Channel Mastery - Ep. 190: Kristin Carpenter, Founder of Verde Brand Communications

Verde Brand Communications

Covid-timed consumer, consumer Trust + spending trends, held inventory

featuring

Kristin Carpenter is the founder of Verde Brand Communications and the host of the Channel Mastery podcast. She earned her stripes in the $873 billion outdoor recreation industries through a decade-long career as a journalist. In 2001, she pivoted from reporting on stories to helping brands create their own stories in the launch of Verde Brand Communications, an award-winning brand communications, PR, and digital marketing agency. In 2018, Verde launched the Channel Mastery podcast to help specialty brand leaders modernize their businesses to be exceptional to today’s connected shoppers.

show highlights

In this special solo cast episode of the Chanel Mastery podcast, Kristin dives into the level setting we’re seeing in the business landscape and, more specifically, in the outdoor industry as we head into one of the largest buying periods of the year. Kristin touches on the regression of the Covid-timed consumer, economic slowdown, consumer spending trends, held inventory, and the important months ahead that can not only shape how we finish this year but also set the tone for the partnerships we have and how we work to maintain and build trust with our consumers in 2023 and beyond.

Welcome back everyone to a brand new season of the Channel Mastery Podcast and to season eight, The Ocho. Honestly, I'm not even sure what season we're on. We've been producing the show for five years now, but I just like saying The Ocho so we're going to go ahead and say it's season eight. My name is Kristin Carpenter. I'm the founder of Verde Brand Communications and the host of the Channel Mastery Podcast. So stoked to be here with you today. Verde is the presenting sponsor of Channel Mastery. You can check out our incredible clients, our awesome team and our services that support our specialty outdoor recreation clients at verdaypr.com.So I'm recording this show just at the end of July. It'll air August 1st, 2022. And there is so much going on in our businesses with the economy and with the world. And all of these are factors influencing our consumer today. I have to say, there's not a lot out there for us as specialty business leaders to lean on as far as resources go that are tailored especially for us right now through such a complex time. And that's why we're doing Channel Mastery. We're here to bring you your business resources and analysis insights, everything tailored for specialty brands operating in the outdoor recreation space. So taking the macro trends and making them relevant and actionable for you basically.And we're ramping back up for weekly shows and we have Verde as our presenting sponsor, and we have a brand new sponsor too for this season going forward. The Lifetime Sea Otter Classic Executive Summit, 2023. I'll catch you up more on the details of that at the close of this episode, but know that we're very proud to be working to produce the April, 2023 Executive Summit for leaders in the outdoor recreation space with Lifetime right before the Sea Otter Classic 2023. We're super excited about that. More details to come.So if you're new here, Channel Master is a weekly show for executive leaders in outdoor rec. Yes, our categories are different, but in one very important way, we are all similar. We share a consumer. Our consumer in outdoor rec makes highly considered purchases and they use their favorite channels to discover, research, engage with and join up with our brands and with each other. We also have a shared consumer who loves to be outdoors, doing as many things as possible. They are not siloed to one category, as we all know from our personal lives. They love to protect the places they play. And we share this consumer profile and outdoor rec, no matter what the category. And outdoor enthusiasts have multiplied through the pandemic. We are seeing this summer that things have really maintained in terms of traction and the newcomers sticking around. So we're going to get into that here in future shows, but we have a lot more of them is my point.And they also love to wear their favorite brands. They like to choose to buy from their favorite retailers because doing so supports their very identity, their personal values. And that's a very special relationship with our consumers. That's why we're specialty. And Channel Mastery is here to help you protect that relationship and grow more relationships with ideal brand fans every week going forward. Our relationship with our consumers is our biggest asset and also our biggest threat. And that's why we need intelligence, insights and resources that are tailored for us. We are all special snowflakes. And that brings me onto today and our brand new season.So today's show is a solo cast and it is 100% about level setting where things are out there with the business of outdoor rec and business in general, the economy, et cetera. This will lead us into the forthcoming shows for this season, all of which will help you be remarkable to your ideal consumer and brand fan during what I can say is a pretty turbulent time. And here's where we're going to go together today in this solo cast. I'm going to share a snapshot of where some of the macro trends are in this rapidly changing business environment. And I'll add in some insights from outdoor recreation markets, because I've been doing a lot of research, a lot of interviews, many, many conversations. It's been really fun reconnecting with folks on this, but yeah. So I'm going to try and make it relevant through those conversations. And those conversations are the future podcasts that we have in the queue for this season for you.From there, we're going to get set on what's to come solutions wise. As I said, our new season will deliver experts and resources who can help us operate through the complexities of 2022, finishing 2022, the best we can and prepare for what's to come in 2023 in the business of outdoor rec. So let's do this. Super excited.Where is our consumer