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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The Coming Mobile Tsunami

Let’s get this out of the way right at the start – I don’t like the word tsunami. In my day, it was a “tidal wave”.  And that is the start of our problem – some marketers just can’t accept change.

If you have been a reader of this blog for a while, you know I have never given an endorsement to a 3rd party, except for the speakers I’ve had at our annual catalog seminar, including Amy Africa, Kevin Hillstrom and Frank Oliver. I also don’t believe in citing research published by 3rd parties, especially the DMA and the Postal Service, whose data, in my opinion, is always suspect.

I’ve been asked many times by other vendors to give their product or service a plug, but that is not the purpose of this blog. I want you to think about growing your business – I don’t want to always be giving you a sales pitch, not for Datamann, and especially not for some other company.

However, I’m making an exception today. Carole Ziter, from Trigger Email Marketing, sent me some original research that I want to share. I’m doing this for three reasons:

  • I’ve known Carole since 1991, when we began serving together on the Board of the VT/NH Direct Marketing Group. Last fall, I had the honor of presenting Carole with that Group’s Lifetime Achievement Award.
  • Carole and her husband Tom have helped me a number of times in my career with answers to direct marketing problems, which is what her research is about today.
  • Carole is a direct marketer at heart, owning her own catalog for many years, and now co-owning an internet service company. She is always thinking about driving response.

That bears repeating. For the almost 30 years I’ve known Carole, she is one of the most passionate people I know with regards to a love for direct marketing and getting someone to respond to an offer. With Carole, it’s not about a catalog or an email – it’s about getting a customer to respond.

Carole sees what’s coming and from her perspective, it’s a Mobile Tsunami. Unless you are one of those rare catalogs whose consumers are over 75, your customers are going to continue migrating to their phone to shop from you. If your target audience is 35, you already know this.

This spring, Carole’s company tracked 500 major catalog and ecommerce companies on one thing – did they have cross-device shopping carts, meaning if I put something into my cart while on my laptop, will it show up in the cart when I access the cart on my phone?

Below are the results of that research:

  • Of the companies tracked, 44% did not send a single email within their 3-week test period;
  • 60% had no abandoned cart recovery program – many of them well-established brands;
  • Of the companies with abandoned cart recovery programs, 39% sent a single autoresponder and 22% sent just 2 reminders, and 54% do not rebuild their carts across all devices.

Carole then took this a step further, and analyzed the cross-device shopping cart abilities of sixty of the companies that attended the Datamann catalog seminar in March. This was her process: Email subscriptions were completed via desktop when possible; a single item was placed in a shopping cart and abandoned via desktop; abandoned cart emails received were opened via phone; Return to Cart buttons were clicked via a phone to verify the presence of a cross-device feature.

Of the 60 companies Carole reviewed, only 29 (48%) had abandoned cart recovery programs. Of those 29, only 11 companies (18% of the total) had some form of a cross-device cart saver program.

One of the reasons I don’t write about these types of programs is that I feel that 90% are common-sense things that you should be aware of and should already be doing. Amy Africa was speaking about the need for abandoned cart email programs more than 10 years ago. Of course, Amy’s ideal was to start emailing consumers within 3 seconds of their leaving your site, but still, the concept has been around for a while, and has been proven to work. Plus, it’s not like the competition is getting any easier and that your response rates could not use a boost. So, it always comes as a bit of shock to see that companies are not doing some of the basics.

(Part of Carole’s research also tracked basic check-out procedures, and I was further shocked at the number of companies that still don’t have a Guest checkout. Why don’t you just tell customers right up front to go to Amazon?)

On the other hand, what is considered a “basic marketing technique” to one mailer is an extra hurdle to other mailers. There are literally hundreds of additional programs, services, products and methods that you are constantly being sold, and of which you are told that failure to implement each one will spell instant doom for your company.  Plus, there are ten different versions of each of these services from different vendors. You don’t have the time, staff or resources to do all of these things that you are told you should. You have scarce resources which you are struggling to manage.

