Asian crisis control

The financial crisis that hit Asia over the past few years has also hurt some of the U.S. business-to-business catalogers marketing there. But for the most part, the mailers have emerged slightly bruised rather than battered.

According to a recently released report on the state of the Asian economy by the Manila-based Asian Development Bank, the slowdown in Asian economic growth began with a deceleration in exports in 1996. It worsened into a currency crisis in ’97 and turned into a widespread regional contraction (in which Asian currencies were devalued, forcing up the price of imports) last year.

Indeed, it wasn’t until ’98 that most catalogers contacted began to feel an impact from the economic crisis. For instance, Global Motorsports, a $175 million cataloger of motorcycle parts, suffered a 20% sales decline in Japan and Thailand last year, according to president/ CEO/chairman Joseph Keenan.

“While they’re not very big markets for us overall,” Keenan says, “at $5 million in sales, Japan is still decent for us, and it’s definitely a downturn there.” Global was experiencing 12% annual growth in Japan prior to ’98, Keenan says, which makes the 20% sales drop more painful. On the other hand, the Morgan Hill, CA-based Global’s business in Thailand “is so small, it’s not worth talking about.”

Growth slowdown Optic supplies and educational tools cataloger Edmund Scientific, which launched a Japanese catalog in 1996, didn’t feel the fallout from Asia’s economic downturn until this year, according to president Robert Edmund. After doubling sales in Japan in ’97, Barrington, NJ-based Edmund enjoyed a 300% sales gain in Japan last year.

But with sales for the first half of ’99 of just under $2 million, Edmund’s Japanese division is running “only” 60% ahead of ’98. “Some of it is a matter of our business maturing there,” Edmund says, noting that the $42 million company mailed more than 100,000 catalogs in Japan this year.

“Then again, we’re not getting the large commitment orders in Japan that we get in the States,” Edmund says. In the U.S., original equipment manufacturers (OEMs) place $1,000 average orders, whereas average orders from research and development customers run only $300. He wouldn’t specify the exact breakdowns of OEM orders vs. R&D orders in either country.

Rochester, NY-based Transcat, a $76 million manufacturer/cataloger of test and measurement instruments, has had mixed results in its Far East markets, which include Japan, China, South Korea, Singapore, and Thailand. All told, Transcat’s Asian business is 10% of its total sales, with China representing the largest share (30%), according to director of international sales Mike Malone.

Although Transcat’s business in China “wasn’t substantially negatively affected,” Malone notes that over the past couple of years sales in South Korea have slipped 65%, while Singapore has been “soft.” Sales to Japanese customers, on the other hand, jumped nearly 50%, he says, due largely to an increase in the company’s field sales staff. Transcat’s reps visit key accounts in Japan using the company’s catalogs as reference tools.

Given the ailing economy, one might think that $1.4 billion office supplies cataloger Viking Office Products couldn’t have picked a worse time to launch in Japan. But early response to its 1 million-plus mailing in April ’99 has been “really good-above plan and better than most of the other countries we’ve opened in,” says chairman/CEO Irwin Helford. But Helford doesn’t think the Japanese economy has had much of an effect on Viking’s business, since nearly 75% of its products are consumables, such as paper and pens, compared to more discretionary categories such as furniture and electronics.

Recovery expected Asia’s developing economies, including Singapore, South Korea, and Hong Kong, will increase 4.4% overall this year, the Asian Development Bank report predicts, while a more robust economic recovery is expected during 2000. And the anticipated rebound has some business catalogers rethinking their mailing plans.

“Although we leveled off catalog circulation this year, we’re considering increasing circulation 20% in the fall because of the positive signs,” says Edmund Scientific’s Edmund. “We’re on track to increase our sales in Japan another 60% this year.”

But Global Motorsports is playing it safe for now, according to Keenan. “Although we’ll call on our Asian distributors as aggressively as ever, we can’t predict the results.” While Global is hoping the market will rebound in Japan, “there are more things in play than just the economy for us to succeed there,” he explains. “Because we sell a very discretionary luxury item, our sales are the farthest thing from a leading-edge economic indicator in Japan.”