1% Ownership

One thing that many readers probably dislike about this blog is when I cite a catalog or website that I think is doing a great or lousy job of something, but then I never revisit the comments two or three years later to see what actually happened with that catalog or website.  This is actually a problem of all those books that you read which tell you how to achieve excellence for your company, which cite ten great companies, and then you look at those companies five years later and half of them are in chaos.

But two things came up the other day that encouraged me to revisit this posting from April 2015 called A Catalog Apollo Program. In that posting, I argued that one way that catalogs could improve their profitability, and thus their chances of survival against Amazon, was to band together and have giant fulfillment centers instead of each company maintaining their own.

I’m not going to rehash all my arguments as to why this idea was valid and should be considered – read the original article at the link above. It might not be a timeless masterpiece, but there is some logic to my arguments, even on a small scale of five or six catalogs.

However, I cited the fact that two Boston newspapers – the Boston Globe and the Boston Herald – which are arch rivals and intense competitors had agreed back in 2015 to have the Globe print both newspapers at their plant in Boston. A win-win for both companies, which drove down costs and freed up resources for both.

Then last week I read that the Globe had opened a new printing plant in June, and had not once produced the Herald’s daily edition on-time since the switch, after more than 3 months. The Herald was apologetic to its readers, but was also over a barrel – it could complain to its “business partner” all it wanted, but it was not going to change the situation, unless of course the Globe gave priority to printing the Herald’s paper first each day.

The experience of the Globe and the Herald seems to prove the saying that “the worst ship is a partnership”.  On the other hand, newspapers are not the healthiest industry right now, and neither company is gaining anything from this situation.

The second reason I wanted to revisit this concept was something that occurred that was more favorable to my original argument. My wife and I had to purchase a new oven last week, and we were told it would be delivered in 2 days. The owner of the local appliance store where we bought the oven is also the guy that came to our house to install it. I mentioned I was surprised that he could get the oven in just 2 days, as it was not a common model.

Here is his response: “We are members of a consortium (the New England Appliance and Electronics Group) which is comprised of small private appliance dealers like us in New England. There are 93 members, and we own 1% of a giant warehouse in Franklin, MA. All of the appliances we sell are 100% in-stock all the time, and available within 1 to 2 days. In the past, I had to guess how many of each appliance I would sell just to get the minimums from the manufacturers. So, my costs/unit are way down, I carry no personal inventory for our specific store, I got rid of my warehouse, and the warehouse we own part of is super-efficient. Life is good.”

I know what you’re thinking – this works for appliance stores where geography keeps them from competing with one another. It also works here because all of these stores can share a common inventory – each one can sell Bosch, Maytag, Whirlpool, and GE. But, you’re thinking this could never work in catalogs where everyone is selling something different.

But let’s look at this from a different perspective. One of the first things that happens when one of the catalog conglomerates (Bluestem/Orchard Brands, Cornerstone, Potpourri Group) acquires a new catalog is that the new acquisition’s fulfillment is immediately switched to the conglomerate’s all-in-one distribution center. No new brand gets to make the argument that “only they now how to do fulfillment to their customers”.

Let’s say you had a small catalog consortium of 7 or 8 single-title, non-competitor catalogs. Let’s say you got together once or twice a year to share marketing tips and discuss the state of the catalog industry in general. Wouldn’t it make sense to explore the concept of doing joint fulfillment? The catalog conglomerates have proven that it can be done across many different product categories, mixing apparel, hardgoods, gifts, home furnishings, etc. all under one roof.

Sure, the risk is great, and you already have a warehouse. But you have an old warehouse. You’re still paying Darrell and his brother Darrell to manually pick, pack and ship each order. But what if you could switch to automated fulfillment (you know, those warehouse robots)? What if you did not need to worry about seasonal hiring peaks because your warehouse was super-efficient, and could be located in an area with a ready pool of the few employees you needed, even in this economy?

I know – as I said before, I’m no Stan Fenvessey (who died in the early 1990s), or even Bill Kuipers or Bill Spaide (all well-known fulfillment experts). There are a thousand reasons that you can tell me why this won’t work. But, Amazon is not going to stop or slow down – they are on a mission to destroy all retailers in their way. If you believe enough in your future, would it be worth it for you to explore owning 1% or 10% of an efficient distribution center if it cut your per/order costs by more than half?

