In an industry as broad as the catalog business — one that encompasses merchandising, marketing, fulfillment, and what have you — it’s tough to cull a definitive list of the most important stories of the past two decades. • But here at Catalog Age, we don’t balk at a challenge. And so we combed through our archives and drew up a list of the top 20 stories that have appeared in Catalog Age during the 20 years that the magazine has been in business. • Like nearly all such lists, ours is subjective. If you feel we left out something of note, let us know. Maybe we’ll even include it in our “Top 40 Stories of the Past 40 Years” issue.
20 “The Real Junk Mail Problem” May 1990
In 1990, as environmental groups became more vocal about excessive advertising mail, recycled paper became a hot topic. In a feature story, “The Real Junk Mail Problem,” and an editorial, “Whose Mail Is It, Anyway?” Catalog Age challenged catalogers to consider using recycled paper.
While several mailers have tried paper that consisting of some reused content, few have made a go using 100% post-consumer waste recycled paper because of costs and quality issues. For instance, when it tested recycled paper in 1989, outdoor gear cataloger Recreational Equipment Inc. (REI) suffered into a number of web breaks and poor photo reproduction.
More recently, the papers and processes have improved. Apparel mailer Norm Thompson Outfitters, which has worked closely with the nonprofit group Alliance for Environmental Innovation, in 2001 began printing all four of its catalog titles on paper with at least 10% post-consumer content.
Nonetheless, among the catalogers participating in the 2002 Catalog Age Benchmark Report on Production, only 12% used recycled paper for their primary catalogs and 18% for their order forms. Sixty-six percent didn’t use any recycled paper.
— Paul Miller
19 “The Search Is On…” June 2002
By the time URLs had become as commonplace as fax numbers among catalog pages, it was clear that “if you build it they will come” did not apply to Websites. But it was also clear that spending millions on Super Bowl commercials wasn’t the best way to drive customers to Websites either.
The emergence of search engine optimization (SEO) signaled the maturation of e-commerce. Attracting visitors was no longer enough; if those visitors didn’t spend more on the site than it had cost to attract them, your Website would be a cost center rather than a profit center (hello, Pets.com). And in the 21st century, it was all about the profits. “The Search Is On…” discussed Website-building practices such as doorway pages and flat directory structure solely in terms of their effect on SEO.
But while most catalogers seem to understand the importance of SEO, they aren’t necessarily practicing it. According to a follow-up article in the January 2003 issue, only 6% of the Catalog Age 100 companies with Websites used H1 tags, which can be key to high search result placement; just 39% had keyword-rich title tags; and 24% used frames, which are difficult if not impossible for search engines to spider.
— Sherry Chiger
18“Spiegel’s Had Enough of the Credit-Card Business” June 2002
Offering private-label credit cards is always risky business. Just ask Spiegel. For fiscal 2001, Spiegel Group’s First Consumers National Bank (FCNB) credit-card unit had racked up losses of $69.3 million. And by the end of 2002, the credit-card division had $2.28 billion in outstanding debt.
To cut its losses, the Downers Grove, IL-based general merchant tightened its credit criteria, snubbing the subprime borrowers whose high default rates had accounted for so much of its debt. But that led to sales declines, as 78% of all Spiegel purchases paid for by credit card were charged to its private-label cards.
“When you ease up your credit scoring to entice more lower-income buyers,” says Kevin Silverman, an analyst with capital growth fund ABN AMRO, “you allow less creditworthy people to borrow, and fewer loans get paid.” Indeed, most catalogers — including L.L. Bean and Lands’ End — offer cobranded credit cards in conjunction with companies such as Visa and Mastercard, alleviating much of the risk.
As for Spiegel, in early March, after trying unsuccessfully to unload its credit-card unit for more than a year, it stopped accepting charges on FCNB-issued cards and said that it planned to liquidate FCNB. And on March 17 it filed for Chapter 11.
— Mark Del Franco
17 “Back to Business” November 2001
It’s safe to say that in the days immediately following Sept. 11, 2001, few catalogers — and few U.S. businesses at large — were thinking about the fiscal ramifications of the terrorist attacks. But soon enough catalogers had to reconsider their circulation, marketing, and merchandising plans. With sales off as much as 60% in the weeks after Sept. 11, it was hardly business as usual for catalogers.
