HOW CGTA WHOLESALERS ARE LIKE WINE EXPERTS

 Wine experts make predictions about vintages in much the same way CGTA wholesalers judge a product collection.  

Wine buyers will purchase a wine today even though the wine itself will take several years to mature.  Consequently, wine tasters are employed to taste the wine today and then assess how well it will mature.  The buyers will then rely on this assessment of the future to price the wine.

CGTA wholesalers ship the bulk of their collection immediately following a trade show.  Because they are importers they need to place their production runs 4 to 6 months in advance of the trade show.

So much like the wine industry, CGTA employs product developers, think of them as wine-tasters of the industry, to select products they believe will sell based on their experience.

Now predicting the future is always a difficult task.  But those who can do it well are rewarded handsomely.  So let’s take a look at how some in the wine industry and in the CGTA have made prediction easier.

In 1989 an unknown (to the wine industry) mathematics professor, Orley Ashenfelter, predicted that the 1989 Bordeaux would be the “Wine of the Century”…without having tasted the wine!

Wine experts went ballistic!  The Wine Spectator, the premiere wine magazine with a subscription base of 30,000 oenophiles characterized Ashenfelter’s prediction as “Neanderthal” and “ludicrous and absurd”.  

Nevertheless Ashenfelter stood by his prediction.

When the vintage reached the market, Mr. Ashefelter’s prediction proved correct.  All the “wine experts” who disparaged Mr. Ashefelter were wrong.  They all missed predicting the “Wine of the Century”.  You can read an account of this here.

Wine experts assess the quality of a wine by tasting it.  With a wine like the Bordeaux they would taste the wine after it is casked and then make an assessment as to the eventual quality of the wine several years in the future.

The experts will assess qualities like, balance, tannins, cassis, earthiness, etc.  Not only are these very subjective characteristics, they need to forecast how these characteristics will change over time as the wine ages.  

Now think about that for a minute.  How could anyone taste something today and then predict how it will taste at some time in the future?  Seems kind of ludicrous when you think about it, doesn’t it?  Yet, at the time, people believed this was possible and these experts were highly paid for their forecasts.

Is it really any wonder these experts failed to predict this “Wine of the Century”.

Yet Mr. Ashefelter did predict the wine would be outstanding without the benefit of a tasting.  He used a simple formula which he developed which was:

WINE QUALITY= Winter rainfall + average growing season temperature – harvest rainfall.

Now of course the wine experts were outraged. How could their years of experience be surpassed by a simple formula…but it indeed the formula proved better and continues to this day.

HOW CGTA EXPERTS ARE LIKE WINE TASTERS

3 years ago, in the CGTA, an expert panel with 10 to 15 years experience each, were shown a vendor’s new collection before it was offered to the market.  Our expert panel worked closely with their customers, read all the home décor magazines and generally kept abreast of the industry.

Among the dozens of new products in the collection was this rather unassuming product:

They were asked the sales potential for the products in the new collection and their reply for this particular product was greeted with a shrug.  “We have a few customers who may be interested”, was the common reaction.

A CGTA SUCCESS THAT TOOK EVERYONE BY SURPRISE…almost

Now when you look at that item, it’s not difficult to imagine why the expert panel didn’t predict this to be a huge success.  It’s not particularly exciting.  Yet this product was probably one of the most successful products ever sold in the CGTA.   

Where most products sell 300 to 500 units this product sold over 20,000 units.  That’s huge. Now think of the consequences of being unable to predict the sales of this item.

$195,000 POTENTIAL LOST SALES...and a lot of disappointed customers

A wholesaler who usually sells 500 units of an item isn’t going to take a bet on producing 20,000 for a trade show. So if they encounter a truly successful product, most of their customers would need to wait another 4-6 months to get the item.  Think the customers would be happy?  Absolutely not, and most customers would have cancelled their orders.

That’s a lot of lost sales potential for both the wholesaler and all their retail customers. In the case of this wholesaler they could have potentially have lost $195,000 in sales on this $10 item (19,500 units x $10).

Yet every trade show wholesalers produce too few of their bestsellers and too many of the items they incorrectly thought was going to be a hit.  That’s the worst of all possible outcomes…lost sales and dead stock.

HOW THIS WHOLESALER AVOIDED THE PROBLEM

It's hard to make predictions, especially about the future.  Neils Bohr, Nobel Prize, Physics

This wholesaler, fortunately, didn’t rely on the forecast of their expert panel.  They didn’t need to.

The wholesaler actually asked their customers, several months before the collection was introduced, if they were interested in the product.  The customers, CGTA retailers, said yes they were interested and they placed their orders immediately…several months before the trade show.

Too many wholesalers believe they can predict what customers will buy, despite the fact that season after season they mostly get it wrong.

Now before we get too excited, let’s be clear on one thing here.  The inability to predict what will sell is not the same as offering products no one would buy.  Obviously wholesalers offer products that retailers want, otherwise they wouldn’t be in business.

The challenge for wholesalers is to predict the quantity they will buy; and most aren’t very good at it.  Many wholesalers turn their inventory 2 times per year.  That means in any given month they have 6 times more inventory than they can actually ship.

And that costs a lot of money, which is built into the price of the product.  

With retailers struggling to compete with price-chopping big-box retailers like Homesense, wholesalers need to improve if they want their customers to survive. (One of he main retailer complaints about wholesalers is high prices.)

Pre-season booking programs, which this particular wholesaler used, help both the wholesaler and retailer compete more effectively.  Unfortunately only a few wholesalers in our industry have developed the skills necessary to offer booking programs to their customers.

They simply sit back and wait for trade show orders to appear.  Retailers deserve better.

If you’re a wholesaler waiting for the trade shows to launch your new collection each season you have a problem.  And that problem is that you will eventually be unable to compete with wholesalers who offer booking programs.