You Never Know From Where The Punch Will Come

This posting is about a company that tried to control its own destiny and failed, but there is a lesson here for every catalog, especially those jumping on the Amazon bandwagon.

In 1999, I was contacted by a lingerie manufacturer in East Los Angeles that wanted to start a catalog. He had been manufacturing underwear for more than 15 years. He got a big bump in business about 10 years earlier when Victoria’s Secret started buying some of his products. They liked working with him so much, they contracted with him for more and more products. In the year prior to his call to me, VS represented 80% of his sales.

Then it happened. Victoria’s Secret informed him that they had established their own manufacturing plant in China, and would be scaling back their purchases from him dramatically. He never thought that VS would throw him a punch like that. He thought they were his partner. He thought his own catalog would be his route to survival, because he wanted to control his own destiny.

I was doing a ton of traveling at that point, and as luck would have it, I was going to be on the west coast in two weeks, so I arranged to meet him. I won’t retell the whole meeting, but there was one memorable moment. After we had met for a few hours in his office, he asked if I would like to see where the products were made. We walked down a short hall, and he opened a set of double doors, and there was row after row of “work stations”, with hundreds of women of every possible ethnicity, each hunched over a sewing machine, with piles of bras and panties all around them.  When you see a company in human terms like that, it gives you a very different perspective on what the owner was attempting to do. He was not only trying to save his company, but save a few hundred manufacturing jobs as well.

I gave the business owner a very sobering estimate of what was involved in a catalog launch, and 18 years ago, it was still fairly easy and lucrative to do. But still, I pointed out all the issues, not the least of which was that he would probably not be profitable for 3 to 5 years. But, he thought he had two massive advantages – he was the manufacturer, so he had great gross margins, and he knew the business, and knew what sold.

He decided to do the launch on his own, with no additional help from any catalog consultants, including me. I did find him a former copy writer from Brookstone who apparently had been waiting her whole career to use the word décolletage in product copy.

Instead of doing an in-studio photo shoot as I recommended, the owner spent a modest fortune on a photo shoot in Mexico with some very expensive lingerie models (apparently models that look good wearing a piece of cloth that can just barely be called a garment are very pricey). The book mailed once and that was it. I never heard from the guy again and don’t know whether he survived as a manufacturer.

So, what’s the lesson to today? Simply this: Thousands of companies are now flocking to Amazon. They know the dangers involved, but also realize that if they can’t beat them, they might as well join them.  A reader the other day told me that two years ago Amazon was 15% of their business, and soon it would be 40% of their overall business. For many of you, Amazon is becoming your number one sales channel.

You see your use of Amazon as a way to control your own destiny. For some of you, the future looks rosy as those Amazon sales keep climbing. But what happens when Amazon becomes 70% or 85% of your sales? What happens is that you have lost control of your destiny, because that punch that knocks you out of business could come at any time.

Amazon is ruthless. They know that once they have the majority of your sales, they can start to squeeze you. Maybe they’ll increase the fee they collect as a commission on your sales. Maybe they will charge some “Amazon access” fee. I expect that in many cases, they will become the manufacturer, and simply drop your line completely.

Amazon is not your friend. It is a sales channel that eliminates dependence on others – especially sellers like you. They want to control every aspect of the transaction, and are well on their way toward that goal.

What is the alternative? Don’t walk away from Amazon, regard it as you would any other channel. But just remember, as it becomes a bigger piece of your sale pie, it could also turn around and punch your headlights out. Be careful.  And continue to build a diversified portfolio of sales techniques, beyond your current catalog. That is what we will focus on at the Datamann Catalog Seminar in April.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Fluff or Reality?

Six months from today, you’ll have a choice – do you want fluff or reality?

On Thursday, April 5, 2018, Datamann will be hosting our sixth annual seminar on catalog growth and survival for the VT/NH Marketing Group.  I’m very proud to say that this has become the largest single-day event for catalogers in the US.

Once again, we will be joined by two of the industry’s leading experts on the future of catalogs and ecommerce – Amy Africa and Kevin Hillstrom. We will give you specific, detailed methods on how to survive and even grow in this tough market.

