Eziba's Meltdown: How a DMer Fell Apart

Eziba this week became the latest in a long line of e-commerce businesses that launched a catalog only to discover that the unfamiliar terrain of the print world is difficult — and costly — to navigate.

The North Adams, MA, company began as a Web site, eZiba.com, in 1999 specializing in artifacts acquired from local artisans worldwide. A catalog was introduced in 2000, and by 2001 it accounted for half of the company's sales.

Eziba refinanced after the roof of its shipping warehouse caved in because of heavy snow two years ago. It appeared to be in good financial shape until a few weeks ago, when local newspapers reported that the company was in a cash crunch and layoffs were imminent. The financial difficulties were caused by a mistake with its fall catalog, which mailed to a list of infrequent buyers instead of frequent buyers.

Dick Sabot, Eziba's chairman and co-founder, told The New York Times that the company sent out tens of thousands of catalogs in late September and early October. Just a few years ago, Eziba mailed as many as 6 million catalogs a year.

Eziba suspended operations last week and told reporters this week that it will not publish a catalog when it reopens for business. Eziba and its lawyers did not return several calls for comment.

The company is voluntarily selling off assets to repay creditors such as the Mass MoCA museum, which is suing Eziba for $95,420.02 in unpaid rent, maintenance and utility fees. A group of new and current investors plans to buy back the company and reopen as an online and retail business as early as six weeks after the liquidation is completed.

There's no easy answer for who's to blame, because there are so many links in the chain between a cataloger's in-house list of names and the stage when addresses are printed onto a catalog for mailing purposes, said Andy Ostroy, chairman/CEO of ALC of New York LLC, which manages Eziba's file. Obviously, though, “the checks and balances that should be in place weren't,” he said.

That system of checks and balances differs for every company, he said. Some companies depend solely on vendors to verify that the right list of names is used for a mailing, while at others the marketing team double-checks everything before anything goes in the mail. For Eziba, “it's anyone's guess as to where the blame lies,” he said.

There are 65,660 total buyers on Eziba's house file, according to its September data card.

“People who have started in the Web channel have had a much harder time getting a [multichannel] brand established,” said Mike Wychocki, executive vice president at Haggin Marketing, Sausalito, CA, which has helped many established brands enter the catalog arena.

Numerous retail Web sites from the dot-com boom of the late 1990s started catalogs, but there are few success stories, Wychocki said. Fashion retailer Boo.com launched a catalog in 2000 and soon suspended operations. Today it exists as part of Fashionmall.com. Garden.com also tried its hand at catalogs in 2000 and was defunct later that year. Art.com's print effort debuted in 2000, but its assets were acquired a year later by poster Web retailer Allwall.com.

“The Web is good for bringing really narrowly focused offerings to market. When you try to go to a catalog, there [often] are not enough names in the universe to support [the cost],” Wychocki said. He thinks this is what happened to Eziba.

One of the few successful examples is Red Envelope, which has a broader positioning, he said.

Mistakes sometimes happen during the complex process of managing mailing list databases, and narrowly positioned catalogs are particularly vulnerable when they occur, said Donald R. Libey, managing director of Libey-Concordia, Philadelphia, advisers and investment bankers to the catalog industry.

“This is a business of formulas,” Libey said. “If all the formulas are followed, you win. But when one is missed, you're setting yourself up for disaster.”

If it happened to an L.L. Bean, the results wouldn't be so drastic, he said, but “when it happens to a small catalog, it's a disaster.” This is especially true when it happens on the rare magnitude of what occurred at Eziba, he said.

To ensure that such a mistake doesn't put a direct mailer out of business, many look at how much money is available and how much a mailing costs per catalog, ensuring that they never mail more than a disaster might take, Libey said.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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