Deliver: Hot Off the Press: How Lillian Vernon Goes From Design to DoorstepLillian Vernon Corp. publishes six catalogs a year. Each book averages 96 pages and contains more than 700 products. Products sold are in the gifts, housewares, gardening, seasonal and children's categories. An average Lillian Vernon product sells for $30.35, and the average customer order is $56.85. More than 101 million catalogs in 22 editions were shipped last year, as were more than 4 million packages.
Like any cataloger, the 54-year-old White Plains, NY, company has an established set of processes to produce and ship its catalogs. DM News' Mickey Alam Khan gets a behind-the-scenes look fromKevin Green, executive vice president and chief marketing officer at Lillian Vernon.
How does Lillian Vernon approach printing and fulfillment?
We mainly prospect with our catalogs, and we do some freestanding inserts in terms of advertising to sell some product and generate interest. But we don't do traditional solo mailers.
We print with Quad/Graphics. We print in a process called roto-gravure printing. It's a high-speed, high-quality printing process that is most useful and economical when you have print runs of large circulation quantities and high page counts. We mail more than 100 million catalogs across 22 different editions on an annual basis. So for us, the roto-gravure printing process is the most efficient and economical, and it produces the highest quality.
We buy paper ourselves. We have someone who's responsible for paper buying. We currently have a deal with International Paper for 100 percent of our paper needs, and we eventually put it out for bid before each contract expires. We really try to get a feel in the marketplace for what's going on.
As a rule, we do not look at the spot market. In some cases, catalogers can contract for 50 percent to 75 percent of their paper needs and then try to use the spot market for special deals to get more paper cheaply. However, the risk it puts you at is the quality of the paper that's available on the spot market and also the timeliness of delivery of that paper. We contract for 100 percent of our paper needs to ensure the quality that we need and our ability to meet deadlines because we mail 22 editions a year. Meeting our mailing dates to create the proper spacing between different catalog editions is very important. So we, as a cataloger, can't assume that risk with the spot market as others can.
It's very much an electronic handoff these days. Lillian Vernon has an in-house desktop production group, and we produce the pages ourselves and then we transmit them to the printer. So there's very little going on in terms of human intervention from the time Lillian Vernon creates a page to the time it's engraved onto the cylinders on the printing press. That's something that's happened over the last five or six years, but it's highly efficient.
What about postage?
Because we mail a lot of catalogs, we get high postal density. High postal density really means that we put a lot of catalogs into different ZIP codes, and the U.S. Postal Service offers discounts for people who prepare their mailing in a way that they can take a bundle of catalogs and give it to the local postal carrier in the order in which they walk their route. That's called carrier route sequence discounts. We're able to lower our catalog postage costs as a result.
The other thing that we do is what's called drop shipping (sectional center facility delivery). This means that our printer, who's based primarily in Wisconsin, when they take the catalogs, they print it for us, they put them into their trucking system and they will try to deliver the largest possible batch of catalogs to the smallest USPS facility. If we do that, we're doing a lot of the legwork for the postal service and they give us a discount.
How much does Lillian Vernon spend on postage and printing? And what's the cost of an average catalog?
Postage represents probably about 45 percent of our total cost to send the catalog to a customer. Printing is high in percentage, approximately 19 percent. But the paper is another 20 percent. So between the paper, printing and the postage, you're almost there in terms of the costs. The balance would just be the odds and ends of things like the cost of the prospect names that we rent to have to send a catalog.
How much does a typical catalog cost us? We're in line with the norm. But it obviously depends on the time of year, page count, circulation and quantities. But you could say about 45 cents. I don't think we have an annualized number for the amount we spend on postage. But out of the average 45 cents per catalog, it's probably around 21 cents to 22 cents. So at 100 million catalogs a year, it's around $21 million.
What's the timeframe for creating a catalog and shipping it out?
It takes about 16 weeks, and that will include going through deciding which items we're going to pick up from previous offers that we've made. Any given catalog usually has about 75 percent of its pages filled with products we've offered before. That's important because, in our business, advertising is repetition. So when customers see some of our best products over and over again, it helps with the sales of these products. Also, part of it is just timing, that we hit our customers with the best products at a particular time of need.
The other 25 percent of the items in any given catalog are new, meaning we just sourced, and that process can begin a year in advance of mail date. That's our product development process, where we internally develop unique, hard-to-find and exclusive products as well as working with some of our vendors around the world to do the same thing. But once we've decided on a product that would be new in any given catalog, the important steps are the photography and the copywriting. For the pick-up item, we already have photos and we already have the copy written. It's pretty efficient to put those items in the catalog. But for the new items we have to take new photography and write new copy. That's the time-consuming part of it.
Then we go through steps where our merchants turn it over to creative. And that turnover process is really saying, "Here are 500 items or so we'd like to be in this catalog, here's the pages we'd like them to be on, here's the items that have done the best and the items we'd like to be featured and here's basically the benefits of some of the items that we'd like you to stress in the copy."
Our creative department comes back after a few weeks with the new items photographed and all the pick-up items put in place. And they really present a layout or the first pages of what the catalog will look like, and then they work together over the balance of the items to put it all together. Once they've done that, it gets sent to the printer, and cylinders are engraved and eventually the printing presses start rolling.
A rate increase is coming from the postal service next year. Would you look at some other delivery companies?
We might. As the USPS' rates go up, alternatives will come into play. There really are not a lot right now in terms of placing magazines and catalogs in someone's mailbox. The post office still has a monopoly on that. We've tried alternate delivery methods such as commingling with magazines and polybags in the past, even local newspaper deliveries, going in those bags and being left on the doorstep.
But a lot of those alternative delivery methods have also led to much lower response rates. For some reason, the catalog isn't as well received or perhaps presented via those methods. And so the post office still has the only game in town, realistically. But we'll certainly be looking and see if anyone steps up there to really push alternative delivery methods. E-mails will be in greater use for spurring customer activity.
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To read more Deliver articles visit www.dmnews.com/production