carry-over products can help segment product categories, ease the order cycle, combat oversupply and support e-tailers to achieve stronger SEO results.
What can we learn from other industries?
Henrik – Pointed towards the premium and luxury industry, those who never discount, which in the long term leads to fuller margins. Naturally, this comes with great responsibility, and collaborative working within the Outdoor industry to not saturate the market with discounted product. In reference to oversupply, Henrik stated, “we should not overfill the boat.”
Matt – In support of the luxury and premium industry, Matt continued this notion, mentioning that increased margins in turn lead to more sophisticated retailer opportunities.
Thomas – Drawing on a different example, Thomas pointed toward the automobile industry. They do not change the product name just because they change the colour, or improve the car’s specification. For example, the VW Golf has remained the same since its first launch in 1974. Brands should also invest further in product names to clarify segmentation.
– The Outdoor industry should draw influence from the premium and luxury industries as good examples of non-discounting and maintaining strong retailer opportunities.
– Brands should note that changing a product’s name does not constitute as a new product. A name change or new colourway of a product is change for the sake of change.
How can we create sustainable models for the future?
Henrik – As previously mentioned, Henrik commented that retailers and brands should work closer together to find out what is selling, where it is selling and when. Working closer together and sharing more information is vital for a sustainable future. Henrik strongly expressed that retailers need to cease putting product on sale ahead of the main demand, as this is proving detrimental to the market.
Matt – Expressed the feeling that retailers are chasing every last sale at a cost. Addressing the challenge of over supply, Matt wants to generate and provoke a feeling from the consumer of ‘ I should have purchased whilst I still could’. Sale fatigue with products on sale day in day out is also leading to consumers waiting for the end of season sales to make their purchases, further supporting Henrik’s view that premature discounting is destroying the market.
Jørgen – Jørgen began by noting that all brands plan to grow, although the market is not in a state to accommodate. At present, brands are pushing more products to market, which in turn leads to oversupply, and the market simply cannot handle it. Just a few per cent of over demand is detrimental, further fuelling oversupply, and consequently, the need to discount. Jørgen stated, “If we (brands) decrease supply of product by 3%, this will heighten demand as consumers will know that this product will sell out.” Complimenting Matt’s wish to generate a feeling of impulse to buy. In the long run, this would lead to increased margins and profitability.
Thomas –Building upon Jørgen’s comments, Thomas expanded upon this in reference to the point raised earlier; that in order to find the magic per cent of supply, retailers need to share more data with the brands. This will, in turn, lead to a stronger distribution channel.
– Brands and retailers need to work collaboratively to create a level of demand to combat oversupplying and sale fatigue. This can be achieved by fractionally undersupplying consumer demand.
– The sharing of data and information between retailers and brands is vital to sustain positive relationships.
In conclusion, after exploring this integral relationship that underpins our industry, it was evident that the sharing of more information, data and continual communication from both retailers and brands is key to a successful relationship. The industry needs to work collaboratively to not oversupply, generate demand for product, and maintain a transparent pricing structure. Discussing what is selling well, when and where will also help achieve the desired balance of new innovative products to carry-over, supporting a stronger stock cycle. After a unanimous vote from the panel for OutDoor to be held earlier in the season, who knows? We may all be heading back out to Friedrichshafen in 2016 sooner than expected.