BIG TIME make way for the MCM 100

Jul 01, 2007 9:30 PM  By

It’s always tempting to scrutinize industry lists such as the Multichannel Merchant 100 in hopes of discerning industrywide trends. In which case, the fact that 83 of the 100 companies with the greatest catalog- and Internet-driven revenue enjoyed year-over-year increases in sales should be cause for, if not rejoicing, at least a sigh of relief. In fact, that’s the same number as last year — and the year before.

But given the disparate markets and marketing media that the Multichannel Merchant 100 companies sell to and through, using the list as some sort of benchmark or surveyor’s tool can be somewhat tricky. Sure, both electronics components cataloger Digi-Key (#35) and apparel cataloger retailer The Talbots (#64) grew direct sales by more than 45% — but not for the same reasons.

For Digi-Key, the addition of a new manufacturers’ line was one factor in its growth. For Talbots, the acquisition of women’s apparel cataloger/retailer J. Jill Group in May 2006 was the primary factor.

That said, if you’re looking to the Multichannel Merchant 100 for some suggestions for sales growth, you can find them. Just keep in mind that no one tactic is suitable for all.

GROWTH TACTIC #1: Buy, buy, baby

Acquisitions of outside companies enabled numerous merchants in addition to Talbots to appreciably increase revenue. The August 2006 acquisition of $285 million Sportsman’s Guide contributed mightily to the 15% rise in sales at multititle mailer Redcats USA (#21). Likewise, MSC Industrial Direct Co. (#23) grew sales 26% largely by acquiring $257.5 million J&L Industrial Supply in June 2006.

Then there’s Catalog Holdings (#42), a subsidiary of Golden Gate Capital, which last year added apparel catalogs A.B. Lambdin, Carabella Collection, Venus, and WinterSilks to its collection, which had consisted of Newport News and Spiegel. The four smaller titles accounted for much of Catalog Holdings’ estimated 24% sales growth, to what is believed to be $693.5 million.

And don’t forget about Golden Gate’s other collection of consumer catalogers, Appleseed’s Topco (#40), created by the roll-up of Appleseed’s, Draper’s & Damon’s, Haband, Norm Thompson, Sahalie, Solutions, and the Tog Shop. At least one other Multichannel Merchant 100 company will be included under that umbrella next year: Blair Corp. (#57), which was acquired this past April.

GROWTH TACTIC #2: Diversify and conquer

Redcats’ acquisition of Sportsman’s Guide exemplifies this tactic as well. Most of Redcats’ other titles are apparel books, though the company started expanding into home decor with the launch of Brylane Home in 1999. But Sportsman’s Guide, which specializes in outdoor gear, and its Golf Warehouse subsidiary represent an altogether new market for Redcats. Only one of Redcats’ other catalogs, KingSize, targets men.

As David Solomon, co-CEO of New York-based investment banking firm Goldsmith Agio Helms, told Multichannel Merchant when the deal was announced, “If you’re looking for cross-selling synergies and demographic, it’s not going to happen with this deal… It’s a diversification. And companies do that when they feel they are running out of room for growth.”

Spin-off titles are another tried-and-true means of diversification for catalogers. Blyth (#86) cited the strong performance of its Walter Drake spin-off Easy Comforts in its third-quarter results. Whereas Walter Drake sells a broad range of housewares, gifts, and stationery, Easy Comforts specializes in ease-of-living products for seniors.

Blyth is so enthused about spin-offs as a way to grow, it launched another Walter Drake spin-off, outdoor products title Sundial, in February. Another Blyth brand, Miles Kimball, recently launched two titles as well: Mrs. Kimball’s Candy Shoppe and Serenity Falls, which sells “gifts for the soul.”

Restoration Hardware (#78) is another big believer in growth via spin-off. Last year it rolled out two line extensions, Restoration Hardware Outdoors and Restoration Hardware Gifts. It also launched a second brand, Brocade Home, which targets a younger, more female demographic. Aided by a 49% increase in overall circulation, these spin-offs contributed to the company’s 52% rise in direct sales. Going with the flow, this past spring the company mailed the debut issue of the Restoration Hardware Bed & Bath catalog, and it’s prepping Restoration Hardware Kids for next year.

Spin-offs and brand extensions aren’t a panacea, however, as several other companies on the list found out. School Specialty (#28), which had been on a spending spree several years ago, announced in April that is was looking to sell its video production unit so that it could focus on its core business — nontextbook school supplies. Aramark Corp. (#59) folded its Crest Uniform Healthcare title as part of its efforts to boost the profitability of its workwear/uniform division. And after launching two upscale home decor catalogs — 10 Crescent Lane and Paces Trading Co. — in 2005, Home Depot (#30) shuttered them last year.