But, as you get ready to go into this fall/holiday season, having a shopping cart that can be viewed across multiple devices seems to me to be one of those standard customer expectations similar to an 800# twenty years ago. You can’t compete with Amazon on many levels. But one thing which Amazon has perfected is convenience and speed. They don’t have a beautiful design, nor many digital bells and whistles. It is all about being efficient in getting your order. Keep that principle in mind as you think about your website this year. Get with it. (And if you want help, contact Carole by going to the Trigger Email Marketing website).

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Mid-Summer 2017 Catalog Observations

It’s the end of July, and you’ve almost finished paginating your Holiday catalog. It’s not going to mail for another two, maybe three months, and there are not many changes you can make to it now.

That’s ok, because it isn’t your catalog which you should be changing. It’s your website that you need to work on.

Beyond The Upsell:

When I worked at Brookstone in the 1990s, we spent a lot of time coming up with just the right products for our “telephone upsell” list. You have to remember, this was before the internet, when 50% of our orders came in over the phone. At the end of the order, the CSR would ask the customer if they wanted to hear our list of daily specials, which always included a quart of maple syrup. We argued endlessly over what was the best way to spiff the CSRs for the upsell effort. We argued whether the “specials” should be good products, or overstocks we were trying to get rid of.

Most of you have adopted a variation of upsells on your website with features such as “Customers who bought this product, also liked these products….”

There is nothing special in the list below from FineArtAmerica.com. They take the basic product I was searching for (a poster of Napoleon Crossing the Alps), and show it to me in a variety of options such as a canvas painting, acrylic print, etc. In 2017, you expect different options like this for a poster/print/photo.

But further down, you can see they offer this image of Napoleon as a shower curtain, pillow, phone case, coffee mug.

Lots of you with gift catalogs spend an inordinate amount of time finding/developing new products with witty sayings, or cute images, like a smiling cat, or a mug that says “You Are An Amazing Woman”. But you squander the opportunity to really drive sales for that product because you think only in terms of ONE option for that product.

I hear many of you that sell products which are “nice to have” complain that you depend on consumers looking through your catalog to “discover” all the great new products you have. The future of catalog/ecommerce is going to belong to the companies who can capitalize on taking a great product, and turning it into 100 different options. Consumers will shop the sites where they know they have the most options. That’s why I love Cafe Press – contrary to what catalogers tell me – that “no one browses a gift website!”, I do browse their site (where else can you get a “Nixon in 2020” t-shirt?).

If you are a gift cataloger, stop thinking so one-dimensionally about your products, and think about how you can turn that great new t-shirt with the Walt Whitman quote into a phone case too.

Not In 100 Years:

Is this good catalog upselling, or foolishness? I spotted the item below in the Garrett Wade catalog, and then checked it out on the website. It’s a standard kerosene lantern. I have similar lanterns that have been in my family for more than 100 years, and which I have used repeatedly every summer for the past 50+ years. In all that time, I have never had to replace a wick.  But, Garrett Wade offers 10 replacement wicks for $5.95. Unless you were living in a bunker, and needed to use this lantern pretty much 24 hours a day, I can’t see why you would ever need so many replacement wicks.

Was this just great upselling on the part of the merchant? ($5.95 for 10 wicks is actually a good deal). Was the merchant hoping that the average person buying a kerosene lamp would not know that they didn’t need that many wicks? Or did the buyer himself not know that?

I’m not going to give Garrett Wade too much grief on this, as they do something that most of you don’t do, which is an absolute missed opportunity for you. Right below the offer for the lamps above, they have a link to a video on how to use the lamp. (Ok, maybe if you don’t know how to use a kerosene lamp, you might think you do need 10 replacement wicks).

The video is 1 minute long, I can tell it was not “professionally” produced, but it shows the product in use, and is actually pretty good! It sits right on the Garrett Wade website, so doesn’t send me off to YouTube to watch. Why aren’t the rest of you producing similar videos to showcase your products? Think about how much time people watch videos on their phones – video enhances the sale. You are too concerned about “getting it right”, or that fact that it will look “homemade”. So what? It helps sell.