Here is where you have a choice about fluff or reality.  I saw that one of the co-ops gave a presentation last month at a conference about selling on Amazon. The co-op rep was a co-presenter with a guy that has actually sold products on Amazon for 5+ years, and who could have used the full hour (he could have used a whole day) to discuss all the nuances, tricks and implications of selling on Amazon. But the conference organizers chose to give half the session time to the co-op – possibly because the co-op was a sponsor of the event.

This had me intrigued – since the co-ops are missing out on all the transactions that are migrating to Amazon, what could one – or any – of the co-ops possibly have to offer about the subject? I downloaded a copy of the presentation, and the 21 slides from the co-op were the usual superficial fluff you would expect. The first dozen or so slides described the Amazon shopper’s demographics, as compared against the co-op’s database. No surprises here since probably more than half the US population uses Amazon. The next few slides were about the Amazon customer’s perceptions of retailers and their opinion on free shipping. Guess what – the co-op’s findings are that Amazon customers prefer Free Shipping. (I’ll bet you are kicking yourself now for missing this presentation).

So, what was the final message from the co-op regarding Amazon? It was basically this: Go ahead and sell on Amazon because the Amazon customer is also buying from other sources – like catalogs – at “more than average levels” as indicated by activity found in the co-op’s database.  Of course, nowhere in the presentation does it indicate how that average Amazon shopper’s activity has been trending with non-Amazon sources over the past five years.

And we know why that number was not reported – none of the co-ops want to admit that Amazon is choking off their transactional information, and thus their ability to provide you with viable prospecting models. What else would you expect from one of the co-ops but a presentation that says all is well, and Amazon is not a problem for either you, the mailer, or the co-ops?

I know you are not that naïve. I know you want to be treated with respect. That is why our seminar exists, as an alternative to the few remaining catalog conferences, symposiums, client events, etc., that are vendor sponsored, vendor dominated, full of fluff sessions and hard selling of services to you. Sure, Datamann is the sole sponsor of this event for the VT/NH Marketing Group, and Datamann clients get a few perks from attending. But in six years, I’ve never used the podium to tout Datamann’s services. Nor do I share the attendees list with any other companies that want to set up time with you to discuss retargeting, Facebook ads, or online tracking. If you attend our seminar, you can relax and learn.

I’m honored to have Kevin and Amy join us again. We will not be presenting fluff. The tools, strategies, and tactics we will share are not easy tasks to accomplish. They are hard work. (No, there is no magic mailing list which Kevin is going to reveal to you when he says to adopt low cost/no cost methods of customer acquisition).  We will be discussing the reality of the industry and your survival. Sadly, some of you won’t survive. But you stand a better chance of continuing the fight if you face reality instead of naively embracing fluff.

The 2018 seminar will be held at a new location (for us) – the Event Center of Nashua, New Hampshire, a new conference center combined with a Marriott Courtyard only a few miles over the border in New Hampshire from Massachusetts, and much easier to get to if you are flying into either Boston or Manchester.

More to follow. See you in Nashua in April.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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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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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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If You Were Buying A Catalog Today, What Is it Worth?

Back in late June, I wrote that “the big catalog conglomerates (BluStem/Orchard Brands, Potpourri Group, Cornerstone) keep acquiring more catalog titles because it makes their investment in efficiency even more profitable. But, you never see other catalog companies purchase online-only companies because those types of companies would not fit into their efficiency model – there is no synergy, no gains in productivity.” (Note: I wrote that before Camping World, a retailer and cataloger, acquired TheHouse.com, an online-only seller of sporting goods, so there are instances of catalogers buying online companies.)

I received an email a few weeks later from someone connected to the mergers and acquisition (M&A) industry that specializes in buying and selling catalog companies. She commented on the above quote: “That statement is somewhat correct but missing a small point we discovered as we have tried to help our clients acquire web-only businesses over the last year. They can buy a 5-9% EBITDA catalog company with a 4.5-6x earnings multiple. But, it is difficult to find a web-only business with 5-9% EBITDA and, even if you do, they go for 9-12x earnings multiple. I suspect none of the catalog private equity groups which you mentioned can fund that kind of acquisition metrics. Amazon is in an envious position with their stock price, impervious to lack of profits from their retail business.”

