Paper Price Cuts Fail to Quell Catalogers' Woes

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Catalogers aren't singing any hallelujahs about recent news of falling paper prices. With most catalogers facing the slow economy, eroding consumer confidence and additional postage rate increases for the year, some say prices need to fall even lower for them to take notice.

"Yes, we're seeing paper prices drop," said Tom Shipley, CEO/chairman of T. Shipley catalog. "But right now it's not a burning issue. I think for many of us, we're still trying to deal with the last postage increase."

Other catalogers echoed Shipley's sentiments, and though most agree that the decrease in paper prices -- as much as 15 percent -- is welcome, it's hard to rejoice when the economy and mailing costs are dampening sales.

"There are people in the business using phrases like 'This is the worst we've ever seen,' " said Donald Cooke, vice president of direct sales for Midland Paper, Westport, CT. "It's as if someone slammed on the brakes. There are a lot of savings to be found, but no one is biting."

Paper mills are being affected by the economy and postage rate wars that are forcing catalogers to rethink business strategies. Some mills have cut paper prices 10 percent -- 15 percent for higher quality such as glossy paper used by high-end magazines, Cooke said.

This follows last year's massive acquisition of smaller paper mills by larger ones, which was hailed by some industry observers as a positive step that would bring stability to a historically unprofitable industry.

The industry is waiting for the holiday planning season to begin in a few weeks, when catalogers typically look to buy paper for the big mailing season.

But don't hold your breath, said Martin McClanan, chief executive officer of the San Francisco-based Red Envelope catalog. Falling paper prices haven't had a major effect on his company's accounting decisions.

"We've bought paper for the next six months, but we're still in negotiations for our big Christmas book," McClanan said. "We're seeing the lower prices, and from what we hear, the general trend is that prices will either stay flat or go down further. Overall, you really can't get excited about one element because there are other elements that figure in the equation."

Not even smaller catalogers that typically would consider lower prices a relief seem excited.

"It's not giving me any more incentive to purchase paper," said Steven Brecker, owner of New Jersey-based The Jazz Store catalog. "The prices may have gone down, but my printing costs have gone up, postage costs have gone up, and people aren't spending as much. A slight reduction isn't getting me excited."

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