Some mailers took to cutting circulation through the rest of the fall/holiday season — already writing off the biggest season as a loss. Others reduced prospecting while mailing more to customers. Some rearranged drop dates; others rethought their product offerings.
By February 2002, Catalog Age was reporting on layoffs at Spiegel, Brylane, and Lillian Vernon Corp. And the decision to cut back or eliminate prospecting altogether is still hurting some mailers. Three months after Sept. 11, $30 million gifts cataloger Design Toscano delayed mailings and cut circulation 15%, which ultimately backfired, says president/owner Michael Stopka. After sales fell off dramatically, the Arlington Heights, IL-based mailer reverted to its pre-attack circulation levels in January 2002. And Stopka says he has no plans to cut circulation again.
— Shayn Ferriolo
16 “Genesis Restructuring” March 15, 1999
After the steep postage and paper increases of the early and mid-1990s, many believed economies of scale would increase a company’s chances of surviving. That led to a flurry of catalog roll-ups — companies with similar demographics offering complementary product brought together to form a larger corporation that could benefit from sharing resources and obtaining volume discounts.
International Cornerstone (Garnet Hill, The Territory Ahead, Ballard Designs) and Fulcrum Direct (After the Stork, Biobottoms, Storybook Heirlooms) were two of the higher-profile roll-up firms. But even more well known — or notorious, depending on your point of view — was Genesis Direct.
Led by Warren Struhl, the cofounder of specialty papers catalog PaperDirect, Genesis in 1996 began snapping up niche catalogs, such as Hot Off the Ice (hockey merchandise), Lilliput (cast-iron automobile miniatures), and Globalfriends (toys). In 1998 Genesis began buying larger companies, such as Carol Wright Gifts and The Edge Co. At the same time, the Secaucus, NJ-based marketer spent millions building a massive, world-class infrastructure.
But after Genesis filed its initial public offering in April 1998, its stock price was never able to climb back to its original price of $16.25 a share. The state-of-the-art fulfillment center in Memphis, TN, proved to be a financial drain, as the billion-dollar business it was built to handle never materialized.
In February 1999, Genesis restructured, changed its name to Proteam.com, laid off 150 employees — 30% of its staff — and began selling off its non-sports-related titles. But those moves weren’t enough to prevent the company from filing for Chapter 11 in August 1999. The bankruptcy court awarded GE Investments, which had owned 25% of Genesis, sole ownership of Proteam.com. In January 2002, Bethel, CT-based Star Struck acquired Proteam’s sports catalogs, including Manny’s Baseball Land and Soccer Madness, from GE Capital.
As for Fulcrum Direct, it went out of business in July 1998, though several of its titles, such as Storybook Heirlooms, continue to operate under new ownership. International Cornerstone, meanwhile, is still in business. But few in the catalog industry talk about roll-up strategies anymore.
— MDF
15 “Viking Sets Sail for Europe” June 1991
It was not Viking’s first voyage overseas, not would it be the office supplies cataloger’s last. In our June 1991 issue we reported that the Los Angeles-based Viking Office Products was “setting sail” for Europe. The company had first mailed into the U.K. in 1990; it followed up with catalog launches in France (1992), Australia (1993), Germany (1994), Italy (1998), and Japan (1999); subsequent catalog markets have included Austria, Ireland, the Netherlands, Belgium, Luxembourg, Switzerland, and Spain.
Viking was hardly the first U.S. business-to-business cataloger to conquer Europe. Branford, CT-based industrial identification products marketer Seton Nameplate, for one, arrived in the U.K. in 1985; by the time Viking landed in the U.K. in 1990, Seton was already marketing in Canada, Germany, and France.
Nor did Viking hit a home run every time on international playing fields. In December, Office Depot, its parent company since August 1998, sold Viking’s nine-year-old Australian operations to Officeworks, a subsidiary of Australian cataloger/retailer Coles Myer, blaming industry consolidation in that market as a hindrance to growth.
But Viking has made few missteps in its overseas catalog expansion strategy. Its courage, perseverance and, of course, success in international marketing blazed a trail for many an American b-to-b mailer.
International sales now account for more than 14% of the company’s consolidated worldwide revenue, and represent 21% of consolidated segment operating profit.
— Melissa Dowling
14 “Divine Intervention” January 2003
It’s a testament to the kudzu-like growth of e-commerce that a software provider can claim to have patented numerous basic Internet protocols and accuse scores of i.merchants of patent infringement after doing little more than visiting their Websites. The Internet patents in question appear to be so broad, said one cataloger, that “essentially these guys are trying to patent e-commerce.”