I’m not an M&A expert and don’t pretend to be, but let’s look at this from a few perspectives. For those of you not versed in the M&A vocabulary, let me explain a few things being said in the email sent me. A catalog with a 5% to 9% EBITDA, basically means that catalog is generating profits of between 5% to 9% of sales, which would be a very healthy catalog, especially if they had been able to maintain that level of profitability for several years. Once you start getting down below 5%, your catalog is generally not healthy, and is of little interest to being acquired by the private equity companies – unless they can get a really great deal. The buying price is “4.5 – 6X earnings”, means that if a catalog was generating $25 million in sales, and was generating 7.5% of sales as profits ($1,875,000), then the buying/selling price would range between $8,437,000 (4.5 x $1,875,000) to $11,250,000 (6 x $1,875,000).

This 4X to 6X profits multiple to determine the selling price (or value) of a catalog has been around for a while. I even checked with Jim Alexander (my mentor in many catalog related things) who confirmed for me that even in the heyday of cataloging in the 1990s, the multiple was typically 5X to 7X earnings/profits.

The second half of her email is more intriguing. She states that online-only companies have an inverse situation. Apparently not many of them are profitable, because it is difficult to find any with 5% to 9% of sales turning into profits, and when you are able to find such a company, the owners of those companies determined their value by a much higher multiple of 9X to 12X earnings.

Those of us merely on the sidelines can speculate that these online-only companies probably have an inflated view of their potential, each thinking/expecting that their business is the next Apple/Facebook/Google. Heck, they probably play foosball in the office and wear man-buns.

What do you think the reaction is when a cataloger that is in “acquisition mode” encounters one of these not-so-profitable online-only companies that thinks they are worth twice the multiple of the cataloger’s own business? Well, you can pretty much guess the reaction and comments: “Who do these guys think they are? I’ve spent 40 years in this business, building my catalog, going on endless press-approvals, countless buying trips to China, installed three generations of order processing systems, was a charter member of the DMA Catalog Council before they killed it, currently participate in 32 co-mail pools a year, helped start all 3 of the remaining co-ops with my customer file, and these guys have had a website up for four years, they don’t even know their 12-month buyer count, and they think they are more profitable than me? This is crazy!”

But, since I’m a history buff, let’s look at this from a historical perspective. Is it 1903 or 1923?   In 1903 there were 32,000 cars and trucks registered in the US, and 21 million horses. In 1903, most people would have probably thought an investment in a wagon/buggy company was a better idea than investing in a car company (although, that was the year that Henry Ford started the Ford Motor Company). In 1923, the number of cars swelled to 15 million, and the number of horses grew to 25 million.  There were probably still many in 1923 who thought that horses, buggies and wagons would never be displaced by cars. After all, the number of horses grew while the number of cars grew. A rising tide lifts all boats. Plus, all of the horse trade publications of the time featured articles on topics like “Manure Is Not Dead”, and “The Value of the Omnichannel Blacksmith”.

Sadly, for the buggy industry, 1923 was the year when the number of horses, buggies and wagons in the US began to drop, and we know how it ended. Today, there are 263 million cars and trucks on the road in the US alone, and only 3 million horses.

There is none so wise as to foresee the future or foretell how and when catalogs will end. Is 2017 equivalent to 1923? Picture yourself back then – without the knowledge of how cars would take off. You’d like to think that the 1923 version of you had the foresight to look around and say “Yeah, horses are dead. I don’t care how good a deal I can get on investing in a buggy company, cars and trucks are the way to go. And yes, I know that there have been literally hundreds of car companies that have gone out of business since 1900, but a few of these companies like General Motors, Ford, and Studebaker, look like they are going to be around a while.”  (So, you would have been 66% correct).

In my opinion, the question facing the catalog industry is not so much whether the online companies are worth a higher multiple. The question is whether catalog companies are still worth a multiple of 4X to 6X present earnings? You can see the handwriting on the wall. Consumers are migrating online and to mobile, the catalog co-op databases are dying, response rates keep trending down, and fewer and fewer catalogs are generating 5% to 10% earnings. No one can predict how much longer the industry has, but only the naïve would believe that better days are ahead. Would you invest here?

