Sierra, outdoor outlet store chain, is planning on opening 26 new locations in the next 12 months. 26! Great overview of the industry dynamics at play by Colin True on The Rock Fight this week. Colin very pointedly calls out that this isn't about a short term 'supply chains and post pandemic' inventory glut. This news demonstrates that TJX and Sierra have a firmly held belief that outdoor companies are going to continue making too much stuff at an increasingly sustainable rate. It's been feeling a lot lately like we need a rudimentary class in basic supply and demand economics in retail. Several times a year I hear the phrase 'well, if you're planning to be down, you're going to be down' uttered advocacy for larger orders from retailers. That statement, along with the implied growth mentality behind it, and the choice to ignore demand as key factor, is a plague on the outdoor industry. Making more product does not always correlate to more sales or more profit. It just means you made more product. Sales are determined by demand - and as we're seeing play out year in and year out at an increasing level in the outdoor space - when supply outstrips demand...surprise surprise...price reductions are the only exit plan. Why are overproduction and price reductions such an issue?? 1.) As Colin points out - not a day goes by that we're not hearing of some aspirational sustainability story from an outdoor company. Allowing the continued and sustained over-production that is occurring year in and year out is flagrant hypocrisy. Where are all the 'we only make what we need to' sustainability initiatives? 2.) Price reductions - The drumbeat is growing from all sides of the industry on shrinking profit margins. Retailers, reps, and brands are paying higher wages, shipping costs, electric costs, insurance costs, legal costs, production costs, marketing and media costs, testing for PFAS costs, and the list goes on and on. Profitability is getting squeezed at every step along the way from production to retail and the impact is being felt on many levels. So why are price reductions bad for business?? Because in a world where margins are already getting squeezed, every dollar lost along the path might mean one less employee to help a customer have a great experience, get outside, and achieve the thing we say we're all in it for at the end of the day.
Founder at Rock Fight | Writer | Producer | Host of THE ROCK FIGHT | Likes coffee and going outside
Last week we got back to back stories from SGB Media and The Daily by Outdoor Retailer about the good times being had at The TJX Companies, Inc. TJX of course owns Sierra which is the go to place for outdoor closeouts and the good times being had are a result of all the issues going on across the outdoor industry. TJX is so confident in the way things are going that they are planning to open 26 new Sierra stores in the next calendar year. Dealing with excess inventory is an important part of the 'making stuff' ecosystem. We need those willing and excited to help clean the slate. The Winston Wolf from Pulp Fiction problem solvers and the vultures who swoop in and ensure that we're not standing ankle deep in old roadkill. But the thing that we're overlooking is that TJX's confidence is based in the amount of stuff brands are going to pump out in the coming years. So much so, that they're opening 26 more stores this year alone. Stuff from brands that market themselves on the back of conversation, environmental stewardship, sustainable practices and an increase in circularity. That's the topic on today's episode of THE ROCK FIGHT: The Wolves and Vultures of the Outdoor Industry. Available at the links below or wherever you get your podcasts. https://lnkd.in/gGWJGdyK #outdoorindustry #sustainability #circularity #closeout #podcast #outdoors
Benji Thrasher
9mo
This is such a great post. And so spot on! Hope all is well Gabe!
Eddie Soehnel
10mo
(Part 1) There is no incentive to produce less, considering all the stakeholders that rely on new product sales - investor dividends, employee jobs, suppliers operations/jobs, contractors, etc. The industry is stuck without an incentive to product less - called degrowth. Who wants to get laid off because your company decides to degrow and put a cap on how much gets produced? So everyone keep producing more, discounting it, which means a race to the bottom, where everyone loses. On the other side is the market. People's garages and closets are saturated with too much product after decades growth. Layer on all the other fiscal problems that are time bombs waiting to go off (govt fiscal/monetary issues, entitlement spending, wealth inequality, growing costs from resource constraints, climate change, conflicts...I can go on.), and there could be a reckoning where the consumer can't spend anymore, government can't keep stimulating, and low on the totem pole is funding for public lands, which gets decimated (because government spending has to slow down). The industry needs balance in revenue from many sources - new product sales, used product sales, rental, repair. But the tools to do these are too immature.
Eddie Soehnel
10mo
(Part 2) What could help is adopting a standard across the industry that pays a 2% royalty fee to all originating brands from used product sales - no matter which platform - and equipment rental fees - no matter where they happen, paid by the buyer (call it a tax). The tech to do this is easy and already available. We just need to come together, agree on it and start doing it. This is high margin revenue that goes right to the bottom line to help manufacturers. Back of napkin projections show a brand could reduce new product sales 10% yet still maintain net income, Some brands could be a lot higher. Imagine if the whole industry produces 10% less stuff but still maintains net income. That could help.
Wes Allen
10mo
Gabe Maier, you really nailed it. "Make less stuff" should be the mantra for any brand that is serious about profitability and /or sustainability. Yes, we all need to have enough products to make our sales numbers. BUT. Virtually every brand in the industry has overproduced in the last two years—and it is killing businesses. Plus, we all should reserve the right to riot at the next line showing from a brand chirping about their next greenwashed product when they have tens of thousands of items on their closeout list. The hypocrisy is starting to be overwhelming. You know what is truly sustainable? Responsible f'***ing production planning.
Nick G
10mo
Scarcity can be an incredible profit tool, provided the top line dollars are planned right. The other piece in this glut equation, I think, is the fact that every retailer now seems to be an outdoor retailer. From Urban Outfitters to Nordstrom to...when brands open wholesale doors in verticals they have not historically, the potential for inventory blowback is high(er). Gabe Maier, thanks for this.
Jessica Bishop
9mo
Very important conversation. Are they listening?
TERRY ATWOOD
10mo
Go Woke Go Broke.
Colin True
10mo
Thanks for sharing, Gabe. Love the additional insights here.
VP of Revenue at ULTRAVIEW Archery
10moWell said Gabe! Are you, or any retailer, able to sing the praises of a brand that has held the line? I keep hearing all the negative around the industry, I would love for once to see a spotlight put on the responsible manufacturers that are working hard to be a part of the solution. Do any even exist today?