Putting it Behind Us

Greetings from the IMRA Marketing Conference--200 of my closest friends have convened in the New Mexico Pueblo to share information about the zeitgeist and to see what happens next.

There is an air of uneasiness here--not overwhelming, but most definitely present. Most of it surrounds the fallout of the Coach Debacle, and the uncertainty about whether Coach is the last or just the most recent refugee from our market. The community is wondering whether other Brands may take Coach's lead and "get control of its distribution" by exiting the business.

One thing I did learn--Dooney & Bourke will NOT take the lion's share of Coach's business. They have concerns about their ability to deliver all that opportunity and they will be judicious about taking on new programs and/or accounts. Bully for them--better to say "no" than "maybe" and disappoint clients already suffering from Coach-itis.

Now that most of the dust has settled it's easier to see the damage caused by the Coach situation. The real losers in all this were the Reps, who lost a major source of income and presence with their accounts. Resellers will replace Coach with something else, participants will select some other product instead of that Coach piece. But the Reps find themselves with a void in their income stream and no immediate way to replace it.

And the prevailing sentiment is one of frustration--that Coach was less-than-forthcoming about the circumstances that led them to issue their Corporate Division the Death Penalty. That there hasn't been any "closure" about Paul Spitzberg--one day he's off to tend to a family medical issue, the next day his voicemail says he's no longer with Coach and that all questions should be addressed to his former second-in-command.

And everyone wants someone from Coach to give us the full story--everyone wants to be the person who gets the definitive interview with the principals that will give us something to hang on to about all this mess. As I've said--the market deserves the full story, but it's unlikely that we'll see it in the near term...

Oh, one more thing--when I go to Sam's Wholesale Club this June and see a Coach piece in that display case (you know the one--next to the jewelry counter), should I send a snide note to Coach wondering where THAT piece came from since they killed Special Markets to "get more control over where Coach product is sold"? Just wondering...

Some other Random Thoughts about the Conference:

• I've seen some non-traditional attendees this year--more than I recall in the past. There are more Master Distributors (or Multiple Resource Coordinators if you wish) than before. I've seen a couple of promotional marketing companies here, looking to work with reps to create and execute companion airplane offers and other non-merchandise programs. It's another example of the further splintering of the business from my view.
• Those of us who are positioning gift cards to the reseller audience have been frustrated, and nobody's exactly sure why. Those resellers that use gift cards have been happy, but there haven't been as many as we thought and/or expected. There's some concern that resellers are "afraid" of losing control with their clients--that by selling Gift Cards they will have less impact on what their clients want to use for reward and recognition programs.
• I had a long chat yesterday with someone who has always been a "forward-looker" and this person believes that Reps and Brands are too entrenched with resellers. This person postulates that by abdicating influence on the selling process (allegedly for more "feet on the street" and/or more mind-share) they lose the chance to make a compelling case for their products. Resellers are notoriously fickle, and few if any can communicate a Brand's value proposition in any real way.
• The New York Incentive Show is moving towards "sold-out" status--there is cautious optimism that this new incarnation will provide NY-area buyers with a viable show that provides education, networking, and a strong portfolio of Brands. Whether New York is the single largest target market in our market is not subject to discussion--maybe this time the format and venue will draw the crowds we all know are there.

The resilience of the business is apparent--it could have been a World Class Pity Party but instead we're hoisting our half-full glasses to figure out how to get past the Coach story and write the next chapter in our lifecycle. Hurray for us...

Pete

In Search of the "New" Rep

This coming Sunday (25) I'm heading off to Albuquerque for the annual IMRA Marketing Conference. It's the premier gathering of Incentive Suppliers and Representatives, a confab to meet, greet, network, and perhaps get a peek at the future of the Rep/Supplier relationship. As I prepare to go, I've made a little list of things I expect to see and/or hope to learn:

• A small group of Reps will be more highly motivated this year than in the past. I'm speaking about the Coach Reps, a group that has just seen a significant drop in their top-line revenue. I would expect to see them more assertively pursuing available lines.
• There will be some "buzz" about at least two relatively high-profile Supplier Management jobs--Samsonite and Cross appear to still be "in play" and it's likely some current Managers will seek to move to one of those opportunities
• I sense there is still a disconnect between many Brands and the Promotional Products Community. Some Brands have determined that the market is fertile ground to increase business, others have decided to approach it indirectly (through master distribution like Indigo and others) or ignore it altogether. But Reps are in the middle--PP distributors are a significant and (most likely) increasing percentage of their sales, and they must get their suppliers on board with tools and selling approaches to maximize that market.
• Allied with the above is some "grumbling" I've been hearing about some of the traditional "Big Kids" of the Incentive business--that the business with large Incentive clients is down somewhat but the demands of doing business with them haven't changed.
• Reps are being pressured to take on more lines because more suppliers are in the market. At the same time, Reps don't have the personnel and/or resources to effectively serve a large number of suppliers. Again, Reps find themselves caught between opportunity and resource allocation, and there are no easy answers.

