Cashmas in July: Turn Q3 Inventory Into Q4 Cash

[00:00:00] Richard: And in the course of our conversations stale inventory and thin cash has come up 600 times. So in other words, like this is not a niche problem. This is like everybody is having this issue.

[00:00:11] So it becomes really crucial. So let's, let's talk then specifically about, okay, if people don't wanna just deeply discount everything, which is I think a lot of the, the issue that people take with doing something like this, then what, what's the approach?

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[00:01:14] Richard: Hey, folks. Welcome to the Ecommerce Playbook podcast. I'm your host, Richard Gaffin, director of digital product strategy here at Common Thread Collective. It's been a little while. I've taken a little break, but I'm back now. Excited to be back in the studio, and we got Randall Thompson, who's our VP of go-to-market here at Common Thread Collective.

[00:01:31] And Randall's been on with us before but he's joining us again to talk about a very exciting event that we have going on here at CTC. We're celebrating a brand-new holiday. It's called Cashmas in July. And to all those who celebrate, happy Cashmas, and we hope you'll join us. But Randall's here to talk through a little bit about what this is kind of the impetus behind us putting this event together.

[00:01:53] And and we'll, we'll just kind of get into a little bit of your experience too, Randall specifically in your entrepreneurship journey around the necessity of this type of thing. But let that sort of enough kind of like setup. Let's just kind of get into the details of it. So Randall, why don't you talk to us a little bit about what is Cashmas in July?

[00:02:12] Randall: Yeah. First and foremost, Richard, as you pointed out, the, the background here is is suitable for the topic. I'm kind of trying to go for the warehouse vibe here or the 3PL vibe. But yeah, Cashmas in July a play on Christmas in July, obviously. And ultimately you need to turn cash or you need to turn inventory into cash in Q3 in order to be ready for Q4.

[00:02:35] So that's kind of the very broad stroke of Cashmas in July

[00:02:39] Richard: Right. And so talk to me a little bit... Y- y- you'd mentioned kind of, the sort of warehouse aesthetic that you've got going on there, and part of the reason that we were talking about that before is, like, you had mentioned some of your personal experience, again, from when you ran your business around the kind of issue of, particularly if you had your own warehouse, being around inventory that was gathering dusk in the sort of...

[00:03:02] or dusk, dust in the summer doldrums. So talk to me a little bit about, like, that experience, and then kinda how that plays into why we've put this together.

[00:03:12] Randall: Yeah, so y- Fourth of July is kind of like the last event that shows up on your calendar before you get into this lull of Q3. I've lived the lull of Q3 before, and right as Q3 kind of shows up, you're making Q4 bets. You're bringing in an inventory that you're gonna hopefully sell in Q4 for a real fat margin.

[00:03:34] And the, the whole hypothesis here is that the more cash that you have in Q3 to be able to allocate to those bets in Q4, the bigger the bets you can make, and theoretically, the more money you can make in Q4. And yeah, from personal experience, I've over-ordered a ton of product before and sat on that product and kind of just twiddled my thumbs and stared at the product, and I always thought to myself, "When is the right time to actually turn this into cash, or do I continue to kind of wait this out and there's gonna be some sort of epiphany that hits me on how I can turn this into cash?"

[00:04:08] And that that, that's my experience of it is Q3 is the time to take a look at your inventory in a lull, take that inventory, turn it into cash so you can make bigger bets in Q4.

[00:04:20] Richard: Right. Yeah, we've, we've spoken on this podcast before many times about the, the issue of the Q3 doldrums and what you do in a season in which there is no, let's say, natural marketing moment between 4th of July and when the holidays roll around. So, let's talk a little bit about the effect that liquidating inventory, let's say, in July-- or well, in Q3 has on Q4 performance.

[00:04:47] So you've sort of laid out the basic philosophy, which is that obviously if you have more cash on hand that you can then put towards making bigger bets on Black Friday, the better things are gonna go. But we have-- and we'll share this in the, the show notes, we have a, a kind of landing page we put together for this that includes a very interesting diagram, to me anyway, which is the difference between brands who do something like this, like do, let's call it a Cashmas event, and brands who don't.

[00:05:13] So talk us through a little bit about like what the, what the contrast is there.

[00:05:17] Randall: Yeah. And I'll speak from, from my experience. I think, I think I lived like eight or nine Black Fridays of owning, owning my own business, owning my own brand of selling stuff online. And o- obviously my like just me just feeling things doesn't necessarily like back up like that's not like data rich.