today? I'm just going to say August 2022, even though I recorded this on the 28th of July, I wanted to wait for the Federal Reserve meeting to happen yesterday, but this is airing August 1st, 2022, The Ocho. As we head into some of the most important shopper moments of the year, back to school, holidays, all here on the near horizon. So the macro trends that we're all stepping through right now as if it's a minefield or a dog park, the US is in the grips of its highest inflation in 40 years. As I said, by the time you listen to this, the Fed will have raised the fund rate to its target range of 2.25, 2.5%. So 0.75% point. We are definitely heading into tightening territory with rising recession odds.I have to just say too many headlines about recession odds. I mean, we're basically making the consumer think we're already in one with how much the media attention that's on that. So it would be nice if there was a way to restrict that. Consumer loans are tightening. Geopolitical unrest from the war in Ukraine continues to impact worldwide energy prices and supply chain disruptions. Consumer confidence and demand are softening and nationwide employment is still good. However, The Great Resignation is still affecting businesses, especially those who need quality, passionate people for frontline specialty work in outdoor rec. Excess inventory seems to be parked like that annoying high pressure system as we wait for snow. It really does feel like that. Unpredicted retail brand relationship dynamics in our markets as a result of that inventory glut are definitely signaling a challenging and interesting road ahead. We're going to get into that very much so in a very near term episode. We're sailing into uncharted waters from a forecasting standpoint too.And a lot of my people I've interviewed and the resources that I've tapped into are all trying to figure out what is the post COVID day to day going to look like from a demand standpoint? And how much of the last two year demand pull forward is going to affect or will affect current and future demand? How much and how long will the impending economic slow down depress demand until we get to this new day to day or new normal? I don't like to say that, but new day to day, in operating. So despite all of this on the macro level, believe it or not, consumers are still spending. The Fed just upgrades, as I said, but they're still spending and I was quite dubious about this. So I dove into some research and want to share just a few high points with you.A retail sales report issued by the US Census Bureau mid month in July pointed out though spending continues, consumer confidence is around record lows. Housing data has been weak lately. And regional manufacturing surveys are reflecting a slowdown. The July, 2022 National Retail Federation, Monthly Economic Review offered a little more context. The economy's moving away from extremely strong growth toward moderate growth, increased income from employment gains, rising wages and more hours worked is expected to support household spending. Regardless of the prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable, with most US households continuing to have high levels of purchasing power. I was quite dubious when researching this, but I kept seeing it in my research.Axios details this trend in a July article titled The Powerhouse Consumer. I was dubious when researching this, but I kept seeing it in my research. Axios details the trend in a July article titled The Powerhouse Consumer. "For all the talk about a recession," the article reads, "the consumer, the bedrock of the economy, appears to be holding strong. Spending was broad based and not just boosted by more money spent on gasoline, added Jeffrey Roach, Chief Economist at LPL financial. In a note in that article. The census report referenced previously said the electronics and appliance category showed a decline in spending from 2021 down 1.8%. American consumers," the article said, "are pulling back on goods that they've already stocked up on early in the pandemic. And depending on who you ask, outdoor sporting goods could fall into that same category." But you and I know it depends on the consumer and what they want to buy or need to buy in our markets. Either way we're experiencing what other durable good categories are. It's a tug of war of sorts between lack of supply and slowing demand.And the biggest commonality we share with macro trends is the current insanely high inflation that is most certainly weighing heavily on the consumer. It's a demand and a supply problem in some cases, but in other cases, it's demand and now inventory glut. Which brings me to the next point for us to focus on here, which is held inventory. And yes, there's a little captain obvious in what I'm about to read from McKinsey's July article tackling inflation and margin pressure in the sporting goods industry. But it's important to the level setting conversation here, nonetheless. So I'm going to read it. There's only three points."Excess inventory is a significant risk." Yeah, we kind of knew that, but let me keep going. "Past blocked orders are unlocked and large flows of goods are hitting company's warehouses and seasonal discount prices are a reality. Inflation will accelerate this problem further due to cash flow pressure on so many players, especially retailers, but also brands and manufacturers." So let's pause, let's look at this from the outdoor recreation business ecosystem. Retailers are indeed pulling back on, and in many cases canceling orders. And the main reason is that they're over inventory obviously. Today brands have worked hard to be their own best retailers, especially larger brands with established e-commerce platforms. They're being hit very hard with over inventory, softening consumer demand, and also cancellations from retailers.Let's add in the interest rate hike and its tightening of the lending markets, which impacts private equity, impacts everything, impacts retailers looking for capital and consumers hoping to buy higher ticket items. And container congestion eased right at the moment consumer demand seems