Survey 2001: Changes for Catalogers

Since 1992, I have commented on the state of the catalog industry based on the annual benchmarking study. For the past four years, this has been done as a collaboration with the Direct Marketing Association’s State of the Catalog/Interactive Industry Report. The 2001 report will be released in July.

The questionnaire went to 1,100 catalogers in January, asking for their 2000 results, and we received results from a little more than 100 catalogers. This may seem small, given the total number of catalog companies. However, the respondents’ combined sales represent about 5 percent of all catalog sales, making them a fair sample of the industry.

Responses were tabulated and reported based on company type and size. This lets report readers match the industry reports against their own performance on more than 800 data points.

The full report includes responses to more than 150 questions, the majority being multipart. As an inducement to participate, respondents receive a free copy of the final report.

The results are reported in seven sections: demographic information; marketing; interactive marketing; merchandising; operations; finance; and strategic issues. With this breadth of topics, it is impossible to cover the entire report here. Therefore, I will review only a few highlights this month and next.

The responding companies’ revenues were slightly greater than last year and closer to historic norms for the survey with 44 percent reporting revenues of at least $20 million and 26 percent reporting revenues greater than $50 million. In 1999, the same categories were 41 percent and 22 percent, respectively.

Because we include only companies with catalog revenues exceeding $1 million and there is no accurate census of catalog companies by size, we assume that, if anything, our respondents are larger than the norm. This is natural, as larger companies are more likely to conduct internal benchmarking studies and thus are more willing to participate in external ones.

The most dramatic demographic change was the effect of the Internet. For 1999, respondents reported that 2 percent of net revenues came from their Web sites or from interactive operations. In 2000, 13 percent of all sales came over the Internet. All other income sources, such as wholesale, retail and other, remained constant with the drop in catalog revenues. This is not surprising, as 95 percent of respondents had a commerce-enabled Web site by 2000.

However, while 86 percent of respondents reported being profitable for 1999, only 79 percent did so for 2000. Our only speculation for this drop is that while companies saw an increase in the portion of sales that came over the Web, they did not see a corresponding drop in circulation. In fact, there was an increase in median circulation. Part of that may have been an effort to gain names before the January 2001 postal increases set in.

Looking at the marketing statistics, one constant measure over the years has been sales per catalog mailed. For 2000, respondents reported sales of $2.20 per book, down from 1999 results of $2.40 per book. However, for 2000 the median circulation rose 70 percent from 2.6 million to 4.4 million, primarily from major increases by hybrid and business-to-business catalogers.

Earlier I speculated about postal increases boosting circulation. This is evidenced by that in 1999, 36 percent of books went to prospects, but in 2000 prospect mailings increased to 47 percent of all catalogs circulated.

The increased prospecting mailings appear to have created more mailbox glut. In 1999, 59 percent of the prospect books went to catalog lists or cooperative databases like Abacus or Z-24. In 2000, these two categories represented 74 percent of mailings. Is it any wonder that consumers complain of mailbox glut as more catalogers target the same people?

One reason that mailings are aimed almost exclusively at catalog lists is that after all these years and talk of database marketing, the respondents – and, I suspect, most catalogers – still rely on the traditional RFM segmentation.

In the 10 years that we have surveyed catalogers, their heavy reliance on RFM as the primary segmentation tools indicates they have been unwilling to invest the time in using their primary asset – their database. With flattening response rates and rising costs, many catalogers can afford to make better use of their databases.

Finally, with all the pressures about privacy, catalogers remain reluctant to treat the customer with respect. Only 4 percent of the catalogers put their privacy statement anywhere in the catalog other than on the order form.

I seriously doubt that being upfront about privacy and telling customers or prospects whether their names are rented will cause them to stop shopping with the company. Nor will it cause so many to opt out that list-rental income will disappear. Yet those two reasons are the only rational ones for burying the privacy policy.

Next month I will provide comments from the survey concerning the Internet and strategic issues facing catalogers.

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