What is to Become of Single Title Catalogs? – Part 1

With the news that catalog conglomerate Potpourri recently purchased the travel product catalog Magellan’s, bringing Potpourri’s total number of titles to 15, I started thinking about the future of other single title catalog companies.

There’s nothing wrong with being bought by a conglomerate like Potpourri. They are an extremely well-oiled and efficient catalog machine. If they follow their standard procedures for this new acquisition, any remaining assets of the company will be trucked to the Potpourri headquarters in Massachusetts, and production of the catalog will be streamlined in with the other 14 titles. They’ll throw a few pages of sex toys in the back of the book (maybe for Magellan’s they’ll find a travel assortment), and the book will be homogenized into the rest of the assortment. Great for Potpourri and their investors, but is this what’s best for the catalog industry?

The catalog industry, especially here in New England where Datamann is located, was built on the strength of a multitude of single title catalogs scattered around the nation, not unlike the plethora of small town retail stores that lined every Main Street. It’s so easy to be nostalgic for what cataloging was like 20 years ago, but it does no good.

I used to think that conglomerates were the death of the catalog industry, especially those that were venture capital-backed and which knew nothing about catalogs/mail order. On the other hand, it really doesn’t matter whether those mail order know-nothing VCs are backing a single title, or multiple titles – if they don’t know what they are doing, it’s a train wreck waiting to happen.

Even though almost all the major conglomerates – Potpourri, Cornerstone, Orchard Brands – have some form of venture capital behind them, the core management who run the day-to-day show are catalog professionals, both in experience and in terms of being catalogers at heart. They know how to get it done, and for the most part, don’t go off track.

When I worked at Brookstone, we were owned for a short time by Bain Capital (yes, the same Bain Capital of Mitt Romney fame).  Back in the mid-1990s, Bain was a magnet for proposals from companies that wanted to start catalogs. As such, Bain would send my boss at the time (Randi Lawrence) and me some of these proposals to review.   They all carried a general theme – “We don’t expect to be another LL Bean. We simply expect to be at $400 million in sales in five years with 20% EBITA.” That’s a great goal, except for the fact that no one has ever accomplished it.   I still see that hubris in some of the VC companies that acquire catalogs and expect to magically turn them around with their (self –perceived) superior management and marketing skills.

But I’ve gone off track. I wanted to write today about the future of the single title catalog. The problems facing them are no different than those facing any single-location retail store, or even most small companies in general.

I’m not concerned with the small catalog that never should have gotten started in the first place because it was not filling a needed niche, but was simply a copycat, or a pet hobby of the owner. Because in fact, since many of those companies kept their operations small (keep it small, keep it all) many of them are doing very well, even though they are less than $10 million in sales. Instead, I’m talking about the single title company, doing between $25 million to $100 million in sales. They are the ones that seem to be struggling the most.

Here are the obvious issues:

  • They almost always have a physical store – but just one, which is enough to be a distraction from the core business of the catalog, because it is usually much larger than an “ordinary” store in that product category. This is because when it opened, usually next to the company’s headquarters, rent was cheap and the store just seem like such a good idea. But they have never been able to replicate the retail model.
  • They cannot buy in significant volume to get competitive gross margins, and if they do commit to a container load of products that don’t sell, they lack the ability to dispose of the overstocks as efficiently as bigger multi titles.
  •  They cannot leverage their most important asset – their customer list – across multiple offers.
  • Conversely, they must leverage a greater amount of overhead over a smaller base than their bigger multi-titled counterparts.
  • They usually feel compelled to have all the new bright shiny objects (hey, being omnichannel works, right?), so they invest their precious few discretionary dollars into funding a social media “initiative” or a “green” initiative, which gives them a warm feeling, but does nothings for sales. As a result, they are usually chronically short-staffed and undercapitalized.

The biggest problem I see for the single title is that they can only do “so much” because they lack a vast repertoire of tricks on how to do things differently. They lack the infusion of differing and new ideas that come with a growing company hiring new people. They become very parochial in their view of their catalog, their customers, and far too confident in their own management skills.

Thus, more and more, single title catalogs that lack both a growth strategy and survival strategy, are either succumbing completely by going out of business, or they are being acquired by the conglomerates. I mentioned earlier that I always thought the multi-title conglomerate were bad for the industry, but I’ve changed my thinking. One good thing about a multi-title conglomerate taking over a single title – they tend to get rid of a lot of management waste and internal culture that was flawed. That’s where we’ll pick up Part 2.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com