Managing Innovation and Competition by Improving Asset Value and Marketing Effectiveness: Spotlight on the Outdoor Recreation Economy
The purpose of this article is threefold: First, to summarize how the pressure to innovate hampers inventory management efforts; Second, to summarize how competition and media fragmentation complicates effective marketing; third, to recommend an inventive solution to improve asset value and marketing effectiveness while facing these two challenges.
While this article focuses on the outdoor recreation economy, its findings are applicable to any industry.
The Outdoor Recreation Economy
We all know that the great outdoors is BIG – dozens of national parks; hundreds of national memorials, monuments, trails, sites, battlefields and seashores; and millions of acres of public land throughout the United States. In fact, almost 40% of land in the United States is public, which explains why it is so easy to find beautiful places to picnic, swim, camp, or otherwise unwind.
In addition to the sheer size of the outdoors as a destination for American families to pursue leisure, sport, or adventure, the outdoor recreation economy is equally large and vital. For example, the outdoor recreation economy generates approximately $887 billion in consumer spending and employs over 7.6 million people nationwide. Outdoor recreation is a bigger industry than autos and pharmaceuticals, and it is almost as big as the financial service/insurance industry.
The outdoor economy is certainly unique and interesting, not only because of the linkage to recreation but also its connection to the environment, conservation, and public health. But while unique, firms in the outdoor economy have pretty typical objectives: the need to create value for stakeholders, increase share of market, and provide satisfactory experiences for their customers and employees.
Two of the biggest challenges facing firms in the outdoor space – and any industry — are how to manage innovation, and how to weaken competition.
Innovation and its impact on inventory
The pressure to innovate in the outdoor recreation economy derives from multiple sources:
• Proliferation of segments: The outdoor recreation economy is powered by no less than ten segments including camping, fishing, hunting, as well as snow sports, water sports, wheel sports, and trail sports. This creates a LOT of new products vying for warehouse slots and consumer interest.
• Pace of technology: Technology moves at breakneck speed. This necessitates numerous improvements that must be quickly brought to market: higher-performance sporting equipment, more durable outdoor gear, and new ways to embed technology into EVERYTHING — apparel, footwear, and the new and thriving segment known as wearables.
• Seasonality: Shorter selling periods are another reason to innovate. For example, consider the almost continuous changeover from snowboards to paddleboards. Consumer attention spans are so short, and the latest bells and whistles are critical to standing out during tight merchandising windows.
Creating a robust pipeline of new products….. adopting new technology… coming up with something new every season… Sound familiar? Feeling a little stressed just reading this? All of these pressure points result in constant struggles for both manufacturers and retailers to produce and market new lines with ever-changing materials and features.
A important consequence of innovation is the investment in inventory and other assets (real estate, production lines, vehicles, infrastructure, etc) that is required to ensure that product is available and distributed in a timely manner. And in spite of best efforts to forecast, manage the supply chain, and advertise, oversupply is not uncommon. Moreover, there is simply no way to accurately predict sell-through, and analysis shows that 85 to 95 percent of all new products fail. In short, surplus or under-performing inventory and assets are the expensive results of innovation.
The traditional strategy to avoid surplus inventory is to be overly conservative (don’t produce enough) or overly aggressive (produce too much and then discount or liquidate). An alternative strategy is to use trade finance techniques to lock in sales sales volume and price points, by partnering with Sherwood Integrated Solutions.
Sherwood’s Asset Purchase Program mitigates inventory risk. When you work with Sherwood as a partner in this program, you will avoid suffering losses on surplus or underperforming inventory. In addition, this solution extends to real estate, equipment, and other assets. So updating property, plant, and equipment in order to invest in new products and technologies becomes less of an issue. Imagine locking in pricing at full value. If the inventory doesn’t sell at the end of the season or becomes obsolete, it won’t gather dust in the warehouse. With the Asset Purchase Program, you can sell off this extra inventory at an acceptable price. This in turn frees up capacity and improves supply chain operations.
Competition and its impact on Marketing Effectiveness
Another major challenge is presented by the competitive landscape Returning to the outdoor recreation example: A decade or so ago, it would be normal to see outdoor gear confined to specialty retailers, department stores and mass merchandisers – REI, EMS, Cabela’s, Dicks, Wal-Mart, Target, Sears.
However, as is the norm in today’s world, these traditional stores are being disrupted by the likes of Amazon, a company that made an incredible $136 billion in net sales last year.
Outdoor recreation brands and retailers now have to battle on two fronts. The first is engaging with consumers in traditional brick-and-mortar stores, providing them with “high touch” customer service. The second is to compete effectively via e-commerce against Amazon and other online brands.
The terminology has evolved along with the marketing and distribution channels. Here are some useful terms to help describe today’s consumer behavior:
• “Showrooming” is when a shopper visits a store to check out a product but then purchases the product online from home
• “Webrooming,” on the other hand, is when consumers scour products online before going into the store to evaluate and purchase.
• “Omnichannel” is a term which accurately describes how customers engage with companies or brands in many different ways across multiple platforms.
This somewhat complex shopping experience is not hard to imagine: While some customers spend hours researching ski equipment on their laptops before seeking their best deal in store, other shoppers will spend hours researching backpacks and camping gear in store before confirming their best deal online. And with mobile technology, it even happens simultaneously as shoppers use their phones while they are evaluating bicycles to check reviews and prices. The question: is it possible for outdoor retailers and brands to be EVERYWHERE?!
In order to compete in the omnichannel environment, marketing has become more fragmented and potentially expensive than ever. A successful approach to capture consumers’ showrooming and webrooming behavior requires a broad portfolio of spending: traditional, digital, and social media; in-store marketing; e-commerce; website and online content using not only text and image but animation, video and even VR; and big data to handle analytics. All this in addition to the supply chain necessary to get product to where it needs to be… Needless to say, this makes marketing effectiveness and profitability a Herculean challenge.
Sherwood is able to support you in this new competitive landscape by making your marketing and operational expenses more effective thanks to our capabilities and broad relationships in media, marketing, and supply chain… we help you deliver all of these mission-critical services more efficiently.
Persistent, measurable improvements in how you sell things and how you buy things
Sherwood Integrated Solutions helps to lighten the pressure of innovation and competition. Whether you have an existing issue such as older-generation rafts or kayaks languishing in a warehouse, or if you want to take a more aggressive position in the next generation of water sports products, Sherwood will enable you to achieve the volume, pricing and sales you require to stay in control on the fast current of sales and marketing.
At Sherwood, we do three things very well: we are experts at inventory and asset recovery; we have access to best-of-breed media, marketing, freight, and logistics services; and the transactions are leveraged by trade finance techniques that mitigate risk, contain cost, and improve processes and performance results. Call, click, or contact Sherwood today to learn more.