Maybe you would if there was still value in an acquisition which allowed you to roll a new catalog acquisition in with some existing brands and benefit from more efficiency. But, what to pay? The 4X to 6X earnings mantra doesn’t seem like a good ratio anymore if you know there is built in obsolescence to your acquisition.

And that is the problem I see facing the future of cataloging. The people working in those private equity firms looking for catalog companies to buy are not new to the industry. They have been doing this for a while. Like that mythical cataloger I mentioned earlier, they built this industry while building their business. They are not about to admit to obsolescence – they want the thrill of watching the order count grow on Cyber Monday. (They probably still check with the mail room to see how many mail orders came in). They just got a break from the USPS on mailing heavier books – how could that NOT be a great thing? After years of dreaming of moving the 3.4-ounce threshold up to 4 ounces, this is their moment of glory. They are going to mail more pages and not spend a minute on making their websites more effective, or adding any callouts in the catalog to drive consumers to the website. Print (just like manure in 1923) is not dead!

Meanwhile, they all remember what happened to Garden.com, and a host of other online-only companies that crashed and burned over the past 15 years. They know that Amazon had a one-in-a-million chance of surviving when it launched 20 years ago. They hang onto the last comment in the email above from the M&A analyst who wrote “Amazon is in an envious position with their stock price, impervious to lack of profits from their retail business.”  They see the irrational exuberance in the stock market as the so-called FAANG stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have surged in value, while traditional retailers with real stores and real catalogs, have seen their value pounded in the market. And they think it is not only not fair, but crazy.

But that is the buyer’s perspective. What if you are the seller? You think that 9X to 12X multiple looks pretty good for those online companies. You think maybe you need to stop thinking like a cataloger and beef up your online presence.

Let’s continue this conversation….

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Do You Want to Be Pure or Rich?

This is part 2 of my revisit to what is to become of the single title catalog.

Around 2004, when I was working at Millard Group, we hosted a client symposium. Catalogers at that point had gone from having a simple website on which – if you were lucky – you could place an order without the site freezing up, to acknowledging that the internet was something that customers wanted.

One of our presenters was Steve August (at that time, the marketing guy for the Brookstone catalogs), who explained how Datamann (a shameless plug!) was doing fractional allocation matchback for Brookstone, showing how orders on the web could be matched to a catalog mailed. There was a stunned look on many of the attendees’ faces. I could tell that many of them were thinking, “I can’t just look at a source code report anymore? I have to do all this extra work?”

Finally, the CEO of a New England based catalog company said, “I hate the internet. I wish it would go away. I can’t understand why anyone would want to order off the internet when they can call one of our telephone reps, who can help them pick the right product.” Two-thirds of the room nodded their heads in agreement with his statement, and the other third rolled their eyes and quietly thought “jerk”.

I cite this story because catalogs have moved a little further along the ecommerce spectrum, but many still harbor the belief that they wish the internet and mobile would go away, or at least, were not so powerful. They love their catalog. They know they are doing an adequate job of reaching their baby boomer customer, but they long to get that baby boomer’s 30-year-old children to purchase from them and, ideally, to place that order from a catalog, which these catalogers view as their key to catalog growth and catalog survival.

For most catalog companies, you have done everything you were supposed to with regards to your website. You have added all the mandatory bells and whistles. You have an online staff that runs your PPC, SEO, email and abandoned cart programs. You finally developed a mobile site.

But deep down inside, management still feels that the heart and soul of the company is the catalog. After all, out in the company lobby, there’s a stack of the most recent catalogs – there is not a screen on the wall showing the website’s home page.

Ok – you get the point. You are still catalog-centric. Even companies that think they have turned the corner, and think they are web-centric, admit to me that 100% of their products are in the catalog, and they have no “web-only” products.

When I Feel the Heat, I See the Light

However, this series of postings is about what has changed among catalogers in the past 2 ½ years since I first wrote about the plight of single title catalogs. I have witnessed among many catalogers a change in focus and a realization that the internet is where the future of the company lies. And I’m not just talking about having a good website to compliment that catalog, but a fuller ecommerce orientation that includes using PPC, SEO, Facebook, and Instagram, etc.