[00:05:37] But based on what you just said, the, the chart that's on this landing page my feelings align with what, what the data is showing. And essentially, sometimes I would come into Q3 and I wouldn't quote unquote "liquidate the, the stale inventory," and Q4 just felt a lot more flat. Versus when I would enter into Q3 and I knew the list of inventory that I needed to move and I moved it, it felt like I, I not only came into Q4 with more inventory 'cause I, 'cause I had more cash to, to, to place those bets, but it also felt like I very much so had momentum going into Q4.

[00:06:15] And whether that's the the customers from Q3 coming back in Q4 to make a purchase or even just the awareness. I, I think one of the, the things that are, that's like maybe most overlooked is as you spend money in Q3, you're growing this ring of awareness of people that whether they interact with the ad and they click on the ad or the, or they, they make a purchase or, or none of the above, they, they now have just-- you've just now captured their awareness in some, in some capacity and, and that flows over to Q4 when it's, when people are primed up to buy.

[00:06:49] Richard: Yeah. A-a-yeah, and that's a great point too. Like, we often talk about Q3 being this sort of downtime for brands generally, this sort of dog days of summer type of experience. But what we also talk about, the one thing that-- note that we always hit every single Q3, is that Q3 is prep time for Q4, and it's crucial to sort of grow your active customer file or whatever so that...

[00:07:09] A-and just generally speaking, grow awareness so that when Black Friday comes, you can actually-- you can hit a much larger list harder. And, and so I'll share a couple of these data points from these charts, which I think bear out sort of anecdotally what you just shared with us, which is the idea that, okay, one brand, for instance, realized 156K in Q3 cash, which we're defining as cash that came from a dedicated liquidation event of some kind.

[00:07:35] And that brand saw a 42% year-over-year growth in Q4. Another brand put created $218,000 of cash in Q3. That led to 67% year-over-year growth. I mean, it's pretty well correlated that the more cash you create in Q3, the higher your rate of growth in Q4. And then we also con-contrast that with some brands who didn't do anything of the sort, maybe put-- created 12K of Q3 cash, which is like, my understanding is generally speaking, it's like through these sort of like half-assed maybe discount campaigns sometimes, or just continuing to run evergreen or whatever.

[00:08:08] And these brands are seeing like, you know, they shrunk 8% year over year or grew 4% or grew 11%. So the relationship, it seems anyway, between Q3 cash generated and Q4 growth year over year seems pretty well correlated anyway. And so that's kind of fundamentally where we're coming from here. So another sort of corroboration as well is this idea that the conversation we, you know, we use what is it?

[00:08:33] Gong, I guess, to record all of our sales conversations, so we have some understanding of what people are thinking about. And in the course of our conversations stale inventory and thin cash has come up 600 times. So in other words, like this is not a niche problem. This is like everybody is having this issue.

[00:08:51] So it becomes really crucial. So let's, let's talk then specifically about, okay, if people don't wanna just deeply discount everything, which is I think a lot of the, the issue that people take with doing something like this, then what, what's the approach?

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[00:09:28] Randall: Yeah, and let me say something in regards to the Q3 event. What-- From an operator side, I know that what ends up happening is you enter into Q3 everything slows down. Your OPEX typically does not change. And, and the, and the combination of those two things, things slow down, OPEX doesn't change, and then also you're showing up and you're taking your checkbook out and, and writing bets for Q4 inventory.

[00:09:56] The combination of those three things makes you go, "Oof, this is, this is not good." And it makes you, it makes you go inward. It makes you, makes you wanna stop spending. What, what a, a cash event does is it allows you to spend and build those buckets of people in, in a time that you're gonna sell to them in Q4.

[00:10:18] So I know that I know from an operator standpoint, a lot of times the the knee-jerk reaction in Q3 is kind of just hang out on the sidelines and just like, and wait for-- to go get the money in Q4. But really what you're saying about about the data that, that we pulled and did the side by side is that when you run these cash events, despite within your loins, within, within your, your biology as an operator, you're like, "No, I don't wanna do this.

[00:10:44] I want to preserve my cash." It, it makes a lot of sense to run, run something like this. But yes the a lot of, a, a lot of times the, the most simple solution to liquidating your inventory is to liquidate your inventory. You know, it's like to slash the price. But what we're ultimately proposing and like what, what's been kicked around and I think is absolutely true is that you can, you can put a narrative around why you're doing what you're doing with, with this particular set of inventory and create a story around it that doesn't necessarily always have to point back to, "Hey, we bought way too much of this and so we're gonna discount it 75%."

