Holiday 2017 Catalog Observations

Since most of you are prepping for big sales this week, I’ll keep today’s posting short.

Response:

I’m still hearing mixed signals for response so far in November. Some of you are doing well, some of you are soft. Most of you told me that you have a lot riding on what happens in the next 14 days. In some cases, your entire year’s success hinges on your sales over the next two weeks.

Here is one thing I noticed – Lands’ End has been pushing (via emails) 50% off selected product categories, and LL Bean had a 25% off everything offer last weekend. That tells me some mailers are sitting on a ton of inventory.

Catching Up:

Years ago, I tried to draw conclusions based on the number of catalogs I was getting at home in a certain month or a certain week, compared to the prior year. But, I’m on so many seed lists, decoy lists, and customer lists, I realized how fruitless it was to make those comparisons because I can never accurately determine why I was mailed a catalog. And of course, one lone catalog shopper in rural NH is not indicative of the rest of the industry. So, I stopped trying to do year over year comparisons.

However, since the beginning of November, I’ve received over 200 unique catalogs at home. Based on a quick count, more than 70% have had some type of free shipping offer – either full free shipping, or with a minimum $ amount purchase. Five years ago, that would have been 5% to 10% of the catalogs received. Five years ago, we were already in the Amazon-era of cataloging, yet it has taken until now for most of you to acknowledge that you have to change your marketing to remain competitive. Now you are simply playing catch-up.

Someone Has Been Busy Selling:

One other thing that has stood out among all the catalogs I’m getting this season – they are loaded with blow-in inserts.  Years ago, getting catalogers to accept blow-ins was a hard-sell because they felt they detracted from their brand, or they just couldn’t be bothered. Apparently, the resistance to accepting those inserts has been outweighed by the lure of incremental income. I see no harm in accepting these inserts for most of you, and the extra income can be used to fuel your own customer acquisition efforts.

They’re Back!

Two years ago, I wrote about the death of the Chef’s Catalog (click here).  But guess what was in my mail box this week? A quick check on-line revealed that the remnants of the company and customer list were acquired by some venture capital folks in Napa Valley a year ago, with the intent of having just a lively website.

Oh, but the lure of launching a catalog must have been too great. I read that one of the reasons they bought the company was access to the “11 million past Chefs customers who will be the initial targets of the Chefscatalog.com launch. People enjoy purchasing from Chefs Catalog. They value the assortment that enables them to cook at home, set the table and entertain.”

Let’s hope these investors, none of whom appear to have any catalog experience, did not really believe that their 11 million old customers (which must have gone back to start of the company in 1979) were all viable. But I doubt it. I also suspect that no one was whispering in their ear “Do you really think it’s a good idea to launch a catalog of homewares that are available in every other kitchen/cooking catalog and on 1,000s of websites? Especially a title that crashed and burned just two years ago?”

Granted, I do believe that the prior owners of the Chef’s Catalog (Target) squandered the opportunity to grow the catalog by linking it to products in Target stores. But, these new owners are coming into a crowded field, with a product category that is already saturated. If the spread below is any indication of their “merchandising” ability, they don’t stand a chance. All of these products are available at either Wal-Mart, Bed, Bath and Beyond or certainly Amazon.

Here’s another thought: why stop here? Maybe this could be a new trend – resurrecting dead catalog brands. Why not bring back Home Trends, Right Start, Deerskin, and Spiegel? If there really is a “resurgence of catalogs” (as I read in one blog recently from a catalog-centered vendor), then bringing back old, dead titles should be a great opportunity. Maybe there’s a whole new generation of skiers wanting to buy sweaters from the Carroll Reed catalog.

Have a happy Thanksgiving.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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The Board

The Board of Directors. The owner. Upper management.   No matter where you work, you have to deal with one of these three factions, and sometimes all three.

More and more I’m hearing from clients and other catalog mailers that their Board of Directors/owner is questioning the need for a catalog. Most of the requests are reasonable, asking the catalog staff to conduct hold-out tests, reduce circulation by eliminating “unprofitable circulation”, and examine ways to reduce costs, and potentially live without a catalog, or at least, not mail as many.

In several cases, the requests are more draconian. In two instances, the catalog staff has been flat out ordered to cut circulation by 30% or 50%, while still maintaining current sales. In one case, the “Board” has decided to completely eliminate all prospecting with the catalog, and move all new customer acquisition to the web.

What’s driving this?  Many of these people are not trained catalogers, so our first impulse is to dismiss their requests as being uninformed good intentions. I’m also not naïve enough to think that all these owners, board members, and upper management are reading this blog and absorbing my comments about the future of catalogs.

No, they don’t have to read this blog, and they don’t have to be professional catalogers, to know what is happening. They are aware of what is going on around them. They see and read about all the major retailers having problems. They know from their own experiences ordering products online as general consumers, whether with Amazon or some other vehicle. They surmise what is happening even without the specific proof for the individual company on whose board they serve, or which they may own. And they are looking at the future.