From early September to mid-November 2002, Chicago-based Divine began contacting marketers with accusations of patent infringement. Divine had acquired a suite of patents — mostly relating to Internet protocols — and was intent on exercising what it saw as its legal right to protect them. The accused marketers, meanwhile, had to either pay Divine’s request for a fee — generally $10,000-$20,000 or 1% of gross Web sales — or risk fighting the company in court.
On Feb. 25, Divine filed for Chapter 11 bankruptcy protection. At press time, the company was expected to sell its assets to pay its creditors. So what will happen to the Internet patents?
“It depends who buys the assets,” says Ernie Schell, president of Southampton, PA-based consultancy Marketing Systems Analysis and an organizer of a direct marketing group challenging Divine’s patents. “There will be a respite from the attacks, but if the buyer, whomever it is, smells blood, it could become an even bigger problem down the road.”
— MDF
13 “1-800-You-Lose” April 1995
In April 1995, Catalog Age wrote, “Marketers are gobbling up toll-free 800 phone numbers at a rate of 60,000 per week, and the entire supply of 7.6 million available numbers will run out in seven months.” To solve the problem, the Federal Communications Commission would introduce another toll-free prefix, 888, in April 1996.
Catalogers worried that consumers wouldn’t recognize an 888 number as toll-free and therefore would balk at using it. But that concern appeared to be unfounded, notes Liz Kislik, of Valley Stream, NY-based telephony consultancy Liz Kislik and Associates, since “catalogers have always been in the habit of listing ‘call toll free’ or ‘toll-free ordering’ where they advertise their number.”
A greater concern involved branding. Catalogers with vanity numbers, such as Lillian Vernon Corp. with 1-800-Lillian, would not have exclusive rights to the 888 version, since extending these vanity numbers would exacerbate the toll-free number shortage. Many marketers did secure the numbers in the new prefixes where they could, however. A similar problem took hold in the late 1990s, with the proliferation of Internet domain extensions. 1-800-Flowers.com, for instance, did not have automatic rights to 1-800-Flowers.net. Instead, marketers had to register for any variances in names or extensions.
Even 888 numbers soon came to be in short supply, thanks to the proliferation of fax machines and cellular phones. In April 1998 the FCC set up the 877 prefix, shortly followed by the 866 prefix in July 2000.
— SF
12 “F&G: What Went Wrong?” August 2001
Peoria, IL-based Foster & Gallagher, which included gardening catalogs such as Breck’s, Michigan Bulb, and Stark Bros., as well as children’s titles such as Magic Cabin Dolls and general merchant Walter Drake, closed in June 2001, leaving many employees without severance pay, health insurance, and pensions.
The 52-year-old company’s downfall began in the late 1990s. Sales fell from a high of $476 million in 1997 to $337 million in 2000. Its last profitable year was 1998, when it earned $1.6 million. In 2000 F&G posted a $7.7 million operating loss. Some of this was due to the April 2000 passage of the Deceptive Mail Prevention and Enforcement Act, which restricted sweepstakes use. Michigan Bulb had relied on sweepstakes as a prospecting tool; according to an F&G employee newsletter, between 1999 and 2000, Michigan Bulb’s gross revenue tumbled 44%, from $116 million to $65 million.
F&G began selling off its nongardening catalogs. Wand Partners bought food gifts title The Popcorn Factory in July 1999; in June 2001, flower and gifts marketer 1-800-Flowers.com bought F&G’s $30 million children’s division. At the same time, F&G also consolidated operations and laid off workers.
Meanwhile, in April 2001 a group of former employees filed a class action lawsuit, alleging that F&G had illegally borrowed $70 million from its employee stock ownership plan to buy out top officials. As a result, the suit charged, the plan’s assets plunged from $82 million in December 1997 to $7 million in December 1998. F&G shut its doors in June, and on July 2, 2001, it filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.
On Aug. 27, 2001, the U.S. Bankruptcy Court for the District of Delaware approved the sale of F&G’s fulfillment business, Louisiana, MO-based Stark Bros. Fulfillment Services Co., to Lexton Group, headed by former Stark Bros. vice president Jack Alexander. Terms of the deal were not disclosed. On Sept. 19, 2001 the bankruptcy court approved the sale of substantially all the assets of F&G’s $50 million gifts business, including Walter Drake, to San Francisco-based equity management firm Brecon Capital for $15 million.
