Here are five lessons Gene has learned throughout his storied career.
The last 10 percent is more important than the first 90 percent
Whether it’s a premium athletic shoe or a luxury car, it’s the details that matter. The distinguishing value of those types of products come from the added incremental details which are usually the last 10 percent of finishing a product. The more fun stuff.
Today’s consumer doesn’t just want things that work, they want products about which they can feel an emotional connection. And what they often fall in love with are the fine details. One example is when Ford enlarged the size of their cup holders years ago to accept a Big Gulp. Their sales increased. Apparently for many, Big Gulps are fun and an important part of the driving experience.
That last 10 percent of a product is often used to tell a story. What is the difference between a generic football jersey and one with the name of a star athlete? That name stitched on the back of a piece of athletic apparel tells a story about you. That story could be about where you live or something you wish to tell the world about your personality.
Probably the most iconic example is the Air Jordan brand from Nike. That small symbol of an outstretched flying basketball player in a move called the Grand Jete took a great shoe and turned it into a $3 billion per year enterprise.
20 years ago consumers chased brands. 20 years later, brands chase consumers
We are living in a consumer-driven universe. There’s been an axis shift between the corporate brands being king and our planet now containing seven billion brands who think they're king. Each person among us is a brand, and this shift is a force behind the struggle with brick and mortar retail and how products are increasingly marketed to consumers. Consumer product brands must contend with the fact that the consumer is now in charge.
The mandates from the brands are no longer as powerful. Advertising and even celebrity influencers are becoming a less material force for selling consumer brands. We listen to our friends to judge a product and whether or not we should own it. The power has shifted from the corporate voice to that of every person out there.
Before Nike had an advertising budget, they used to call consumer influence “Word of foot”. They depended on that as their main marketing channel. Gene thinks that concept is even more relevant today than it was back when Nike first relied on the power of fans to sell their shoes.
In fact, what a kid wears proudly in school may be more important to the brand that what the local sports hero wears on the court.
Greater talent lies inside challenger brands than leader brands
Having been with some of the most prominent companies in the footwear industry, and then moving his career to brands fighting for market share, Gene was astounded by how much more talented and hungry the people were who built winning challenger brands.
Gene characterizes talent that is often found in challenger brands as interesting, intriguing, and out of the box thinking. He contrasts that with people in leader brands who focus instead on how to incrementally improve what they already have in order to stay ahead.
Having been a top NCAA athlete, Gene uses the analogy of a runner starting out in the lead. In order to hold on to their lead, they aren’t going to do anything risky. The challengers in second, third or beyond are back there trying to come up with strategies and ways to take the lead and win the race.
We all remember the legendary Avis quote, “We try harder”. Avis was portrayed as working toward achievement while the established brands were defending, and that dynamic occurs in virtually every industry. The difference between achieving and defending has a strong influence within the corporate culture that tends to attract better talent. The right talent wants to invent something great rather than maintain what is.
Even though the more established brands have deeper pockets to pay for better talent, the challenger brands can offer people something money can’t deliver: the ability to create the next world leader in the category. Therefore, the challenger tries harder. “To beat Goliath, you need to be a feisty brand.”
Doing well and doing good are not mutually exclusive
Doing well is reaping the monetary rewards of a successful brand. Doing good is effecting a change in the world without regard to the return it brings to the brand’s bottom line. Doing good starts with the heart, not with a corporate strategy. There’s an important distinction between charitable community values being sewn into the fiber of your corporate soul and a list of the charities to whom you sent money last fiscal quarter.
Presenting his corporate philosophy to large audiences all over the world, one slide Gene is particularly proud of states, “No one cares about your brand until they know what your brand cares about.” Gene believes strongly that doing good requires more than just checking the box on the appearance of corporate goodwill
Gene tells a story of his time at the helm of Timberland, whose core values were anchored to this idea of doing both well and good. One year, they chose to conduct their sales meeting of 300 employees in the city of New Orleans shortly after Hurricane Katrina. Their initial purpose was to support the community by bringing some badly needed outside commerce to this struggling area and also to spend a planned full day to help build homes and clean up parts of the hardest hit areas.
Once there, the Timberland employees exited their busses and looked around at the unimaginable devastation surrounding them. One employee removed her Timberland boots and simply left them at the side of the road. One by one without saying a word, others started doing the same until 300 people in socks walked back into the caravan of buses to return to the hotel.
Profitability depends more on what doesn’t sell than what does
Gene reflected on two important quotes he’s carried with him throughout his career. “There are only two types of shoes in the industry. Shoes that sell and shoes that don’t sell.” And, “You don’t make your money on the shoes that sell. You lose money on those that don’t.”
Too much focus is given to the products that sell in any given quarter rather than the product that didn’t, laying in waste in the warehouse or store. Looking at what sold is only part of the measurement of sellthrough. An equally important contributor to sellthrough is what did not sell. Too often, companies place a disproportionate focus on the former.
One of the top growth industries in the US is storage facilities because Americans have a difficult time getting rid of their stuff. Because we would rather pay to hold on to our remote mountain of stuff than let it go, a $40 billion industry has emerged to satisfy that compulsion.
That mentality, according to Gene, exists in part within corporations. Rather than being willing to part with their huge quantities of inventory, they do nothing. Rather than turn that inventory into advertising or capital for current needs, it sits doing nothing but incurring holding costs. Many times, assets just become stuck because of fear and/or indecision.
Gene reminds us that the best buyers in any industry are not the ones who pick the right product, but those who get out of products just before their lifecycle ends. “I think we’re too focused on who can be first to pick the purple shoes versus those who say they’re not for purple just before purple goes out of style.”
Of course, from the perspective of Evergreen Trading, we fully admit our bias and couldn’t agree more. We see the difficulty companies have in divulging their excess inventory, much less in using some of their resources to transform it into a much more productive asset.
If only the corporate world agreed with Gene that “Distressed inventory isn’t a land mine. It’s a gold mine.”