“When Covid-19 closed retailers and resorts, we knew we had to expand the direct to consumer channel as quickly as possible,” says Michelle Miller, CFO of G3 Genuine Guide Gear, confessing that “we did so without as much analysis as we would have liked prior to making that decision.”
The Burnaby-based sporting goods company sells high-end gear specifically designed for ski touring, as opposed to downhill. G3 were hardly the only ones to make quick decisions in response to the pandemic, and Miller believes this move was an eventuality regardless. “It seems inevitable that direct to consumer sales would be required to remain competitive,” she says.
The D2C model has obvious advantages, chief among them the ability to eliminate the middleman and collect higher margins, but, as Miller explains, that’s not the whole story.
“Throughout my career I’ve observed that many businesses under-estimate or fail to evaluate the back office work that’s necessary to support the sales function. It takes time and money.”
Technical Challenges of Direct to Consumer Model
In addition to her duties as Chief Financial Officer, Miller also serves as Systems Administrator, which means she felt first-hand the growing pains associated with the sales channel expansion. The company was already using Shopify, but their ERP had been put in place several years earlier and was only partially integrated with the e-commerce giant’s platform. As is often the case, it was success that provided a wake up call.
“Black Friday came along and we suddenly did a massive amount of sales. We realized that the data entry that somebody used to do in three to four days would take up to 25 days,” explains Miller. “The specific challenges for finance aren’t so much financial, in terms of having enough money or cash flow, they’re understanding how to get those things that are happening in various other websites and platforms to where we can ultimately record them in our financial statements.”
Will the higher margins offset the costs associated with the switch? According to Miller, time will tell.
“We’re still in the infancy of this business model,” she says. “While the costs have been anticipated and estimated, we’re a seasonal business and won’t know the full impact of this move until we complete a business cycle.
Supply Chain Strategy
Components of G3’s materials and manufacturing process rely on overseas providers, which can present a challenge at the best of times, nevermind during a pandemic. As supply chains worldwide are put to the test, the debate rages on regarding the pros and cons of just-in-time (JIT) inventory. For G3, substantial lead times make prudence a necessity.
“JIT remains a desirable goal,” says Miller, “but what we don’t plan for and order now will not be included in the supplier’s production schedule and we won’t be able to get it until next year.”
Remote and Hybrid Work Models
Optimizing work arrangements is another issue that many C-suites are currently grappling with. The early days of the pandemic found some companies struggling to adapt to a remote workforce, but Miller describes G3’s crossover as a relatively smooth one.
During the pandemic, one long term employee of the company reached the end of their lease and no longer found it financially feasible to remain in the Greater Vancouver Area. As a result of their skill set and history with the company, the decision was made to maintain their employment and accommodate remote work; just one example of their forays into utilizing remote technology. Today, staff members conduct daily business through Microsoft Teams.
“For such a small company, we already had a cutting edge approach,” recalls Miller. “Sometimes the best person for the job wasn’t in Vancouver and wasn’t looking to relocate, so we just dealt with it.”
When it comes to planning a long term work model strategy the company is taking a ‘wait and see’ approach, although Miller admits that some tasks do require physical presence.
The CFO describes another benefit the company has enjoyed as a result of remote work.
“We typically rent additional storage space in months when the on-hand inventory levels are high,” she says. “Since we plan to work remotely for the foreseeable future, we’ve overtaken some of the office space for product storage, allowing for better organization of stock, improved flow through the warehouse, and reduced additional warehousing costs outside our primary location.”
Risk Mitigation Strategies
Miller, who wears several hats, sees a common bond running throughout all aspects of management: the desire to carefully plan for a successful future.
“In good times or bad, it’s often about mitigating risk,” she says. “In terms of strategy, it’s about broadening out those sales channels, broadening out the product line, trying to get ‘year round’ so we don’t have such a seasonal impact, and securing our supply chains.”