In the interest of full disclosure, I will be bringing two new entrants to IMRA in search of Representatives. Both have cool selling propositions, but both will be challenged to find a way to cut through the "clutter" of an expanding Supplier universe. I'm going about my search the old-fashioned way--by appealing to the Reps to consider what we have to sell, how we're going to manage the business, and what's in it for them. Should be interesting.

And somewhere in all this I'm eager to learn what Reps and Suppliers believe is the state of their relationship and what (if anything) can be done to improve it for both parties. Pressures on Reps are increasing because of "unfunded mandates" placed on them by Suppliers, themselves pressured by the ongoing challenge to "do more with less". The dynamic is increasingly important because most Suppliers are in a symbiotic relationship with Reps--it's the Shark and Remora thing and both have a life-and-death stake in the outcome...

Talk to you after the Conference, with my two cents...

Pete

OK-now what?

It's been a week since Coach dropped the Big One on its Special Markets Business. And the press is rife with comments from reps, customers, and other suppliers. And the prevailing tone of this discourse appears to be one of "To Hell with them. We can do without them. There are plenty of substitutes for them."

This is absolutely true, and absolutely dangerous. The so-called "Incentive Business" is based on Branded products-the theory goes that our end-users are consumers at heart and they want the things they see at retail. When a Brand exits our market, or severely limits its distribution, the entire market suffers.

The last week of conversations has led me to believe that a kinder, more conciliatory approach is called for. There's nothing we can do in the near term--Coach has made a decision and there's apparently no going back--but in the longer term our market should reach out to them.

There are plenty of clients (we all know who they are) that made great margin selling Coach, never transshipped it, and protected the Brand as much as possible. Should the entire Market be penalized for the actions of a few selfish resellers that did evil things with product? I would suggest that a unified front, with 5-6 of the really Big Kids in front, would make an impactful presentation to the Powers That Be on 34th Street in Noo Yawk.

But that's later--right now we should dispense with the anger and frustration and look at this from Coach's perspective. Were we in their shoes we might have done the same thing--there's nothing so damaging to a Brand (especially an upscale one) than product getting out of control and being sold for less than retail in unauthorized channels.

The onus is on-us (so to speak) to convince Coach that they can have good, healthy business with a higher level of control. That argument comes later, however. Right now the finger-pointng starts and we ask "Why?" a lot. And as much as I believe the market is owed a full explanation, I don't think it's ever gonna happen...


Pete

A Nuclear Winter

And so today, March 6, 2007, Coach pushed the button, unleashing the "Nuclear Option" on its Special Markets Division. The fallout has already hit some of us, and sooner or later we all will feel the impact.

The move was being made, in part, in the words of their VP of Corporate Communications "to ensure that the company has more control over where Coach product is ultimately sold". I've been trying to figure out how that isn't an insult to resellers, especially those that never trans-shipped Coach product to unauthorized channels. Including me, by the way, as Coach was part of Laureate, my online gift card concept.

It appears to me that Coach had plenty of control already, and could have exercised more if they wanted to. Most of us would have gladly signed any reasonable document they might have put in front of us to "ensure that the company has more control". But we never got that chance.

At least everyone got the same deal--even Coach's biggest clients are doomed in the longer term. The Big Kids' legal agreements buy them time, but when those run out they will suffer the same fate as the rest of us. And make no mistake-EVERYONE lost on this deal:

Coach's Reps have lost a significant income stream. Coach resellers have lost a line where they could make healthy margins because of the perceived retail value of the Brand. And depending on whom you ask, Coach has lost $40 million ($50? $60? More?) in revenue.

Mike Landry of Tumi said recently that the entire market gets a black eye when something like this happens. And what are we to make of the market when a major Brand believes that our business is out of control enough to warrant the "Death Penalty"?

"Control" is the operative word. Every company that plays in our market has to weigh "growth" against "control". The Brand must make a choice--you can't have both. And when the "control" issues cause more trouble than the benefits "growth" provides there's a serious problem. We're seeing it in 3-D with Coach.

I was visiting with some contacts today and in the discussion a number came up that represents the impact on the Incentive Market of Coach's departure. The impact of lost margins, of lost commissions, of opportunity. It stunned me.

$50 million.

While there's no doubt that Coach can do whatever it wants to with its businesses, the impact on the market at large is egregious. Was there NO other option that would allow the Brand to continue in the market?

And somewhat lost in all this is my friend Paul Spitzberg. The man who sat in the chair and oversaw the major growth in Coach's Corporate business. Someone who was visible in our Associations and educational events. Where was Paul? His voicemail mentions a family medical emergency and I hope everyone's all right.

I hope we get a fuller explanation than some emails from a laryngitis-stricken VP of Corporate Communications. Coach's impact in our business is such that I think we're owed that.

Rest in peace, Coach. Dooney & Bourke, anyone??


Pete