A Rip Van Winkle catalog entrepreneur falling asleep in 1979 and
waking up in 2004 would not recognize his catalog and would have no clue how to operate his business.
In 1979, there were no desktop computers. Orders were handwritten, and you communicated with customers in writing. There were no Macintosh systems, no Quark or Pagemaker software, no integrated operating systems.
Few catalog companies used 800 numbers. Paying for a telephone call from a customer was considered a flagrant waste of money. “Let ’em lick stamps!” most owners would say.
There was no ink-jet addressing. Catalogs had just moved out of the era of the aluminum Addressograph plates, a little charge card-like plate with each customer’s name and address embossed on the face. They were placed one at a time in an imprinting machine, and the catalogs were hand-addressed.
Most catalogs still printed the disclaimer, “Allow 4-6 weeks for delivery” on the order form. Back then, we got the money in first and then bought the inventory. That way, there were no surprises. And, of course, there was no Internet and no e-mail.
Niche Marketing
That was the Pre-Technology Period, roughly equivalent to the Jurassic Period. The now-extinct dinosaurs of the 1979 direct marketing and catalog world were large. They were called the “big books.” The Montgomery Ward catalog fought with the Sears catalog for supremacy. In turn, they battled the J.C. Penney and Spiegel catalogs.
Penney’s catalog still exists, but the big books are gone. The few massive catalogs evolved into thousands of specialized, niche catalogs that drastically expanded the channel in the past 25 years. They defined what may be the most important evolution in the catalog industry’s history: niche marketing. The prolific expansion of catalogs into so many diverse sub-markets not only propelled the industry forward but opened the minds of countless new catalog shoppers to precision, special-interest catalogs.
Database Marketing
The second monumental advance in this period was database marketing. Before the 1980s, few catalog companies could slice and dice the marketplace to target exact prospect segments. The J.C. Whitney automotive parts and accessories catalog owned by The Riverside Company is a classic example of database marketing’s significance.
Whitney has multiple niche titles targeted to segmented automobile and motorcycle enthusiasts including Jeep, Sport Compact, Sport Truck, Truck, Volkswagen, Cruiser Motorcycle, Honda Gold Wing Motorcycle, plus its all-inclusive catalog, Everything Automotive.
Without sophisticated database prospecting and the ability to target these finite niches, J.C. Whitney would be locked into the catalog of the past, the Warshawsky Company (the forerunner to J.C. Whitney founded in 1915) big book. Database marketing let J.C. Whitney implement a market penetration strategy and a secondary customer penetration strategy within those unique markets.
Another catalog company following the database marketing trail over the past 25 years is AGS Publishing, the Minnesota-based educational assessment and instructional materials company owned by private equity group Ripplewood Holdings LLC. Because of advanced database marketing segmentation of educators, AGS developed catalogs targeted to teachers in psychology, elementary special needs, secondary special needs, speech and language, test preparation and basic skills. Before the database-driven slicing and dicing, AGS would have mailed generically into school districts and hoped the broad-line catalogs reached those teachers needing their products.
Database marketing advances also include house files. In 1979, virtually no catalog companies could do simple recency, frequency and monetary value analysis. Similarly, house file segmentation by product interest, lifestyle demographics or any other differentiation was almost nonexistent. Contact strategy was defined as, “We mail two catalogs a year to everybody.”
Printing Technology
The third major influence, printing technology, has dominated catalogs since the mid-1980s. In 1979, Viking Office Supply was already 18 years old, and owner Irwin Helford had a long history of physically cutting and pasting catalogs together literally on the kitchen table, just like Lillian Vernon. There was no digital anything. We put catalogs together with hot wax, X-Acto knives and light tables.
It wasn’t until 1983-84 that I had the honor of working with the then small printing company QuadGraphics to create the first electronically produced catalog in the world, all contained on a Mac and 250 floppy disks. That was the Streamliners business forms and supplies catalog.
The rush of printing technology has let the industry mail many more catalogs at a much lower cost, driving our huge expansion. Printing technology reduced costs and time while elevating quality and accuracy.
Multichannel Integration
The No. 1 factor in explosive direct marketing growth is the advent of multichannel marketing, including online.