To quantify this change, think about this: At our catalog seminar in March, I gave attendees a list of 16 topics to pick from to choose what they would like covered for the seminar in 2018. I asked them to mark two choices. Out of 200 attendees, we had 84 responses (42%, not bad!). The number one requested topic for 2018 – “How do I change from being a catalog company to an ecommerce company?”.   The least popular topic – “Working with the catalog co-ops”.

But here’s the rub – just as you have maxed out the potential circulation from the co-ops, you have now maxed out the affordable ecommerce options like PPC. Yes, you can still keep mailing catalogs, and there are still some things you can do with social media, with better targeted emails, and retargeting, but none of these are going to move the growth needle in a big way.

Look around and you see that even the main stream media is carrying stories about the collapse of retailing. Thousands of stores are closing this year nationwide. Whole malls are being deserted. But who is growing? Amazon.

Now let’s go back to my title question – do you want to be pure, or rich?

Today’s bogeyman for catalogers is not the internet in general. Today it is Amazon and the other marketplaces like eBay and WalMart.com. Some of you are deathly afraid of Amazon. You think it is evil. “Why would I want to sell on Amazon?”

You either experienced or heard of examples of catalog companies which began selling a product years ago on Amazon, and which did well at first because you were the only one selling it there. Then suddenly, there were ten other sellers – including Amazon. And for the past 10 years you’ve been telling anyone who would listen, about how you got shafted by Amazon when they started selling the same cat-shaped tissue holder that you started selling on their site. Amazon saw how well it was doing for you, and they stole the idea from you. So, ever since then, Amazon has been the enemy.

I’m Amazon agnostic. My biggest concern about Amazon has been that while they grew at 25%+ each year, all those transactions were not going into the co-ops, depriving the co-op databases of a huge chunk of transactions. For some reason, this thought never occurred to many of you because the co-ops simply kept telling you “all is well”.

Many of you dislike Amazon with a passion because you see them as the reason your business is declining. The few buyers you have generated from selling on Amazon just DO NOT RESPOND when you try to market to them. These customers don’t recognize that you and your catalog were the ones that shipped that lighted pumpkin figurine – they think it was Amazon. You want to scream “This is what’s killing catalogs and retail!”

But, how many of you are Amazon PRIME customers? I’m betting that almost all the readers of this blog are, for all the same reasons that millions of other consumers are – it is convenient, and their product assortment is ubiquitous.

Should you be on Amazon? That’s a question each of you needs to answer on your own. I recently read that half the US population either never or rarely uses Amazon – so if you are serving those mostly lower-end shoppers with your catalog, Amazon may not be that productive for you, and Amazon may actually not be a problem for you.

But let’s look at your growth problem from this perspective – you have stalled in your efforts to acquire new customers from your existing sources. You have been unable to develop a marketing strategy that brings in tons of new customers at little or no cost. You are not “creative” in the new online world of marketing, and with new ways of selling. But you do have products, and if you are strong at anything, hopefully it is at being a good merchant.

Amazon is not going to stop growing anytime soon. And after last Friday’s purchase of Whole Foods, you can see that Amazon has its eyes set on many parts retailing. Either be part of it, and follow all the tactics for using Amazon effectively, or stop complaining. Do you want to be pure, or rich? Maybe the more appropriate question is do you want to have a shot at remaining in business or keep crying that you are going to resist Amazon?

I’m not an expert on selling on Amazon – but there are plenty of people who claim to be. I’m sure that one or two actually are experts, and they can help you with the whole strategy of selling on Amazon (as well as sites like eBay and Walmart.com), with regards to pricing, margins, speed, placement, etc.

If you have been a good catalog merchant, and developed proprietary products which would be tough for anyone to copy, then why not sell on Amazon? What’s wrong with generating cash? Your job is to sell product, not mail a catalog.

Let’s be clear, I’m not advocating that selling on Amazon is a cure-all for what ails the catalog industry. It is simply one arrow in the quiver, albeit a very big arrow. As with any company selling products via any channel – whether it be a retail store, a catalog, a website or all three – if you haven’t got unique product, which is priced right, and is in demand, you are in trouble. But if you do have that unique product, especially if it is proprietary to you, don’t be afraid of selling in the marketplaces like Amazon, eBay, and Walmart.

“He is no fool who gives up what he cannot keep to gain what he cannot lose.” – Jim Eliot

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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