The desire to explore this option must come from within the catalog industry. It cannot be vendor driven. Vendors will add a fee/commission that will negate the value to the participating companies. No, this is something you must do on your own, and own it – just as you own your own fulfillment today. It is a concept that must be considered.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Engagement

This is a sample size of one – so take these observations with some skepticism.

I wrote in last week’s posting that I had changed my view on “engagement”. Here’s what changed it.

For years, vendors and other media “experts” have been pushing “engagement” as a way to acquire customers.  “You’ve got to be engaged with your customers!”

I always thought that was a bunch of bunk*. I believed that saying you had engagement with your customers was just a fancy way of saying that you stunk at generating orders and sales. It was like proclaiming that an event was successful because it generated tons of PR, but in reality, was a failure because no one showed up.

Hard orders and sales are what I always encourage clients to focus on – and to a VERY LARGE degree, that is what they must always be focused on. To old school mailers with customers prone to placing orders on the phone, nothing beats the feeling of obtaining a 10% response to a catalog mailing.

But over the past few years, I’ve watched the changing shopping habits of my wife Shari. First, let me point out that Shari is ten years younger than me – which at times seems like a huge generational gap, especially when it comes to consumer behavior. Second, she is not as stubborn as I am when it comes to adapting to new technology. Third, about four years ago, Shari got REALLY hooked on mountain biking.

At first, I tried keeping up with her. But I’m more of a “road bike on a paved rail trail” bike rider. I find little enjoyment in weaving through trees and over rocks through the woods the way she does. You go girl!

In addition to the actual riding, she joined several mountain biking clubs/groups in the area of the trails she rides. All of these groups are active on social media. This is where the discussions of trail conditions occurs – not on the group’s own website, but on their Facebook pages. Plus, I have learned that people who are really into mountain biking, love to share their rides. There are numerous apps with which you can “record” your ride, which can then be posted to Facebook, to show that you went over a certain trail, at a certain time, and that it was part of a 14-mile ride that day. It’s the modern-day version of Show & Tell. This is one example of social media engagement. Maybe not the 2 million Facebook followers I mentioned in last week’s blog, but these bikers are just as motivated, just as inspired, and just as “engaged” when it comes to sharing news about their latest ride.

Shari’s fellow mountain bike enthusiasts – who are worldwide, not just in New Hampshire where we live – also share equipment and apparel ideas. She is constantly posting photos of products she has found online to Pinterest and Instagram. She has purchased products from new vendors – some of them very small niche companies – that others have posted to those sites.

The vendors she purchases from are part of this “engaged mountain biker” community. They are not necessarily the biggest “bike” brands. This is how the new, smaller niche players are grabbing attention, grabbing sales and acquiring customers. The biggest brands often stink at engagement. Those bigger brands are satisfied with buying “disruptive” Facebook ads (because it “scales” faster) rather than creating content with which readers will actually take the time to read.

The little guys grab a few percentage points of the big guy’s business each year, and pretty soon, after 5 years, the little guy is on a roll, and the big guy is trending down and can’t figure out how to stop the slide.

Since we live in a tiny town in rural New England, I think many readers of this blog envision that we probably have a hand-crank telephone. Not so. We have a fairly fast DSL connection, and wi-fi throughout the house. My wife uses her phone for these social media interactions about 90% of the time, and only uses her laptop about 10% of the time. She never phones in an order, and except for my stash of Elvis stamps, we have no other stamps in the house with which to mail in an order.  Unless your customer demographic lives in a nursing home, this is the way of the modern consumer, with more emphasis on engagement and use of mobile the younger you go.

As I said, this is a sample size of one. But, you probably know consumers just like Shari, or you are one too. We know lots of households that have given up their land line. We have never had cable TV (not available in our town because you need at least 10 people/mile) so we are not surprised that people are giving up cable and discovering that you can live without it, because they stream Netflix and Hulu when they want to watch TV. Technology changes consumer behavior, and no amount of cries of “print is not dead” is going to erase that new behavior.

Shari will still occasionally look at a catalog. Since we get hundreds of them – including every women’s apparel catalog – she has a huge selection from which to pick coming to our house every week.  But when I’m sorting the mail on the kitchen counter each night and ask “do you want to look at these new Talbots, Lands’ End, Athleta catalogs?”, she often says “no, I can check them out online”, which means with her phone.

