List Firms Tighten Belts to Ride Out Downturn

In a reflection of the economy, changes and softness in the direct marketing industry have caused several list firms to reduce staff in 2001.

“The direct marketing community is all in one big ship, and we're sailing an economic ocean, which is right now as tough and rough as it's been in 25 years,” said David O. Schwartz, president/CEO of 21stAZ Marketing Inc., Farmingdale, NY. “Typical mailers have cut back in business-to-business from 15 to 25 percent — in consumer from 20 to 40 percent. These things have to have an impact.”

List companies were reluctant to say exactly what that impact has been in terms of downsizing. Most spoke in terms of eliminating “a handful of” or “a few” employees.

21stAZ recently downsized some positions as a function of integrating the staffs of two merged list firms. In November, 21st Century Marketing Inc. acquired fellow list firm AZ Marketing Services Inc., Cos Cob, CT, which still operates out of its Connecticut office.

Schwartz said the original plan was to complete the merger in a year, but the downturn caused the firm to do it in nine months.

“The whole point of acquiring AZ was to acquire the sales organization and clients, and ultimately to bring them in and blend them within our organization,” Schwartz said.

Another firm that reorganized this year was Marketing Services Group Inc., New York.

Within its MSGi Direct division, the firm completed the consolidation of list companies Metro Direct, Stevens-Knox & Associates and The Coolidge Co. Layoffs in November were followed by further cuts in February to eliminate redundancies in the organization, said Jeremy Barbera, chairman/CEO.

“We were doing the integration and making the organization more efficient prior to the downturn, and it better prepared us,” Barbera said.

While Barbera denied any recent layoffs, at least two MSGi Direct list professionals left the firm for positions elsewhere.

Rick Blume and Annette Swanstrom, who both were employed at Stevens-Knox for several years before its acquisition by MSGi, joined 21stAZ in June.

Some firms also have made layoffs resulting from drops in mailer circulation and the soft economy. However, list professionals were quick to point out that layoffs have not been out of line with other industries and that an adequate staff is essential to service clients.

ClientLogic Specialists Marketing Services and Mokrynski & Associates have cut staff this year.

“Our key people are all intact here,” said Howard Kupfer, executive vice president of Mokrynski & Associates Inc., Hackensack, NJ. “We tightened up our course in order to stay healthy because, along with the rest of the economy, catalog sales turned soft starting with the fall of 2000 mailings.”

For the most part the layoffs were not in the sales or client service areas.

“The slowdown in business does not really allow us to layoff too many people because when a circulation plan gets cut down from 2 million to a million five in terms of names being ordered, it's still the same 50 or 60 lists; it's just smaller quantities,” said Lon Mandel, marketing services officer at ClientLogic Specialists Marketing Services, Weehawken, NJ. “Unfortunately, the revenue is cut, but it's the same amount of work.”

Some of the cutbacks may be because many list firms added staff in 2000 as part of e-commerce initiatives or divisions that are not as busy as anticipated.

At least one firm closed its e-commerce subsidiary this year.

Direct Media shut down wholly owned subsidiary in June, said David W. Florence founder/chairman of Direct Media Inc., Greenwich, CT.

As a result, CEO Geoff Boytos' position was eliminated. He departed in July. At its peak, had about eight employees, Florence said. The remaining employees moved back to the traditional side of the business, where DMI now handles its e-commerce lists and clients.

There have not been layoffs on the traditional side of DMI yet, but Florence has not ruled out the possibility.

Still, some companies added people in 2000 simply because for many it was the best year they had experienced in quite a while, or perhaps ever.

“The year 2000 was a strong and prosperous year,” Kupfer said. “Coming off a strong year you expect to at least stay the same or move ahead, and if it doesn't, you can't maintain the level of expenses you had, and so you start to cut back.”

While no one really knows when the economy will recover and mail quantities will begin to rise again, list professionals are thinking realistically.

“There's no reason to believe that tomorrow 5,000 new mailers are going to appear ordering billions of names, but there's no reason to believe that an industry that has been around this long isn't going to survive,” Schwartz said.

“When the economy and the industry goes into a soft period, it causes all well-run businesses to scrutinize the expense lines more carefully and make decisions about what expenses are business critical and which are not for the short term,” said Fran Green, president of data management at American List Counsel, Princeton, NJ. “That's what can cause the elimination of certain expenses, including positions.”

Although Green declined to comment about layoffs at ALC, DM News has learned of at least two employees who were recently let go.

Though other companies are struggling, ALC is seemingly having “its best year ever,” Green said. Though she acknowledged it has been difficult, “we've just had to work harder.”

Looking to the future, at least one list professional has hope for a pickup with the fall and holiday seasons that will continue into 2002.

“Fall results are looking pretty strong,” Kupfer said. “We hope that will hold up in holiday and that 2002 will be a much stronger year.”

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