My only concern with this particular video is that it fails to do any selling – while the guy is filling the tank, he could be telling the viewer how well built it is, that it won’t rust, it will last 100 years, etc.  Consumers still need to be sold. Don’t squander the opportunity. Always Be Selling!

As My Mother Would Have Said – “What Gall!”

I love my local daily newspaper (The Keene NH Sentinel). But over the 30 years I have been a subscriber, the paper has announced a number of “editorial” changes, which you could tell were only meant to keep the presses rolling. A few years ago, they announced they would no longer devote as much space to national and international news. Then sports reporting was cut back, and of course like all newspapers, there are no longer any classified ads in the back.

The kicker came this week via a letter they sent to all subscribers announcing a price increase coming this fall. The best part was this statement: “Due to the size of our premium Thanksgiving edition, there will be a $1 surcharge for this Premium Edition”.

This “Premium” Thanksgiving issue, which actually comes out the day before because the paper does not print on Thanksgiving, is all ads and FSIs. Sure, there are a few extra articles on alternate ways to cook a turkey, or the joys of a vegan Thanksgiving, but beyond that, it is all ads. So, for the pleasure of getting a ton of print ads for which the newspaper is already being paid, my newspaper is now going to charge me $1 extra. What gall!

But, hold on! Can that concept be applied to your catalog? Most catalogs have always had a vendor co-op program where you charge vendors a token amount for appearing in the catalog. What if you took that concept further and charged the vendor the full cost of appearing in the catalog? What if you paid for the entire catalog this way? I know many of you are thinking “Bill has no idea how hard this would be”, or “that won’t work for apparel catalogs”.

Don’t think in terms of 64 pages. Think in terms of 8 pages. What if you got an eight-page catalog completely paid for by a vendor(s)? You could prospect pretty deep if the marketing cost was $0. And, think about this – just as you are getting hammered by Amazon, many of your vendors are feeling the pain of all the retail store closings. They are looking for new markets, and may very well be receptive to helping you, if you grant them exclusivity, or if you agree to promote a new line which they are testing.

Oh, I know – you can’t do this because it would interrupt the flow of catalogs you already have, and potentially cannibalize sales from your Holiday 2 drop. Stop thinking that way. Think in terms of using a vendor-paid-for mail piece as a way to drive consumers to your website. The more baited hooks you have in the water, the more you will catch.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Early Summer Catalog 2017 Observations

Getting Smaller

During the last week of June, I received seven “mini-catalogs” on the same day. Each had a slightly different height and width, though none were tall enough to be a traditional “slim Jim.” They were smaller, about the size of a digest catalog (5 ½ X 8 ½ up to 6 x 9). The one from TravelSmith was 52 pages, but the others were more of a glorified brochure, folding out to six to eight panels/pages. I had also received one earlier in the month from Scientific Direct for Father’s Day, which was a 16-page digest size with a small selection of appropriate gifts.

None of these came from Datamann clients, so I can’t report that these are setting the world on fire with response and new customer acquisition. But, they are examples of what I have long advocated in this space – mailing smaller, targeted pieces to more consumers/prospects. Throw more hooks in the water and you increase your chances of catching a fish.

Yes, I know that postage would cost the same if these mailers had mailed 48, maybe even 64 pages. I know that some of you think it ludicrous to not take advantage of that.

But, let’s look at this example below from Great Courses. They sell “educational courses” which are primarily intended for lifelong adult learning. For example, they have a course on the American Civil War, taught by a professor at the University of Virginia, comprised of 48 30-minute lectures. You can download the video, or buy the DVD.

I don’t have a copy of one of their catalogs, but in the past, they have mailed me what seemed like a 100+ page course catalog. Since my interest would only be American History, about 95% of that catalog was wasted on me.

But here is the more important point – according to the six-panel “mailer” I received in June, they have over 8,000 courses. How could you ever do justice to a product library that extensive by mailing a catalog, unless it was at least 100 pages long? You can’t.  The alternative is to mail a flyer intended to get you excited enough about their products to go to their website. I think their piece did a great job of that.