to have softened. This is affecting apparel and hard goods and for larger dealers with a wide range of categories carried, the glut in these categories is affecting the ability to accept orders of products from other categories too. We're already seeing discounting through the consumer visible channels and it's not even August yet. And we're going to focus a lot there in terms of solutions and protecting your brand.RV dealers are sitting on a lot of '22 inventory right now, when brands want to push what's in for the 2020 model year. Talk about a tug of war. And also in RV, if dealers mention order cancellations brands are quick right there with the discounts. And the cycling industry's experienced the bull whip effect detailed in a recent piece that is really good, and I highly recommend you reading it by Jay Townley in Bicycle Retailer & Industry News. The links will be in the show notes. He summed up the perfect storm we're seeing across a lot of the outdoor rec space as well. So be sure and read that. Inventory glut is something we've dealt with before in the outdoor recreation spaces, but I'm not sure there's a past horizon line we can refer to together that parallels the other market forces we're in surrounded by while we're dealing with the inventory glut.In other words, this is a whole new atmosphere and ecosystem for us and there is no easy button to push. We obviously go back to an easy button when a glut happens and that's promotion. One of my resources told me to expect [inaudible 00:15:59] policy and SPIFF sales programs to be handed out like M&Ms on Halloween in the coming months. When it comes to discounting, know that today's consumer will see it in your brand's relationship and trust with your lifeline, the consumer, will be hurt. Think of what they are seeing in your channels as they research and engage with everything you do. Do you really want your brand to be on sale and racing for the bottom in front of the consumer at these important touch points. You and your teams have worked super hard to build clean channels that are serving your consumer with engaging in trust building brand initiatives. This is no time to take your eye off that ball.I would think of the investment you and your teams have done to be special to your consumers and retailer partners. You've built a brand that stands for something and how that's communicated with your consumers right now is mission critical. And while it's not easy, there are strong opportunities to test and run on topics like this during a time like this, which is exactly what we are researching and bringing to you in future episodes. Your consumer is savvier than ever and knows how to get what they need. And they also want to support brands that reflect their values, that's not going to change. When they do a longer research journey around a highly considered purchase, they are definitely going to choose the brand that reflects their values in our space.Promotions are going to have to happen. I get it, but they can be creative, they can be strategic and bring brands and retailers forward together. And we're going to be working hard to share examples of just. That's actually a specialization of our agency, Verde Brand Communications, but we're also finding a lot of outside experts to help with this. So also from Townley's piece in BRAIN, as we look to wrap up here, he says, "What the bicycle business is experiencing is unprecedented." I'm adding to that something that the outdoor recreation spaces are also experiencing. So he says, "There is no experience to help prepare for the future. The supply side is in the same boat as our consultants and analysts. The past is of little or no help. We need to reach out and gather the available data, keep our eyes open, pay close attention, and be prepared to make adjustments in our business as market conditions and demand require." Nimble, we have to be nimble. It sucks right now. It really does. There's so much going on out there, but we have to take everything we learned through the pandemic, and even prior to that, and be very capable of being able to move quickly and pivot. All of those words that we grew so tired of, we still really need to be practicing religiously. So I want to round out the level set for this new season of Channel Mastery with some takes from Marshall Cohen, who is the Chief Industry Advisor, and as Dirk Sorenson of NPD and friend of the podcast says, "The Consumer Whisperer at NPD." By the way, I'm working on getting both Marshall and Dirk on a show in the very near term.The June article that NPD published is four forces feeding excess inventory, but he really looks at it through the consumer lens. So I wanted to finish with this today because it really sets up everything we're going to be doing going forward so well. "Retailers are reducing excess inventory as consumers are pulling back on discretionary retail spending due to inflation. It is imperative we exercise caution around how we respond to current market conditions. Brands and retailers must find new approaches now to meet changing consumer needs about when, how and what they buy in orchestration with existing brand strategy." That's the foundation of what we're doing here on Channel Mastery. Cohen has a few points to say before we wrap up today that I wanted to share. "Consumers are buying for the here and now thanks to the pandemic training they had. The traditional cadence of retail, the historical twice a year product drops in most of our cases in outdoor recreation, bike, et cetera, is forcing consumers to shop online or at a competitor's shop who has what they want. They want it when they want it. Inventory planning is suffering as a result." Very, very telling and very true. And then "Holiday peaks are flattening such as Mother's Day, Memorial Day, Father's Day. NPD was able to clearly see in their data that these were smaller growth trajectories than they have been in past seasons. Even before the pandemic in 2019, things have steadily gotten smaller around these holiday peaks in retail. This leveling out of holiday sales" Cohen says, "indicated that consumers are not