One common thread I see is that no matter how professional, diligent and talented the staff are at many of these catalog companies, there is a general assumption among the “Board/owners” that the staff doesn’t know what they are doing, or at least not looking to the future.

Years ago, there was a big management change at Brookstone. Our sales at the time were 80% retail, 20% mail order, but because of the way the company’s accounting was done, the catalog represented 50% of the company profits. This put me, the only “catalog guy” left after all the management changes, in a very visible spot. One day, I was asked to explain to the new upper management team, all of whom were “retailers”, how catalog circulation worked.

This was before PowerPoint, so I remember drawing everything out on the white board in the Board room. In my opinion, the basic concept of how to determine which segments of names that should get mailed hasn’t changed that much in 40 years. I learned circulation planning from Bill Knowles at Potpourri in the mid-1980’s, and still use the same basic principles today.

If you had been an outsider at my presentation that day at Brookstone, you would have thought western civilization was going to end. These “retail” guys were second guessing everything I presented. They told me my basic concept of determining the cost per new customer/order was totally flawed, although none of them had alternatives. They were amazed that we exchanged names with our closest competitors (Are you crazy? You give our best customers to Sharper Image? We’ll put a stop to that!), and that our best house file segments generated less than a 10% response.

You’ve all been in similar situations. You do know what is going on, and you are professionally running the catalog and your website. Sure, you don’t have 100% response rates (who does?), but let’s face it, it’s tough to explain catalog reality to people who are non-catalogers, and who “don’t speak the language”.  Fortunately, in my case, the CFO at Brookstone, who was a hold-over from the prior administration, jumped into the discussion and helped bail me out that day.

I learned many things that day, as well as in many, many similar presentations over the years on how to explain to the Board, the owner or upper management how the catalog works, and why certain things work and others don’t.

One thing I always do is use a current non-catalog example of an industry changing. Today, I point to the auto industry, specifically, The Ford Motor Company. In May, Ford replaced their CEO, in part because the Board felt that the existing CEO was not focused enough on moving the company toward electric and self-driving cars.

But, here is the flip-side to what is happening at Ford. Last week’s 3rd quarter earnings showed a 63% profit increase, which was fueled by sales of F-series pick-up trucks, the best-selling vehicle in America since 1977. It is a reminder that despite all the talk of innovation, driverless cars, and electric vehicles, Detroit is still a truck town. The billions of dollars in revenue generated by truck and SUV sales are what enable research in these other areas. Further, Ford, and the other automakers, can’t just throw a switch and walk away from selling big trucks, which are what consumers in 2017 still want.

The same applies to your catalog. Your customers may be moving more online. Your ability to prospect with your catalog may be dramatically reduced because of declines within the co-ops. There are a whole host of reasons why you need to be looking at alternatives to your catalog. But keep in mind, and make sure your Board/ owner/ upper management are aware that you can’t just flip a switch and close down your catalog, and expect to replace all those sales with more Facebook ads, not in 2018 anyway. It is an evolutionary step which must occur over time to protect existing sales and profit.

If you are in a similar situation with your Board/ owner, and need someone to jump in and help add another voice to the conversation, you can always give me a call, and I’ll be happy to meet with them. This discussion is different at every company – there is no established “argument” for either keeping or not keeping a catalog going. But I can help you establish realistically expectations for changes to the status quo that won’t sacrifice sales and survivability in the long run.

As an added bonus, if you are located within driving distance of my home in New Hampshire, I’ll even come in my Ford F-150.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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New Catalogs In The Year 2025 – Part 3

What about new catalogs – will there be any in the year 2025? This is part 3 of my thoughts on the future of the mail order industry, and where catalogs will be in seven years.  Click here for Part 1 and Part 2.

Let me go back to the original question submitted by a reader that prompted me to write this series of posts. This was his closing comment: “I imagine your vision might be pretty on target and might help some folks avoid investments in a future that just isn’t likely to be there.”

Will there be a future for catalogs? The short answer is that catalogs will never completely go away in the same way that blacksmiths/farriers have not completely gone away – people who own horses still need to have them shod. But there are a lot fewer horses today than there were 100 years ago.

The long answer to that question is that catalogs in the future will never have the same value to consumers or to companies that they do today. Therefore, is it wise to invest in a future that isn’t likely to be there?

Again, let me start with a historical analogy.

In the late 1990s, a catalog got started near Portland, ME called Lighthouse Depot. Everything it sold had a lighthouse motif – gifts, apparel, home furnishings, and small replica lighthouses from around the country. I worked with the owner for several years as worked to make his business grow.

The most significant and steady part of his business were the small replica lighthouses. The catalog worked with several manufactures that were introducing new models of current and historic lighthouses. There were collectors that snapped these up as they were issued – customers actually had standing orders to receive each new lighthouse replica when it was released. It was like buying dog food on a continuity plan. What catalog wouldn’t want that type of recurring order?

I commented to the owner one day that I felt the “lighthouse” craze was a fad, just like scrapbooking. He assured me it was not, as he believed there was a deep love affair among the general population with anything lighthouse themed. At the peak of their growth, they had 104,000 12-month buyers.