Garnet Hill mailed my wife an eight-panel mini brochure of school backpacks. Again, I think it is a great piece, and it would make no sense to burden this piece with additional products (kid’s clothing), even though the postage would be “free”.

The reason? The focus here is on backpacks – and the offer is targeted. It makes Garnet Hill appear as an authority on backpacks, certainly sustainable, eco-friendly backpacks. Of course, they need to work on their targeting a bit more, as our son is 17 and will be a senior in high school next fall, but that’s a topic for a future blog.

These companies are testing new formats, new sizes, new page counts, new product assortments. They are trying new things to survive because many of them found that they can no longer afford to keep mailing the “old-school way”. What are you doing differently?

Who are you? Is this spam?

Working for a computer service bureau company like Datamann, our IT staff is constantly reminding us of proper internet/email/computer safety. It is probably no different where you work. As a consumer, you start to get leery of anything in your email inbox that looks suspicious.

Last week, I put something in my cart at Performance Bike. A day or so later, they sent me an abandoned cart email. But the “from” was “Customer Service”, not “Performance Bike”. Ordinarily, I would have deleted this as spam, but the subject line made me suspect that this was intended for me.

 

Plus, I have ordered from them in the past. They know who I am. So, why was the “personalized” greeting left blank with “Dear  ,”?  Oh, my – these are such simple things to fix, but which when left unattended, make customers migrate to Amazon.

Catalog Sales:

I did not hear good things about sales for the first half of the year. Many of you, and not just Datamann clients, reported soft response for most of the winter, spring and early summer. And if the 40%, 45% and even “50% off everything in the catalog” discounts that I saw the week of July 4th are an indication, some of you had a very soft first half.

No one can quantify overall response and give a blanket statement that “sales were down by 8%” over last year. Some of you actually did better than plan and last year. But here is something to think about for those of you that were soft:

  • The economy is doing generally well, with the stock market continuing to gain in record high territory;
  • Gas price are low, and even dropping (at least they are here in New England) as we enter summer, which is traditionally when gas prices increase;
  • Except for some hot weather in the southwest (but it was a dry heat), the weather has been mostly “typical” nationwide;
  • Yes, there is some political drama playing out in Washington, but no more so than usual. There have been no national events that distracted the nation’s attention to the point of where consumers froze in place;
  • With thousands of retail stores closing nationwide, you might think that catalogs – even your catalog – would benefit from the reduced shopping opportunities at the local level.

With all these advantages piling up, why is your response soft? Go back to the question I asked at the beginning of this piece – What are you doing differently? If you are simply following the same pattern of mailings, throwing in some retargeting, testing a new co-op segment and more PPC – that’s not enough.  You need to change the whole dynamics of your business to drive catalog sales. That is what we will look at over the rest of the summer.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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What Happens To Catalogs When …

This posting is part 3 of What Is To Become Of Single Title Catalogs – Revisited 2017.

There is a great scene in the 1967 movie Guess Who’s Coming to Dinner? that speaks to where the catalog industry is today. In case you don’t recall, or have never seen the movie, Katherine Hepburn and Spencer Tracy portray a married couple whose 23-year-old daughter wants to marry Sidney Poitier, who plays the role of a black doctor, and who is equally in love with their daughter. This movie was a big deal because interracial marriage was still illegal in 17 states when it came out.

The movie takes place during an 8-hour period, as the parents of Sidney Poitier’s character, and Hepburn and Tracy, are all trying to come to grips with the idea. At one point, Spencer Tracy is talking with Beah Richards, the actress playing Poitier’s mother. She is trying to understand why her husband and the character played by Spencer Tracy are both having such a problem with this planned marriage. Tracy’s character is opposed to the marriage, and Sidney Poitier has already stated that unless he approves, there will be no marriage. Poitier’s mother says the following:

What happens to men when they grow old? Why do they forget everything? I believe…those two young people need each other…like they need the air to breathe in. Anybody can see that by just looking at them. But you and my husband might as well be blind men. You can only see that they have a problem. But do you really know what’s happened to them? How they feel about each other? I believe… that men grow old. And when sexual things no longer matter to them, they forget it all. They forget what true passion is. If you ever felt what my son… feels for your daughter, you’ve forgotten everything about it. My husband too. You knew once… but that was a long time ago. Now the two of you don’t know. And the strange thing… for your wife and me…is that you don’t even remember. If you did…how could you do what you are doing?”