On the same day, Lawrenceburg, IN-based cataloger Gardens Alive agreed to buy F&G’s horticultural business, which included the Breck’s, Gurney Seeds, Henry Field’s, Michigan Bulb, Spring Hill Nurseries, and Stark Bros. titles, for $10.75 million. Stark Bros. was subsequently sold to Illinois businessmen Cameron Brown and Tim Abair, who run a medical management company.
The former cash cow of F&G, Michigan Bulb, has not mailed since. The class action lawsuit is set to go to trial in May.
— MDF
11 “Postal Service’s Worksharing Concepts Could Save Mailers Up to $500 Million” January 1989
Following a then-unprecedented 25%-plus postage increase in 1988, the U.S. Postal Service was in dire need of making itself more efficient. So the agency formed a task force with mailers that year. The result was six major worksharing proposals designed to save the USPS — and eventually mailers in the form of discounts — $500 million-$800 million the following year.
Among the proposals: having mailers arrange their mail in walk-sequenced order; offering discounts to mailers that drop-shipped mail into destination bulk mail centers; merging magazine and advertising mail in pallets. Most of the proposals were eventually implemented.
So did the plan pay dividends? Not really. The USPS hit mailers with a 42%-plus rate hike again in 1991. Some savings. Then it nailed them again with a 14% increase in 1995. The Postal Service would later introduce such worksharing incentives as prebarcoding discounts, however.
— PM
10 “Fall Fallout?” Sept. 15, 1997
The 15-day Teamsters strike against United Parcel Service in August 1997 may not have been the beginning of catalogers’ splintering from the carrier, but it certainly accelerated the process.
Among respondents to the 1996 Catalog Age Benchmark Report on Operations, 78% used UPS for the majority of their standard shipments. Among participants in the 2001 Benchmark Report on Operations, 50% used UPS for most of their standard shipments.
Rather than abandoning UPS outright, it appeared that many catalogers were using multiple shippers. For instance, Cranston, RI-based gifts and jewelry mailer Ross-Simons had at one time used UPS for 90% of its packages. After the UPS strike it began a steady process of diverting some packages to the USPS while keeping a portion with UPS. Others, such as apparel and sporting goods mailer Orvis, also divided their shipments among various carriers not only to save money but also to avoid being overly reliant on any one parcel carrier.
— PM
9 “Business-to-Business Catalogers Offer Ordering via FAX” November 1987
Believe it or not, the facsimile machine (or as we referred to it back in our 1987 article, the FAX), was patented in 1843, more than 30 years before a patent was granted for the telephone. But the fax didn’t really infiltrate the workplace until the mid-1980s. At $2,000 a pop, fax machines weren’t cheap, but they enabled catalogers to accept orders from other businesses round-the-clock without the expense of staffing the phones 24 hours a day.
“Before you knew it, mailers were trying to figure out how to connect multiple fax machines in a series,” says Don Libey, president of Libey Concordia, who was executive vice president at business forms mailer Rapidforms in the late 1980s. “At Rapidforms, there were like 15 fax machines lined up. If one machine was busy, mailers were figuring out how to have that order roll over to the next machine.” Libey estimates that 12%-15% of b-to-b orders came in via fax in the late ’80s. Fax machines were also a boon for accepting international orders.
Today, according to the 2003 Catalog Age Benchmark Report on Operations, only 7.9% of all orders come in via the fax machine; among b-to-b catalogers, however, 17.9% of orders are faxed.
— MDF
8 “Brighter, Glossier #4 Papers Enter the Market” April 1987
In April 1987, Catalog Age reported on 11 mills introducing 24 new or improved grade #4 papers. Never before, declared the article, “have so many mills simultaneously introduced so many better-quality papers.”
Improved technology, heightened competition among paper suppliers, and a soft market were responsible for the vast improvements in paper quality. And the brighter, glossier papers were in turn responsible for catalogers’ setting higher quality standards. One could even argue that the affordable availability of these superior papers helped the catalog industry as a whole shift upmarket.
Paper quality has improved further since the late 1980s, thanks in part to a European invasion of paper coming into the North American market in the early and mid-’90s, and more modern equipment. This pushed North American mills to upgrade mills in order to remain competitive.