[00:11:24] There, there's some sort of story that can be, that can be wrapped around the inventory event

[00:11:32] Richard: Well, okay, so then talk through like... And, and maybe this, this goes back to our overall philosophy around creating marketing moments, but what-- So what does-- What type of story works, let's say? If there's an example that we can pull or just give us a sense more concretely of like what that would look like

[00:11:51] Randall: To-- where my mind immediately goes is there's always an anniversary of something that's happened within your business in, in some capacity. So it it doesn't necessarily mean that, like, you started your business five years ago, so we're having a five-year anniversary sale. But there's always some sort of milestone that exists internally that's worth celebrating and being forward-facing to the, to the customer.

[00:12:17] And I think that like a good resource for this would be taking your email, connecting it to Claude or connecting it to whatever, and just saying, "Hey, look, look in the month of July, August, and September throughout the past three, four, five, six, seven, eight, however long you've been in business.

[00:12:34] Was there a big thing that happened? Was was there a certain milestone that's worth, worth celebrating?" And, and kind of let Claude do the heavy lifting of trying to identify what it is that you should be celebrating as a business, and then, and then create a story around that to be able to push these, these SKUs into.

[00:12:51] And and, and I think that would be, that would be a great place to start.

[00:12:56] Richard: Yeah. A-and so, o-of course, part of the reason we're talking about this is that this is essentially a service that we're offering of building out marketing moments and then executing against them for this sort of down period. So let's talk a little bit about what, what exactly are we offering here, and how-- what are we putting together to execute this for clients?

[00:13:18] Randall: Yeah. So the client would come to us and they would say, "Hey, we have an inventory problem." The, the inventory problem would have to be specific to at least five SKUs, or at the most five SKUs. With, with those five SKUs, we would come up with the creative, we'd come up with the email plan, and we'd come up with the media plan, and then also we would work alongside them on the narrative and essentially run a dark page.

[00:13:46] It wouldn't be forward-facing on, on the website. And we would go out and we would for a lack of better way of putting this, we would liquidate the, the inventory. But essentially, we would turn that inventory into cash, so you could take that cash, make bigger Q4 bets, and get some momentum going into Q4.

[00:14:04] So there's an email plan e-email plan and execution. There's a creative, creative aspect to this, and there's a media plan to it. And it's a 30-day stretch in which we would we would say, "Here's the plan. We're gonna go and execute this plan," and and we have 30 days to execute it

[00:14:21] Richard: And so how long are, how long are the doors open to, to take us up on this Cashmas in July offer?

[00:14:29] Randall: Well, you know, I guess the-- all the smart marketers say to, to do the SUV model of like scarcity, urgency, and value. But I've never been, I've never really been good at that. So the, the, the answer that I'll, I'll, I'll put out there is it depends on how big of a demand it is, and if there's a ton of demand and we, and, and we can keep up with it, then I think this is, this is most certainly a Q3 item.

[00:14:55] Obviously we might be limited in some capacity to the, to the name. It's Cashmas in July. So, you know, I don't know. I don't know if that means that we're, we're gonna cut it off in July. But ultimately I think that if, if we can engage sometime in Q3, especially if it doesn't bleed into October I think we're, I think we're in business and, and as long as we have the capacity to do it.

[00:15:19] This is a, this is a secondary thing. And, and this is kind of the... The thing is keep your main engine running. You still have certain things that you got going on within your business. This isn't gonna interfere with that. This is a, this is an add-on to that. And so keep your main engine running July, August, September, sometime, sometime in Q3.

[00:15:39] Let's turn some stale inventory into some cash so you can, so you can win

[00:15:43] Richard: Exactly. And I was gonna say too, like, I feel like the urgency part of this is sort of inbuilt, which is to say, like, the sooner you can realize cash in Q3, the better off you're going to be. So, do it now, don't do it later. But yeah, check it out. So we'll have the, the link to the landing page is gonna be in the show notes.

[00:16:00] You can check it out there if you're interested. If you're a seven or eight-figure business and you're interested in putting something together to get out of, break out of the summer doldrums, which is, you know, obviously every single year this becomes a problem, but it's a problem that you can break and a problem that we are trying to break for you with the Cashmas in July event.

[00:16:21] So again, if you don't celebrate Cashmas in July, now's the time to start, I think, randal, anything else that you wanna mention on this?

[00:16:30] Randall: Even if you don't go with us, have a plan for Q3 on how you're gonna gain, gain momentum going into Q4. That's, that's my big takeaway here. N- nine years of running a business, I wish I would've done it more

[00:16:41] Richard: Yeah. Love it. All right. Well, Randall, thanks for joining us. And to everybody else, again, you know where to find us, commthraco.com. Hit the hire us button, let us know you're interested, or check out the link in the show notes for more. But all right, everybody, we'll see you next time. Take care.