just pulling back on holiday gift spending. They might be intrinsically changing the way they shop."And then his last two points. "Consumption is lowering, but it's still happening. Consumer's focus has begun to swing back from shopping to saving. Along with rising interest rates, higher consumer debt, higher prices, and the carefree spending of the pandemic [inaudible 00:21:26] consumer, we are now seeing a more frugal shopper, more selective, still shopping and buying, but more frugal and more selective."And last point. "Consumer upgrade cycles are shifting." This is super important for our space. "This ladders back to the consumer appliance and electronic sector falling from what we saw trend-wise during the pandemic. So bigger ticket outdoor recreation items. The upgrade cycles are shifting. People are seeing bikes being brought in to be fixed or less of just buying a brand new higher end product right now." It doesn't mean that those sales aren't happening, they're just happening less. So keep in mind, staying on brand and really keeping your values aligned and getting super close to your consumer is super, super important right now. "So we're netting out here, retailers and manufacturers should thoughtfully consider how they prepare for significant competitive promotional activity aimed at creating more consumer excitement during the typically energetic retail shopping periods." That was a lot, but it's true. And retailers and brands want to change the tide and shift upgrades, they have to give consumers very good reasons to do that.Our retailers will need to start dealing with how to carry products consumers want for longer periods of time. And again, brands are their best retailers today. So this really affects all of us. As I said, this show is airing August 1st, 2022. It's the kickoff to our brand new season. A lot of us saw the hand we're being dealt months ago in our businesses. And there's a painful recalibration process that we're getting pretty good at. I think it's going to have to continue in a very fluid manner. There are still so many holes in the equation and it's okay if you're a leader who's not sure what that equation is exactly. You are so not alone. That's why we're investing and relaunching the podcast. Part of what we're experiencing is the fear of the unknown, isn't it? We have been dealing with that for years now. And I just want to say we started this podcast five years ago when we were dealing with the so-called retail apocalypse.When you consider where you were at that time versus where you are today as a leader, and just how surmountable that was when you put your consumer first, just know that you have learned so much and we will get through what we face today. So get close to your consumer and your customers, really close and Channel Mastery is definitely here to resource you through it. This is my absolute favorite thing to do. Research and produce market specific, actionable resources. Yes, I'm a total nerd, but this is what gets me out of bed in the morning. For those of you who listened to us during the pandemic, you know that's true. And I am here and super excited along with Verde and Lifetime to bring these solutions to you. It's like we're bringing the Executive Summit of Sea Otter Classic to a year round framework for you in this show. It's awesome.I want to hear from you and make sure we're covering what you need. So please reach out to me on my LinkedIn, Kristin Carpenter or Verde Brand Communications' LinkedIn. We have a lot of important months ahead that will shape how we finish this year, but also set the tone for the partnerships we have and how we work to maintain and build trust with our consumers in 2023 and beyond. A lot of what we choose to do right now will have long term repercussions. So next week, for episode one in The Ocho, I'll have Scott Buelter with Ascent360. I'm super excited to have Scott back. He is super into macroeconomics. He's going to go into his background on that. But just know that he's going to be doing a deep dive on managing inflation and proactively preparing for deflation with a consumer first approach. Couldn't be a better first show and we have so many more resourceful interviews lined up for you just after that. Keep an eye out on my LinkedIn and Verde's LinkedIn for new episodes.All right. That is it. Thank you so much for joining us for a brand new season on Channel Mastery. So excited to have you here. And I will see you next week on Monday, August 1st, we are going to be dropping shows on Monday going forward. Thank you so much.Okay, so I'm going to record the closing commercial now as well. So this needs to go on every episode going forward. Thank you so much for listening to the Channel Mastery Podcast. Please give us a thumbs up if you like what you hear, share it with a colleague or friend, and also make sure to rate and review us on your favorite podcast platform.So Lifetime Sea Otter Classic Summit 2023 is joining Verde Brand Communications as our sponsor for this new year. The goal is to deliver the solutions and best in class resources, presented to executives in the outdoor recreation industries at the summit to you every week on the Channel Mastery Podcast. And we couldn't be more excited to exceed your expectations on that goal every week.So at the summit earlier this year in April, 2022, right before the Sea Otter Classic, we gathered over 200 executive leaders from the outdoor bike, endurance and vehicle supported adventure markets for 2 days of business intelligence, specialty market resourcing and peer networking. It was awesome because it happened right before the Sea Otter Classic, which literally had about 80,000 consumers there. And guess how many people camped at the Sea Otter for multiple nights? Almost 7,000. Okay. This is a very special consumer event. And to have this right before it is huge. We're going to share all the details on the 2023 summit in a very near term episode here. And watch, we'll be announcing things from a marketing standpoint, but I just wanted to make sure and thank Lifetime and Verde Brand Communications. Thank you so much.