— SF
7 “Tallying Up Results at Abacus” March 1994
By the end of the 1980s, most established consumer catalogers felt they’d mailed to every list they could possibly prospect to. Not enough new lists were becoming available. Prospecting response rates were falling. But then came Abacus, the first of the cooperative consumer databases, in 1990. And by 1994, Abacus’s database had grown from 25 members and a few million names to 235 companies contributing 70 million names.
Today, the Abacus Alliance co-op database gives mailers access to transactional data from 90 million households culled from its 1,575 catalog member firms; it also allows participants to model their house and prospecting files against the Abacus database to find the most likely buyers. “Abacus would take all the lists that came into the database and model them in certain ways,” says Don Mokrynski, president/CEO of Hackensack, NJ-based list firm Mokrynski & Associates. “But effectively it was identifying multibuyers.”
Abacus is no longer the only consumer co-op database out there. I-Behavior’s Co-op Database has 470 participants, representing 77 million names. Experian’s Z-24 Co-op Catalog Database consists of 65 million household names taken from more than 590 catalog lists. CMS’s Prefer Network consists of 250 catalog members representing 100 million households. Business-to-business mailers have Greenwich, CT-based Direct Media’s Data Warehouse co-op and the MeritBase co-op from White Plains, NY-based list firm MeritDirect.
But some say that co-ops have led to the overmailing of multibuyers. “It’s tricky, because on the one hand, multis allowed catalogers to increase response in various segments,” Mokrynski says. “But those segments kept getting hit and hit by so many different mailers that response started declining.”
— PM
6 “Bottom-Line Bombshell” January 1995
The first sentence of the article said it all: “This is the Year of Mailing Dangerously.” In late 1994, catalogers were finally recuperating from the 1991 rate hike that increased postage as much as 42% for many mailers. Then U.S. Postal Service hit mailers with an average rate increase of 14% in January 1995. Further, paper prices for coated papers rose as much as 30%.
Catalog Age predicted that “the combined effect of these costs will push many catalogers into the red and increase consolidation.” In hindsight the hikes were not the mass poison pill as some predicted, but many catalog budgets and mailing plans were constricted.
“Right before the postal rate hike went into effect, we put as many catalogs in the mail as we could,” recalls Gina Valentino, then circulation manager of San Diego-based running gear cataloger Road Runner Sports. “We had to change our breakevens, which meant we couldn’t prospect as much as a result.”
But the paper price increases came with little warning, recalls Valentino, now vice president/general manager with catalog consultancy J. Schmid & Associates. “Back then, it was unheard of to lock in paper-pricing guarantees with your vendor. After the paper increases, mailers changed the way they communicated with their paper vendors. It taught everyone a lesson.”
— MDF
5 “Ward’s Was a Battleship Dead in the Water for 15 Years” October/November 1985
When department store retailer Montgomery Ward decided to shut down its legendary big-book catalog in 1985, the decision was praised — albeit with sadness — by observers as long overdue. A pioneer of the all-inclusive catalog originally designed with rural consumers in mind, Ward had failed to adapt to changing consumer lifestyles. Outdated fulfillment facilities and faulty management philosophies were also blamed for its demise.
“Montgomery Ward just didn’t change with the times,” former Spiegel president/CEO Hank Johnson said at the time. Added consultant Dick Hodgson, president of Sargeant House: “Ward’s was a battleship dead in the water for the past 15 years.”
A scaled-down Montgomery Ward catalog of home goods reappeared in fall 1992, part of a joint venture with general merchant Fingerhut Cos. That catalog was sold to TV shopping network ValueVision International in 1996, and the catalog evolved to the current HomeVisions title. Ward filed for Chapter 11 in the late ’90s and went out of business in 2001.
The struggle of the big books continues. Fellow catalog pioneer Sears, Roebuck & Co. folded its all-inclusive title in spring 1993, although it still produces specialty catalogs. J.C. Penney continues to pare down its core catalog, though the latest edition is still a hefty 1,156 pages. And Spiegel continues to mail a general merchandise catalog as well…at least for the time being.
— PM
4 “National Change of Address Usage Mounts as Postal Service Considers Enhancements” May 1987
The U.S. Postal Service’s National Change of Address (NCOA) system was borne out of necessity. More than 40 million consumers change addresses each year, and until the service was created in 1986, catalogers and other mailers had no way to track down these individuals.
