Some Thoughts as We Push Through This Crisis…

Happy Holidays to everyone.

This certainly is a time to be contemplative. We all have a lot on our plates, and though many of you probably feel frustrated, uncertain and frightened, we have endured past the panic point by now and we’re still here. Now it’s time to plan for the future, and it’s time to readjust the relationships in our respective industries that haven’t been working properly or fairly for quite a while.

With this in mind, what has this crisis taught you so far? Think hard on this. For me, it’s been a manifold lesson. The crisis has reinforced my belief in clear and honest communication. It has emphasized the cooperative nature and needs of our professional and of our personal lives. It has taught me that when we recognize we’ve lost control of many important aspects surrounding the way we conduct business, it’s poignantly unsettling. It has also taught me that we can survive much more than we could ever have imagined.

Hence, what should our go forward best practices be? How do we formulate and realize a new set of expectations and needs, as we re-enter the business world?

Brands and manufacturers must level the playing field with their retail partners. Margin agreements, sell-through percentages, swaps and outright end of season returns, must all be reconsidered. Since the brands/manufacturers must lay out all the funds upfront for design, development and production, and then wonder what margin they will ultimately end up with after the season is over, it’s obvious that the formula is wrong and the relationships are one-sided. When Purchase Orders stop being contracts we can count on, it’s obvious that the relationships are one-sided. When terms of payment can be arbitrarily changed without mutual consent, it’s obvious that the relationships are one-sided. When retailers break price whenever they choose during a season, forcing sales and promotions globally, it’s obvious that the relationships are one-sided.

It’s also obvious we won’t be able to correct all the above problems that impact the vendors to retail so seriously, but there are multiple things we can start doing immediately, company by company that will help begin the process. Don’t sell to a store if you know that the net margin you will achieve won’t be enough to make the sale worthwhile. Be more selective in your channels of distribution. Demand better terms on your purchase orders, or walk away. Be reasonable with your retail partners, when in fact they behave as partners. Some problems must be shared. But there are numerous options, as we’re coming to realize now, that can be offered to retailers that can still guaranty you a reasonable margin.

Spend less on product development, develop fewer seasons and fewer styles. Be much more diligent on your edits. Assort better for the new normal so you are confident that what you’ll be distributing has the best chance of appealing to your consumer. Seasonal demarcation will become less important. Think more about when your products will actually be in the stores and what your consumer wants from you at that time. Don’t produce limited runs of product that end up reducing your margin due to minimum quantity requirements from your factories, or excessive costs of development. Learn to say no.

Take control of the sale. Avoid distributing to locations where you do not feel your product will be received well. Conbsider taking your in-house sales team off of commissions, at least for the majors! Instead, incentivize them based upon their ability to sell into styles that perform best. You all know what your sell-through percentages are at the majors. Award your sales team for identifying those styles that performed the best. Focus on bottom line over top line. If dilution is excessive in any one distribution channel, learn why and don’t repeat the same mistakes that caused it in the first place.

Chasing DTC sales when you’re not netting a reasonable percentage on them is a futile endeavor. Success in DTC channels is in the data. Study it and plan ahead. Spend thoughtfully on digital marketing, and know where you can and cannot compete.

Finally, the leaner your organization is, the better you will be able to withstand adverse circumstances. Maintain an overhead that is manageable. Do away with whatever isn’t a must have until you’re on your feet again and able to use profit to build growth with. The perspective that more top line volume will inevitably lead to more profit is not a certainty.

This pandemic is testing our will, our skills, our business plans, our outlook on business and life in general. It feels as if the game we’ ve palyed for so long is finally over and a totally new one is soon to begin. What I’ve learned so vividly in these past weeks and months is that we cannot be in control of everything, but those aspects of our personal and professional lives that can take contorl over, we must exercise and we must do so prudently, honestly, with integrity and with vision. Hard choices need to be made during the recovery, once the world reopens for business. It won’t be easy. Q2 will be a loss for just about every industry and there’s nothing we can do about it. Take the losses in stride and devote your energy toward planning for the future. If you can get past the reality of this loss emotionally, you’ll inevitably find it easier to get through it financially, and be better positioned to make rational choices on your way to prepping for the new normal.

Be safe, be smart and stay healthy.

Best,

Gary