State of the Catalog Industry

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This is part one of a two-part series


A benchmarking study can be done two ways.


First is an internal study by a company, in which it measures a variety of its metrics. Many catalogers do some of these today even if they do not know it.


For instance, measuring response rates by various segments is benchmarking. Other examples are measuring the number of orders filled complete on the first pass and measuring the number of shipments per order.


As useful as these metrics are, they do not tell the whole story.


For a company to improve its performance, both overall and on any individual metric, it needs to know what the industry standards are for each metric. This enables it to focus its improvement efforts on those areas in which its performance is either just at or below the industry standard.


The second form of benchmarking is industry standards.


Many industries and the companies within them do not have any industry standard benchmarking to use. Therefore, to improve the companies, they are constantly striking out in the dark.


Fortunately for catalogers, there is a benchmarking study conducted annually, The State of the Catalog/Interactive Industry Report. This is conducted and published by the Direct Marketing Association in cooperation with W.A. Dean & Associates. This year's study is the ninth.


The entire study could not be discussed here because of its length.


The published report this year is more than 300 pages. However, some highlights from the findings are presented in this article. If you would like the entire study, contact the DMA's bookstore either online or by phone.


Setting This Year's Benchmarks


The study covers general information about the 107 respondent companies and statistics on marketing, interactive marketing, operations, merchandising, strategic issues, staffing and financial performance. There were more than 140 questions, and the results provide companies with more than 600 data points by which to measure their performance.


Finally, to reduce skewing of the results, only catalogers that reported net sales from cataloging of more than $1 million were included in the survey. This has been true from the study's inception.


In years past, the data were presented in two basic groupings: target market and volume.


The target market was divided into consumer catalogs, those with more than 90 percent of their sales coming from consumers; hybrid catalogs, those that market to both consumers and businesses; and business catalogers, those with more than 90 percent of sales coming from other businesses.


The volume segments are $1 million to $5 million; $5 million to $20 million; $20 million to $50 million; and $50 million and more.


The reason for these two major groupings was to provide individual companies with two ways to benchmark their performances, by their market and their size.


This year, the data provided by the respondent companies have been further analyzed by their circulation practices and Internet involvement. This was not done for all 140 questions but only for selected ones. The intent is to provide readers with additional data points for benchmarking that incorporate the major factors affecting remote selling today.


Again, it would be impossible to cover all aspects of even these two analyses, but a few highlights follow.


Shipping and Handling


One of the traditional questions examined by these two new divisions was one of shipping and handling practices.


Not surprisingly, more than two-thirds of the respondents, whether by circulation size or online demand, charge for shipping and handling based on order value. This is an easy calculation for catalogers and all remote shopping companies but a major irritant to customers, especially consumers.


When viewed by their online sales, high online sales companies - those with online sales in excess of 10 percent - were less likely to try to cover all shipping and handling expenses, including direct labor, outbound freight and materials, than those that might be classified as traditional paper catalogers.


Whether this is a factor of trying to compete with pure-play e-commerce companies is not known. But this does help dramatize to the consumer the differences and the perception that catalogers are gouging them on shipping charges.


In prospecting for new customers, firms classified as online companies were more likely to use the Internet than anyone else. This is logical, but the interesting thing is that among these companies, 50 percent of their customer contacts were orders, and 20 percent were requests for paper catalogs.


Conversely, among the traditional catalogers, only 8 percent of the phone calls were requests for a catalog, and 65 percent were orders. This can be interpreted that these more traditional paper catalogers have to rely on list rental prospecting for new customers. This does not add to the pool of catalog shoppers and creates higher competition for wallet share.


Paper Beats Online


Overall, respondents reported that the size of online orders tended to be smaller than paper catalog orders. This was true especially for catalogers that distribute 1 million or more catalogs a year and for those with low Internet sales.


However, half the companies whose online sales were more than 10 percent of total sales still reported that online orders were smaller than paper catalog orders. This may be because of the still-slow speeds for Internet connections. However, it is not known for sure.


A final comment was that among catalogers of all types, the percentage that measures customer satisfaction is still low. This has been true for all the years of the study, and it is surprising.


Catalogers have a disadvantage to brick-and-mortar retailers, since they do not have face-to-face contact with their customers, and unless there is a complaint on an order, there is no further communication with the customer until the next order.


This makes it even more important that catalogers and all remote shoppers measure the satisfaction levels of their customers.


While initially this is an expense that may not seem justifiable, in the long run it should pay huge dividends, especially if the company heeds its customers' comments and suggestions.


Next month: Highlights from the study, including operating, staffing and financial data.


• Bill Dean is president of W.A. Dean & Associates, San Francisco, a catalog consultancy that provides remote shopping companies with the intelligence and professional recommendations to aid them in their decision-making. He can be reached at www.dean-assoc.com or 415/512-7305.
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