But initially NCOA’s matching technology allowed numerous names to slip through catalogers’ files. Mailers’ match rates for new movers were only 3%-5%, far short of the 18% national mobility rate. So the USPS in 1987 offered a “nixie” option. Nixies return codes indicating a match was close but not good enough to meet the Postal Service’s exacting matching guidelines. The addition of nixie codes boosted match rates.
The Postal Service also added other hygiene services, including Address Change Service, an automated address correction service; Address Element Correction, which catches typos in addresses that could lead to nondelivery; and Delivery Sequence File, a computerized file containing all delivery point addresses serviced by the USPS. These tools have helped eliminate wasted mailings among catalogers. In fact, some catalogers have found that using NCOA has helped them correct or eliminate as many as half of their house file names.
Today the Postal Service licenses its NCOA software to 18 computer service bureaus. And whereas fewer than half of the mailers surveyed in the 1993 Catalog Age Benchmark Report on Lists said they used NCOA, last year 75% of those surveyed said they did.
— PM
3 “Face to Face with the New Media” October 1994
In the early 1990s, the World Wide Web was like the Wild West — a mysterious frontier to be conquered. Among the earliest references to the Internet in our pages was a roundtable discussion in our October 1994 issue. Catalog Age summed up the discussion this way: “The best way to reinforce a market identity, the panelists concurred, may be a print catalog.”
Among the first marketers to stake their claim in the new frontier were 1-800-Flowers, which in 1992 became America Online’s first merchant; Deluxe Business Forms, which launched a Website in fall 1994; and the Sundance catalog, which debuted its site in December 1994. By 1995, catalogers Lands’ End, J. Crew, and Crutchfield had opened online stores as well. Ditto a brash upstart that had neither a store nor a catalog but was betting everything on the Web: bookseller Amazon.com.
In January 1995 (“Marketers Pursue Net Growth”), Catalog Age and catalogers alike wondered just who would be using this World Wide Web — hard numbers on Internet usage were not yet available. Several years later, catalogers tended to view the Internet as a savior (“Hey, we can stop mailing a catalog altogether and sell exclusively online! Think of the savings!”) or as killer (“Those pure-plays with their low prices are going to be the death of us!”).
But just as video didn’t really kill the radio star, the Web did not kill the catalog industry. Nor did it alleviate the need for most catalogers to continue mailing print books. Catalogers today enjoy spikes in Web sales at the time of each drop, and former online-only marketers, such as eBags and Wine.com, have launched print catalogs.
— MDF
2 “Personal Computers Are Changing the Face of Catalog Production” October 1988
Back in 1988 the big production story was how computers and desktop publishing would streamline and automate page design. The first Catalog Age Benchmark Report on Print Production — conducted the same year as the article — revealed that 30% of catalogers were using computers with desktop publishing software for page production, while 29% said they intended to use it in the near future. Just one year later, 57% would be using desktop publishing.
Software such as PageMaker, Ventura Publisher, and Ready-Set-Go (and later QuarkXPress) helped eliminate time-consuming steps such as cutting and waxing onto production boards. The PC and later Macs enabled catalogers to bring functions inhouse that were done previously by prepress houses. They also slashed weeks and even months off production cycle times.
Best of all, catalogers could procure the necessary computers and software for as little at $10,000 in 1988 — and recoup their money in as little as one catalog cycle. The technology lowered the barrier to entry for start-ups, while existing catalogers could reinvest the money they saved on production into other areas of the business, such as prospecting.
— SF
1 “Quill’s Day in Court” March 1992
Much was hanging on Quill v. North Dakota, which went before the U.S. Supreme Court in January 1992. As the Direct Marketing Association said at the time, a ruling against office supplies cataloger Quill Corp. in the use-tax case would be “armageddon” for the industry. So when the court ruled in favor of Quill on May 26, 1992, the catalog industry breathed a collective sigh of relief.
By an 8-1 vote, the court upheld most of National Bellas Hess v. Illinois Department of Revenue. That 1967 decision ruled that a state cannot collect use tax from a direct marketer unless the marketer has nexus — a physical presence, such as a store, a warehouse, or sales reps — in that state.
But in Quill, the court ruled that Congress does have the power to pass use-tax laws. This has led states to try to persuade Congress to enact legislation enabling them to collect taxes on remote sales.
So far Congress has held steady. But the issue has heated up during the past few years as e-commerce has matured. The hotly