by Leo Jakobson | September 01, 2012

Merchandise

Incentive: Is there anything new in how companies are using merchandise awards? 

Mitchell: We experienced a recovery to some extent in 2011, and so far in 2012 we’ve been able to defend and slightly improve on that. 

Our business is changing a little bit — for the longest time, we were very strong [incentive] program business, meaning putting [Samsonite luggage] into a program [catalog], and watch it redeem over a period of time. Our business is starting to morph into more of a transactional business, [with clients asking], “How many of these can you ship in this timeframe, because we have an event-specific thing that requires your product.” There are plenty of suppliers in our channel who have always been transactional but we haven’t, so this is a bit of a sea change for us. 

As a supplier of merchandise into the channel I am encouraged and hopeful that the trend of more is more will begin to turn back to smart merchandising. The notion of a client or participant having 50,000 options borders on the farcical, because at some point they’re going to overload — do they really want to drill through 20 pages of luggage to find the one bag that they might like? I’m happy to hear from my clients that we’re starting to move away from that, and we're starting to get back to figuring out what the client really needs, and what the participant base looks like, so that we can merchandise appropriately.

Incentive: What products are hot in the merchandise channel?

Peer: We’re seeing some dramatic changes in redemption patterns, and we're seeing that electronics, for Hinda Incentives, is now the number two redemption category — which I've never seen that before, [it was always on top] — whereas household products like single-serve coffee makers, vacuums and so on, are now our number one redemption category. 

TVs are now more affordable and have been coming back into award assortments. They exited a few years ago when they got to be kind of expensive. We are seeing the emergence of new products on the merchandise side that reflect technological changes that are going on in our society. The smartphone has taken over many of the functions that had previously been served by point-and-shoot cameras and portable audio products, so we’re seeing a downtrend in the iPod. 

McArthur: We still have very strong redemption going on in the electronics area but I think [Dave Peer’s] broader point about the emergence of smartphones, and similar tablet devices is changing the specific items within that category.

Mitchell: We’re noticing that with our customers as well. This whole trend actually started during the downturn. I heard it described by one of our customers as “there’s a flight to home and hearth.” The notion [that] “We’re in this program, instead of getting something that's a little blingy, let’s get something that the whole family can use.” That’s where they started moving into home products, and that's clearly the case in the recognition side with the customers that we work with. They're seeing a tremendous increase in those housewares products. 

In the luggage business, weight's everything now. If you haven’t bought a bag in the last year, your luggage is out of date. [Lighter] is the driving force behind almost all of our product development. Consumers have been very clear that the baggage fees and other assorted inconveniences of heavyweight product just have to go. 

In fact, our flagship collection Silhouette is in the process of a redesign for January 2013, and the number one issue is how do we make it lighter. That requires an almost-from-the-ground-up approach to how you design a bag. The consumer is responding very well to the products that are already in the marketplace that have this philosophy and that's only going to continue.  

There's a point where you can’t make it too much lighter and still keep what I call Samsonite’s DNA, but we’re going to get as close to that line as possible, so that the consumer can pack as much of their stuff in it as possible and not incur those extra fees. 

Hart: I think the biggest trend we’re going to see is digital content — music, books, and DVDs. Digital content will really be coming into play in coming years. That will use up a lot of the lower point balances that would be staying in [reward point] accounts, so it is a good thing. Because of the convenience factor, I believe we will see that really cutting into gift cards. As soon as we introduced gift cards, they cannibalized a lot of merchandise, and, no doubt, gift cards are very popular. I believe digital content will do to gift cards what gift cards did to merchandise. 

Peer: The introduction and development of digital media is addressing a key space that gift cards occupied in an awards structure at the lower dollar value. 

Hart: You’re going to see a lot more concierge services coming into the marketplace. [Program participants] can call an 800 number, and the concierge will get their travel tickets, arrange for housekeeping services, get them tickets to a movie, and so on.