I have come to realize that engagement is not just about having a mobile presence. It is about having content that the reader wants and craves. It is also NOT a panacea for low catalog response rates. It will not and cannot be the sole avenue of sales and customer acquisition for your company – but it does work, and must be acknowledged as something that you must play a role in, if it is appropriate for you. I can get engaged with a baking site because I love to bake bread in the winter.  I’d have a hard time getting engaged with a site that sells keyboards, even though I use one daily.

Bear this other thought in mind. You cannot expect “engagement” to just happen. It is hard work. Maintaining this blog on weekly basis is no picnic – but I’m keeping you engaged. It is also something which is difficult to “hire”. You can hire Datamann to build a database, do your merge and matchback, and you can even hire me to do your circ plan. It’s not as easy to find an “agency” that will build you engagement. Five years ago, I never thought I’d be saying this, but in my opinion, companies in the future will be farming out their circ planning to people like me, and hiring “social media engagement” specialists in-house.

What fun times we are in…

*Instead of using the word bunk in the fourth paragraph, I was going to use a different word. But I was reminded of a story about President Harry Truman. In 1948, when Truman was running for re-election, he kept referring to the Republican platform as “manure”. His aides did not think this was dignified for the President to be saying. So, they spoke to Bess, the President’s wife, and asked her to get him to change his terminology. She replied “Boys, it’s taken me 40 years to get him to call it manure.”

 

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Gone

This one hits home, mainly because I feel like I’m writing an obituary.

I learned earlier this week that Country Curtains, a long-time stalwart of the catalog industry in New England, is most likely closing by the end of the year. Click here for details from a story in the local news: Berkshire Eagle News.

Country Curtains was my client for many years when I worked for Millard Group. The folks that ran the company back then for the Fitzpatrick family – the founders and owners of the company – always treated me with the greatest respect whenever I visited. They were always so polite and circumspect, and were some of the few clients that always wore a tie and jacket to meetings, which I reciprocated. I appreciated their courtesy.

The company is located in a modern building in a tiny town in the Berkshires of western Massachusetts. The furnishings inside have a country look and charm, although I must say, the wooden chairs around their conference table must have come from the Salem Witch trials – they were the most uncomfortable things to sit on.

And now they are gone.  The newspaper account reports that they were losing millions over the past few years, and that they could not keep up with online competition. I’m sure that is part of the story, as are many things unique to the management of the company that we will never know about. Two members of their Board of Directors – Peter Rice, founder of Plow & Hearth and Ben Perez, former owner of the Millard Group, were two of my catalog mentors, and were both talented catalogers. I’m sure they found the decision to recommend closing the company a bitter pill to swallow.

From the sounds of it, every venture capital company and catalog conglomerate in the industry has inspected Country Curtains recently as a potential acquisition. But after kicking the tires, no one saw any – or enough – value in the company to acquire it. No amount of postage savings, retargeting, co-op optimization, personal printing, or enhanced branding was going to turn this situation around. That’s a sobering reflection on the state of the catalog industry.

Country Curtains tried several times over the years to shed their “country” look and develop a more modern, fashionable catalog. The first was about 15 years ago with a catalog called Jane, an urbane version of the core catalog. The most recent was Prospect and Vine, which only mailed once a few years ago. Similar to the core catalog, these other titles always stuck to curtains and other “window treatments”, just with a more contemporary look. They dabbled with a few home décor items, but never enough to get their feet wet.

Country as a decorating theme died out years ago. One could argue that Country Curtains was slow to adapt to that decorating change. One could argue that they were slow to adopt the same shipping speed as  3 Day Blinds and other online competitors.

But, as an outsider looking in, I see their biggest problem as having never developed a business beyond curtains. They knew curtains, they stuck with them. Some of the designs and patterns where in the book for years. And as much as the creative team would probably want to argue this point – the catalog never changed creatively. Maybe there is only so much you can do with “window treatments”, just like there is only so much you can do with water bottles in a B2B catalog – but Country Curtains stuck with a design format and product niche too long.

It is sad to see a great catalog title – one that would easily take a premier spot in a “Catalog of Hall of Fame” – disappear and slip beneath the waves. It is equally sad for the individuals whose jobs are impacted by this move, as well as the local economy. Yet, as someone who weathered the closing of the Brookstone headquarters 24 years ago (has really been that long?) and the loss of 100+ jobs with the relocation of our warehouse 1,500 miles away, everyone that was impacted eventually found new employment.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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