Back in 2005 my brother and I bought a tiny kayak company and over the following 11 years we built it into the largest independent kayak company, selling it off to a Private Equity fund in early 2016.
Since then it has been painful to watch as it has been dying a slow death. At the peak we had around 125 kayaks, including all their colorways, and in our stores we had 75 floor models alone.
Today, that same company has 19 kayaks with just a few colorways.
The problem they ran into is simple and something everyone reading can avoid.
The business was built on customer service and selection. We went wide and deep in product, meaning we carried every color and every size of each product. Sure this meant that 125 kayak models was closer to 1,000 kayaks, but it also meant we had the broadest selection.
Couple the selection with service and you have a winner.
We hired avid kayakers as our customer service team and store associates. They loved to talk about kayaking and whether Jim from Florida would call asking for Kate, or whether a customer service representative was on the phone just talking about their last trip, they had one thing in common: they loved to talk about kayaking.
We were 100% focused on the customer and that meant investing heavily in profit losing items, selling nuts and bolts for $0.25 and carrying the most arcane items you might ever need.
We also merchandised like crazy. When you have that many options, you need to make sure the customer is seeing the right product at all times and that you are also maximizing things like coop dollars. We didn’t have the luxury of great personalization tools, but we ran our own segment builder for emails to ensure that no one was getting a blanket email, it was as personalized as possible, living true to having a real value and service.
The problem was that when we left the smarter people with the spreadsheets who didn’t agree and started “optimizing” the selection and cutting those unprofitable products. They also saw outsourcing customer support as a cheaper alternative.
They were not wrong in a vacuum. But there is a link between selection and service that you cannot calculate on a spreadsheet and it is perceived value and trust.
Invest in things that increase the perceived value and build trust and your lifetime value will skyrocket. Don’t manage by a spreadsheet or in a vacuum.