We have had more than one channel – mail – for less than 25 years. Since 1979, we have added telephone marketing (which drives more revenue than all mail marketing), then fax and now online marketing and, yes, retail. The intellectual shift, however, that lets DMers (and retailers) stop thinking just catalogs, or telephones, or solos or inserts, and begin thinking in terms of integrated, multiple-channel marketing is true, breakthrough thinking.
When DM News celebrates its golden anniversary, models that will be written about are Amazon, Lands’ End, Office Depot, CDW, Cabela’s and American Blind and Wallpaper. Among the smaller, advanced catalogers, Keepsake Quilting, Ultimate Office, 4imprint, Penzey’s Spices and Crutchfield will be commended.
Multichannel DM is converging with retail marketing. The next 25 years will produce huge, converged marketers with equal expertise in direct response, catalog, online, retail and, likely, wholesale marketing.
Professional Management
In 1979, entrepreneurial product merchants ran DM and catalog companies. Richard Thalheimer, founder/chairman-CEO of The Sharper Image, had been in business only two years when DM News was founded. Now, he is one of the few talented entrepreneurs and product geniuses to make the transition to “mega-big-company” and still run the show as a superb professional manager.
And that is the fifth main 25-year evolution to the direct and catalog realm: professional management. Catalog firms in the 1980s were dominated by marketers, those soaring eagles of commerce with big sky vision, wide wingspans and absolutely no contact whatsoever with earth. It was inevitable that individuals trained in finance would replace them, the CPA-manager who now dominates catalog management.
Along with financial management has come return on investment, lifetime value, cost to acquire a customer, inventory turns analysis and warehouse cubing. They are the endless and deathless metrics and benchmarks that drive this precise, predictable and formulaic business. All of this occurred starting circa 1980, driven by what I view as the sixth major change.
Private Equity
Private equity entered the DM and catalog space in the past 25 years. Before then, these companies were public companies, like Sears, Roebuck and Co., or they were closely held, like Lands’ End in its formative years. Virtually no private equity firms were involved in the business.
Banks did not (and often still don’t) understand how this business works. It was common in 1979 to hear a banker say, “Let me get this straight. You’re going to send out 100,000 catalogs, and 95,000 are going to be thrown away without ever being read … and you want this bank to finance this insanity?”
Suffice it to say, it was difficult in 1979. Along came private equity firms with lots of money to invest for three to five years. They saw opportunity in the above-average earnings that catalogs have, the predictability of response, the potential of niche and database marketing and the return on advertising cost. Suddenly, money flowed to single catalogs, and with the infusion of capital and professional management, they were grown and resold at a much higher price, to the eternal joy of the investors.
In the 1980s and ’90s, the enthusiasm grew and so did the demand for more professional managers. Of course, there were setbacks to this new approach to catalog growth. The roll-up of multiple titles and its collapse left enduring scars. But private equity groups are smarter than the average bear, and they began to rationally examine catalog companies as “platforms” that can take one or two add-on acquisitions to move the growth along carefully.
Today, the strategic players, such as NEBS and Deluxe, are so big they have to merge because there are no smaller companies to buy any longer. Taylor Corp.’s appetite for strategic purchases is seemingly endless. Henry Schein has grown the medical and healthcare conglomerate to new heights. What is left are the smaller, middle-market catalog company acquisitions financed by private equity funds. These groups are looking at a short window of growth, generally three to five years. The strategy is to grow and sell and to increase the valuation of the catalog company and, thereby, the return to investors.
As a result, strategic planning for catalog companies has changed in the past 10 to 12 years. No longer is the strategic plan necessarily a family-based plan or a “lifetime” plan or even a conservative, moderate-growth-with-control plan. Rather, it is a short-term, rapid growth and consolidation plan, and that has altered the way catalog companies are managed. Whether that change is positive remains to be seen.
There they are: six major influences to DM and catalogs since 1979 that have caused our industry to grow from $600 billion in 1979 to a projected $5 trillion in revenue by 2017. The drivers have been niche marketing, database marketing, printing technology, multichannel integration, professional management and private equity funding.
The true driver, however, has been the industry’s ability to adapt to change and to embrace opportunities that emerge.