When Catalogs Grow Old:

What happens to catalogs when they grow old? Why do they forget? Why do they lose the passion that brought about their being in the first place and made them successful?

The retirement of Mikey Drexler as CEO of J Crew is, as Kevin Hillstrom stated, is the end of an era. He was not only a great retailer, but a greater cataloger. His departure is an opportune time to reflect on what is happening as catalogs grow old.

I can remember going to DMA Catalog Conferences in the 1980s and 1990s, and there were always one or two great catalog “personalities” that gave keynote speeches. They didn’t talk about how they were using retargeting to drive a 2.8% lift in response.   They did not talk about their cloud computing systems. They talked about their passion for the merchandise they were selling, and the passion they had for their customers.

Most important, they talked about how there was always another dragon to slay – their personal quest was to make the catalog a great place to work, a great place for their customers to purchase products, and a successful company (meaning: profitable). The quest was all about slaying the next dragon, and the next, to accomplish all these goals, and have peace in the kingdom.

Today, catalogs seem to have as much interest in their customers as United Airlines does for its passengers. Today, it is about catching the prey, and making them pay. There is no focus on who the customer is and what the customer wants. The co-ops have an algorithm that finds viable names for you to mail. But, do you really know what those prospects value in you? Do you know what those buyers really want from you?

The quest is gone. As Beah Richard’s character says, “You have forgotten what true passion is.” For catalogs, there are still dragons to slay, but most catalogs have given up, leaving someone else to slay them.

The reason the quest is gone has two parts:

First, remember the old saying about buying computers, that “no one will ever fault you for buying IBM?”  It was the safe choice. There is an equivalent in catalogs today. It is to be predictable. It’s always easy to do the predictable. If the predictable doesn’t work, no one is going to question or blame you, because it is what you are supposed to do. If it doesn’t work, it must be the fault of the economy, weather, or Amazon.

Look at these recent catalog covers. They are predictable.

Just looking at three covers from each company you might not think that. But line up a year’s worth of these covers, and you will see that they are not only boring, but have no passion. It is not just the covers either, but the whole tired product assortment and direction of the catalog. The original founders of these titles had passion, but passion is a luxury they can no longer afford, as passion requires you to break the mold and test new things that run the risk of not working.

In the three examples above, it is easy to see my point about passionless catalogs just going through the motions to keep the presses rolling. But be honest – are your catalogs any different? When was the last time you had a customer contact you and say, “Wow, I really love what you are doing with your catalog. I can’t wait for it to come each month”?  Conversely, when was the last time a customer said, “Man, I really hate what you are doing now”? Either response from a customer would show that there was still some interest out there, and that they were at least looking at your catalog, as opposed to their phone. But I’ll bet that if you are honest, it’s been quite a while since you received either one of those types of comments. That what being predictable will get you.

The second reason that the quest is gone is that most catalog companies rely upon one thing for their continued survival – efficiency. Catalog production follows a very rigid, tight schedule which pervades almost everything a catalog does. Can’t miss a deadline at the printer, can’t risk having the books go out late. Can’t try anything new, can’t risk not making the budgeted goal for the year (even if the goal is 5% less than last year).

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. “If their customers are online only, I can’t mail them a catalog, which is not going to help my co-mail pool savings, so why would I want to acquire a company like that?”

That line of thinking makes Amazon’s purchase of Whole Foods all the more intriguing. There are multiple dragons in this deal for Jeff Bezos to slay. His quest is just beginning, while many of you feel your quest is nearing twilight.

Can you learn to love selling without a catalog, by using all the tools of ecommerce?  Can you get the passion back? The first thing to do is to stop being so predictable. Then stop worrying about being so efficient.

“You knew once… but that was a long time ago. And the strange thing…is that you don’t even remember. If you did…how could you do what you are doing now?”

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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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