Tile’s CEO on navigating the pain points of modern supply and demand

Date Posted: July 11, 2019
CJ Prober, Tile CEO and Alloy Board Member

A couple weeks ago, Tile CEO and Alloy Board Member CJ Prober led a roundtable discussion on managing supply and demand in today’s retail landscape. We were honored to have him join us and share his perspective on modern obstacles and innovative solutions for manufacturers.

Prober is an industry veteran with a decade-plus experience spanning digital and physical products. He began his career as a lawyer, including serving as VP of Legal and Business Affairs for the video game studio BioWare/Pandemic. Electronic Arts, the second largest gaming company in the world, purchased the studio, leading Prober to serve in a series of roles that culminated in SVP of Digital Publishing.

In his next career pivot, Prober helped GoPro expand past action cameras with software subscriptions for capturing and editing footage. He rose to lead the company as its Chief Operating Officer. Now he serves as CEO of Tile, the leader in smart location with a global community spanning more than 230 countries and territories.

With decades of experience, Prober is a thought leader on the intricacies of sales, supply chain management and strategy. The other roundtable attendees, also leaders at consumer goods companies, really enjoyed hearing his experience and also had their own valuable experience to contribute to the group. We’re excited to share here a curated dive into the issues and solutions addressed, including insights into product assortments, when to approach national retailers and addressing resellers.

Keep your product line simple

“I’ll never forget the day that we launched a new product that didn’t fit in with our product strategy,” Prober said. “It was a different form factor. What we discovered after 18 months or so, is that we had two products at the same price point. People were saying, ‘what’s this versus what’s that?’ It just had a massive impact on consumer buying behavior and sell-through. After many, many debates and arguments, that product was finally sunsetted.”

GoPro had a successful “good-better-best” product strategy, offering three clearly differentiated product models. When they introduced a fourth camera, it proved highly problematic. What’s worse, because they lacked visibility into sales performance, it was 18 months before they recognized the new product was underperforming! In the meantime, they delayed a course correction as management decided what to do based on gut feel and intuition, rather than letting the data guide their decisions.

As a result, GoPro built up inventory for the holiday season. When the sell-through was underwhelming, much of that product sat in warehouses into the end of Q4.

“We got way offside on inventory. If it’s the end of the calendar year and if you’re off-side on inventory, you pay the price. You never, ever want to be in this position.”
-CJ Prober, former Chief Operating Officer at GoPro

The situation provided Prober with one of his greatest insights gained at the company: ensure product line simplicity and carefully manage SKU proliferation.

Now at Tile, Alloy has been implemented to streamline and integrate fragmented retail data. The team can quickly understand how different products are performing and identify specific pain points. They’re also using the insights to drive a major effort to simplify their offering. Tile will be going into the holidays with almost 90% fewer SKUs: “Operationally, this is much, much easier.”

 

Establish your brand and strategy before approaching big retailers 

One lesson that came up multiple times was the importance of fully developing your supply chain and sales strategy before approaching national retailers like Best Buy and Amazon. GoPro established its cameras in ski and surf shops before scaling to Best Buy. That incubation period allowed the product to find its audience, gather data and develop its brand. It gave them leverage that wouldn’t have existed if the company had approached the retail chain earlier.

“GoPro was a category leader. They had the best product so their negotiating power with the Best Buys was incredibly strong,” Prober said. “The lesson learned there is that going to big distributors like Best Buy can backfire; you only have one shot at those retailers. Establish your product, establish your brand, establish your merchandising strategy, so that when you go into a retailer, you know you have the best shot at success.”

An attendee from Native Deodorant, which sold to Procter & Gamble in 2017, reiterated those themes. She said establishing Native as a direct-to-consumer business first allowed the natural deodorant producer to aggregate market data that proved invaluable when it did finally work with retailers like Target and Walmart. The initial hurdle was generating demand by investing in social media advertising, but once Native had a thriving audience, it used that data to speak convincingly with buyers when branching out into major brick-and-mortar retail.

“Target said we had too high of a price point and that consumers are never going to buy this. We had a lot of data and millions of customers. We can tell you that this price point is high for your category, but we know there is a market out there for this. We’ve held firm in our pricing, and we’ve been able to grow the category. People are going from $5 to something that is twice as high.”
-VP, Native Deodorant
Watch out for unauthorized resellers

“It keeps me up at night. It’s something that we constantly struggle with. The challenge is no matter what we do, it’s all our fault. Even though we’re not funding it, the question always comes [from authorized sellers] about where’s the sell-through credit,” one attendee lamented on the state of unauthorized sellers on Amazon, who get their hands on product and resell them below established prices.

The problem has escalated in the last decade as promotions have increased in frequency and severity, enabling third parties to purchase product at lower cost. One attendee summed up the reason why:

“We used to do minimum promotions, and when you’re doing 5-10% off, that used to work. It doesn’t work when your largest competitor is doing 30% off three weeks out of every month. As Black Friday and other big promotional periods happen, retailers want to do something big, and it ends up with third-party distributors. When you discount 30%, that’s typically where the third party problems start.”

The volatility of the Amazon Buy Box has only heightened this concern. This piece of invaluable digital real estate sits on the right side of an Amazon product detail page. It’s the quickest way for a consumer to purchase a product on Amazon by either hitting the “Add to Cart” or “Buy Now” buttons. A staggering 82% of Amazon sales process through the Buy Box, and that percentage is even larger in mobile purchases. The problem? That sale doesn’t necessarily go to the maker of the product. Amazon gives just as much opportunity to third-party resellers as the original manufacturer. With pricing the primary factor influencing who “wins” the Buy Box, the struggle is real.

Attendees volunteered various solutions, many to keep third parties from acquiring large amounts of product. Limiting the volume that one account can purchase —even if it’s from a company’s own digital storefront—will keep these sellers from stocking up on heavily discounted goods. And aside from adding serial numbers and using legal action to combat unauthorized sellers, one attendee offered a more unconventional—if effective—fix: buying their own product back.

“We just bought $10,000 of our own product in the last three weeks,” she explained. “Because the problems that ensued in the retail channels are far greater. That’s how we do a temporary fix. It’s just a domino effect.”

 

The roundtable offered attendees a unique opportunity to collaborate on hurdles that hinder the entire industry, and many shared how valuable it was to connect with their peers. Stay updated on upcoming events near you by signing up below to receive the latest Alloy news and insights. And to see why Alloy software is a critical part of Tile’s strategy to navigate modern supply and demand, schedule a demo today.

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