Then along came eBay. Suddenly, all of those replica collectors realized that their collection of “collectible” lighthouses, which they had expected to sell and retire on the proceeds, were not even worth the original purchase price. No one wanted them. Sales at Lighthouse Depot plummeted, not just on the replicas, but everything. The company eventually went out of business and no longer exists.

Yes, you can argue that the “lighthouse craze” was just a fad that was short-lived. But, who knows, maybe the “yoga craze” will turn out to be the same. Or the “mountain biking craze”. Or the “urban logger” craze (which I don’t get at all).

My point is that many catalogs got started because they rode a wave of interest that crested quickly and died. This has not happened in consumer catalogs alone – look at Staples as an example of a B2B catalog that was ubiquitous in every office. If you wanted to order an office product, you went to a central office (maybe Accounting), looked it up in the catalog, and had someone order it. Now you just go online and look it up and send someone a link for what you want.

Aside from the aforementioned “wave of interest”, why else do people still start catalogs, especially today? There are several reasons:

  1. The obvious reason is that catalogs still appeal to a segment of the population that are motivated by a print catalog. I’m one of them. My 17-year-old son would never look at a catalog, even though I’ve explained to him that catalogs pay the bills in our house. Yet, my generation is going to get smaller as my son’s generation become the dominant shoppers in 2025. So, starting a catalog just to appeal to few old geezers like me that like to thumb through a print catalog instead of using my phone doesn’t seem like a good bet.

 

  1. Almost all of the new catalogs today started as a website, and maxed out their potential to acquire new customers using PPC and SEO. A catalog seems like a logical extension of their “brand”, and hence, a good way to acquire new customers. It’s easy to get a few hundred thousand names from the co-ops, and do an initial mailing. The initial mailing results are awful, compared to what new catalogs experienced 20 years ago, but these new mailers don’t know that. They look at the 0.7% response rate and think “Man. That’s pretty bad.” But their co-op rep says “Now that we have actual responders, we’ll tweak the model”. And they do, and response rate goes up a little more. With luck, maybe one of their new lists performs above break-even. The mailer creates an analysis to show that these new buyers are being acquired for slightly less than their most expensive PPC words, so they keep plugging away with a catalog for a few more years. In my opinion, they will soon hit the same wall that most existing catalogs have hit, which is that the faucet of viable prospect names from the co-ops has peaked, and then dried up.

 

  1. There will always be a desire to start catalogs by new “Patagonia wanna-bes”. No one today or in the future will invest money to start a new Lillian Vernon, National Wholesale, or Plow & Hearth – catalog companies that have generated tons of relatively low average order transactions. Amazon, Wal-Mart, and Jet will have those marketplaces covered. Instead, the new catalogs in 2025, like the new catalogs in 2017, will all be about “lifestyle”. Entrepreneurs that haven’t fully thought out the logistics of starting a catalog will be driving these new ventures. They will not know to ask how and if it can be sustained, or where are the new customers going to come from? But they will want to share their vision and their dream with the world, which they cannot do with a mere website. It can only be done with a 48-page catalog, selling products on only half the pages. And they will quickly learn, as so many other catalogers before them have learned, that selling “lifestyle” is not so easy, and that selling “merchandise people actually want” is hard.

Every new catalog faces one daunting task. It is not being profitable, it’s not finding new customers, it’s not having unique merchandise (although that is daunting) and it’s not having great margins.

The most daunting task that every new catalog faces is being able to SELL THE DREAM.  Not the entrepreneur’s dream, or the consultant’s dream or the creative agency’s dream, but the CUSTOMER’s dream. What does the customer want and can it be delivered in a way that can be sustained, and is relevant to the customer?

Somewhere right now, there is another “Jeff Bezos” type entrepreneur who is setting his/her eyes and mind on every market – including whatever market you are in. They are ignoring the established way of doing business, and planning a new way that will leave the existing players in the dust, because they are appealing to the CUSTOMER’s DREAM. If it has not already happened with your market/product category, it will. Your customers are consumers and consumer behavior has changed from what it was 20 years ago. Today, your website and your mobile site HAVE TO BE better than your catalog – that is where people go first when seeking product information. Whether you have a great looking catalog in the future will be of little importance to the customer. They just want the products they need, and they want to order them in a way that is convenient to them. Much to your chagrin and amazement, these consumers have ways of “discovering products” without catalogs. And the next “Jeff Bezos” – whoever that person is – will wipe the slate clean with a new online approach to meeting the needs of your customers, and it is doubtful that it will include a catalog.

We are at an enormous disadvantage trying to look at the future 8 years out, because most of us are looking at the future through our “catalog mindset”. We are trying to envision what catalogs will be like in the future, when we should be thinking about how consumers will be buying then. That is why I asked Amy Africa to be one of our speakers at our seminar in April 2018. If you can survive the next two years, Amy is going to tell you how you need to be communicating with your customers in the future. And according to Amy, you haven’t seen anything yet!

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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