Catalog Consultant: Avoid Spinoffs

BOSTON — Spinoff titles may seem potentially lucrative to catalogers but usually fail, catalog consultant Jim Alexander told attendees yesterday at the 10th Annual DMA Catalog Council Catalog On-the-Road Conference.

“Spinoffs are done too early in the game,” he said. “You need depth of management to focus on the core business and new business. You’re taking an unproven concept [and] putting your best people on it. If you can’t be profitable from Day 1, you shouldn’t be in the spinoff business.”

He also said that square-inch analysis — measuring how the sales of an item per square inch it occupies in a catalog — is useful in determining productivity in allocating space, but is only one measure of productivity.

“It may lead to wrong conclusions, especially in eliminating products,” he said. “Many square-inch winners take up small spaces in catalogs.”

Alexander said catalogs today require 250 to 400 presentations to optimize sales and profits.

“Less product could be folly,” he said. “In the old days, it could be 125 to 150 products, and 10 years ago it could be 150 to 200. Trying to merchandise today with fewer products creates more pressure to be perfect pickers. Merchandise assortments and their relative space should drive page counts, [and] merchandise analysis should drive your marketing plans.”

Most firms with highly seasonal businesses undermerchandise the weaker season, thereby ensuring the status quo, Alexander told audience members.

Alexander gave his take on other topics, including:

Testing new product categories. “It’s important to figure out what type of assortment will be meaningful. It can be like playing Russian roulette. … I’ve said in the past that you’ve got to test three or four of a particular category. It might actually be half a dozen. It might be 10.”

Merchandise price points. “Look for something that is taste-, price- and look-consistent when adding merchandise. You need to develop several items along the price ladder to get them from the lowest to the highest.”

List selection. “I have yet to see a company fail because of list selection. No list is profitable or unprofitable in and of itself.” Catalogs fail, he said, because of lack of sales, poor expense control and/or inadequate capitalization.

Segmentation. “I’m often amazed that the six- [and] 12-month file is segmented nine different ways to Sunday. Where we should be segmenting is the older names.”

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