retailciooutlook

The Social Drive of Retail

By Gene Ku, Chairman, Mobovida, LLC

Gene Ku, Chairman, Mobovida, LLC

This article is for any brand or organization producing a physical product or consumer good open to the possibility of exploring a new possible paradigm shift in the product development and marketing process. With the seismic shift in retail in both the offline and online worlds, brands and retailers alike are struggling to grow their customer base in a manner that insulates them primarily from the presence of Amazon.

The vertically integrated, direct to consumer business model provides such potential in that you own not just the manufacturing process but the most important component which is the actual customer relationship. This is why that over the last several years, billions of investor dollars in venture capital have been plowed into the sector with brands such as Warby Parker, Dollar-Shave Club, Honest Company and more. But is controlling manufacturing and establishing a brand enough?

“Consumer tastes are as fickle as ever and styles change with seemingly every Instagram personality or YouTube celebrity touting new wares from different brands.”

In comes the innovative digital marketing component to complete what we deem at our organization as the “agile product development process”. Never before has there been such marketing channels like Facebook that provide advertisers an unprecedented amounts of transparency for deep targeting and segmentation (think about that next time you decide on your next post). Having intel on who your customers and prospective customers really are, provide better tactical insight as to how those individuals should be marketed to, and better yet what specific customer segments want, need and demand from your brand, service or products. Such channels can be utilized as immediate feedback loops where dozens if not hundreds of ideas for improvements and enhancements can be drawn from.

But before we can explore how this process can be conducted, let’s first get an understanding of the traditional manufacturing and retail sales cycle using the $81.5B global mobile accessories industry as example. The production process that most accessory brands undergo for new product release for a new cell phone launch can typically be characterized by a lengthy, costly and somewhat cumbersome process which includes some or all of the following (maybe more) in some shape or form:

1. Post-Analysis of regression sales data from prior phone releases and internal demand forecast planning teams
2. Post-Analysis of trend forecasts from what planning departments from major brick and mortar retailers (Verizon Wireless, AT&T, Apple store, Best Buy, Target, Walmart, Staples, etc.) had suggested in the form of committed purchase orders and pre-commitments prior to production
3. Forecasting of trends and what consumers want via focus groups, surveys, independent third party research, but mostly a lot of.. “well it sold a bunch last time let’s do it again!”
4. Hypothesis of new styles functionalities, colors, textures, etc.
5. Product design, CAD drawings
6. Injection molding, sample production
7. QA process
8. Product manager(s) approval and production
9. Procurement overseas via air/ocean
10. Sell-through commits to wholesale distributors, and/or directly to retail
11. Retail presentation upon carrier phone model release
12. Hope and pray it sells!!

The inherent challenge is for the brand who undergoes this process and is allocated a certain amount of storefront real estate in the form of “hooks in a section” and has approximately a 6-12 month window, sometimes more, sometimes less to hope and pray that it sells! Well hopefully had they done their process and followed the steps properly, they’ll have a better chance that all of their hard work conducted via the 12-step process for success leads to sell through and re-buys, and does not lead to “dud” products, aging inventory and a 12-step process for sobriety! The latter represents an incredible amount of capital expenditure and time wasted, not to mention having to figure out what to do with the old inventory and write-downs.

But what if you could circumvent some of the capital and time risk of this process? What if the focus is on the consumer trend of NOW and not 6-12 months into the future? Consumer tastes are as fickle as ever and styles change with seemingly every Instagram personality or YouTube celebrity touting new wares from different brands. Producing with an agile and demand-driven process will require certain steps which can change and evolve at any given moment (hence agile). The formula we’ve incorporated that now has our organization growing our sales nearly 100 percent year over year (and our branded sales over 1,000 percent), truncates the traditional model presented above considerably:

1. COPY BETTER – If and where possible identify the trends that are propping up now to your target audience in your industry. See how to make it better then produce.

2. PRODUCE METHODICALLY – Systematically produce based on initial customer demand. If sales exceed inventory produced then scale production based on a series of demand indicators (backorders, returns) - much easier done with a vertically-integrated manufacturing stack.

3. LISTEN – Listen to the customer and elicit live proactive feedback on how to make your product even better.

4INCORPORATE – This is the key component – not just listening to the customer but actually giving them what they want in terms of product improvements, enhancements and additions.

All of the above assumes you have a sophisticated (hopefully digital) marketing ecosystem to drive the process. For example, in our company as a direct to consumer online retailer of mobile accessories, we’ll utilize our intel and have a strong sense of what competitor products are moving and produce our versions (copy better) and launch them to market on a channel like Facebook. With Facebook’s massive audience segmentation capabilities, we’ll launch a Facebook product ad to a particular demographic segment audience that consistently purchased similar products in the past (there are literally millions of segments and audiences an advertiser can create). If the ad is successful, which we’ll know right away as Facebook algorithmically serves the ads and scales reach your audience with velocity based on your specific budget and target customer acquisition parameters, that means that particular segment is highly receptive to the product and we’ve sold through the initial run. The next step is we methodically scale our production based on our audience size and other factors (produce methodically).

The more exposure the ad gets over time more live customer feedback is generated and conversations occur amongst the audience serving as a “live feedback loop” (listen). Based on the volume of customer feedback we will incorporate such improvements in our next production run and re-release the product with said improvements to those same or similar audiences with optimal, scalable results (incorporate).

As long as the manufacturing process is controlled and there is a direct-to-consumer marketing ecosystem (preferably digital) to provide both a sales channel and immediate feedback loop, elements of such a process can be applied and scaled across nearly any retail category regardless of industry segment. Rather than the final step being “Hope and pray” brands and retailers can begin to trust the intel they gather, take a disciplined and scaled approach to production, sell effectively through data-driven marketing channels, and make continual improvements to the product and the process. In the end, the sticking to the theme of agility can help brands and retailers not only survive but thrive in this rapidly evolving environment.