Valuations & Acquisitions: The 5 Cs for Better Gross Margins

It’s more powerful to develop your own brand over time, Solomon says, by delivering on its promise and gaining credibility with consumers. Credibility with many consumers will generate word-of-mouth referrals and ultimately build the brand.

With Sharper Image and Lillian Vernon, Solomon believes once-great merchandisers grew stale by focusing on incremental optimization of SKU mix, maximizing contribution per square inch in the short-term. The method lost merchandising flair and excitement over time, however — thus, it became stale to consumers. “It reminds me of the old Figi’s gift food baskets,” Solomon recalls. “They’d replace the salami and cheese basket spread with the salami, cheese and nuts spread because it had a 2 percent increase in contribution per inch. But they completely missed the big trend: Salami and cheese were no longer a gourmet treat to send to your friends.”