What’s more, Home Depot in February announced it was considering “strategic options” for its $12 billion HD Supply division; it sold the business to three private equity firms in June (see “Home Dept sheds HD Supply unit” on page 7).

GROWTH TACTIC #3: Service with a smile

Beyond product and brand extensions, some of the Multichannel Merchant 100 companies — particularly the business-to-business merchants — are expanding their service offerings. Not only can this boost revenue, but by presenting their company as a one-stop shop that services as well as sells the product, these companies strengthen their customer relationship, engender greater loyalty, and distinguish themselves from competitors.

Case in point: CDW Corp. (#3). The computer reseller acquired Berbee Information Networks last fall so that it could offer complementary network management and security services to its corporate customers. “Our vision is to become the world’s biggest and best direct technology provider,” said CDW chairman/CEO John Edwardson about the deal. “In this competitive industry, customers increasingly want to leverage IT to enhance their business performance. They want easy access to core technology and more advanced solutions.” CDW itself was bought by Madison Dearborn Partners in May.

Black Box Corp. (#33) has been busy integrating services into its product offering for the past few years now, in part by acquiring regional services providers throughout the country, as well as a few larger firms such as Norstan and NextiraOne. In its 2006 annual report, Black Box describes itself as a “one-of-a-kind source for designing, installing, and maintaining data and voice networks,” all but ignoring that it is also a source for procuring the products that go into those networks. The company does compensate for the seeming oversight with its product catalogs, including its Infrastructure Solutions spin-off, which debuted in October, and Multimedia and Networking Solutions, which rolled out in May 2006.

GROWTH TACTIC #4: Continue weaving Web improvements

Direct sales for Hewlett-Packard Co. (#13) are believed to have soared 72%, to an estimated $3.1 billion. One reason has been the computer manufacturer’s effort to make its HP Home & Home Office Website more consumer friendly. Among other changes, the site was redesigned to feature more graphics, and PayPal was added as an alternative payment option. HP is now working to simplify its online computer configurator, which enables customers to customize their PCs, and on adding more rich-media features.

Consumer electronics merchant Crutchfield Corp. (#76) last year added a variation of a product configurator to its site. Its Home System Planning Center enables users to select audio and video components that are compatible with those that they already have. The tool is similar to its long-standing online tool that helps shoppers determine which audio components are compatible with their make and model of car. Crutchfield also added an interactive GPS demo and the TV Fit Finder to its site, among other features.

DBL Distributing (#70), which sells consumer electronics to retailers, also added a number of features to its Website last year. These included account management tools to simplify self-service for clients, automatic updates of new and top-selling products, and an improved search capability. Among the features that Production Tool Supply (#74) added to its site last year was real-time inventory status. And Sears Holdings Corp. (#16) offered visitors to Sears.com more options in terms of how products are displayed, a more-intuitive site navigation, and the ability to redeem gift cards online.

METHODOLOGY

The Multichannel Merchant 100 was compiled by the Multichannel Merchant editorial staff and freelancers Jeff Dorsch, Andrew Grossman, and Ann Meyer, through public records, data card analysis, and input from financial analysts and sources within the industry. To ensure the accuracy of all statistics, Multichannel Merchant tried to contact executives at each company. Some companies declined to confirm sales totals; others did not return messages. In those cases, or when companies would provide only approximate sales, an asterisk indicates that the figure is an estimate.

Sales are for calendar years 2006 and 2005. When a company’s fiscal year varied from the calendar year by more than one month, Multichannel Merchant backed out the data to obtain calendar-year sales.

Whenever possible, sales figures are net of sales taxes and shipping and handling revenue. In some cases, the figures for 2005 differ from those reported last year, reflecting updated information.

For parent companies and cataloger/retailers such as Patterson Cos. and J.C. Penney Co., sales figures are for their direct divisions only, unless otherwise indicated. When companies broke out their telemarketing or field sales revenue from their print and Web catalog sales, we did as well.

To be considered for the Multichannel Merchant 100, a company’s print catalog had to account for a significant portion of the business’s direct sales, which is why major direct marketers such as eBay and Insight are not on the list.

All in the family

A hundred companies make up the MCM 100–but several times as many brands. Here’s a guide to some of the larger multititle mailers and the titles they encompass:

1-800-FLOWERS.COM includes Cheryl & Co., Fannie May, HearthSong, Magic Cabin, Plow & Hearth, The Popcorn Factory, Wind & Weather

ARISTOTLE CORP. includes American Educational Products, Nasco, Summit Learning, Triarco

CABELA’S includes Antique Hardware and Home, Ducks Unlimited, Van Dyke’s Restorers, Van Dyke’s Taxidermy, Wild Wings

CHARMING SHOPPES includes Bedford Fair Lifestyles, Brownstone Studio, Coward Shoes, Figi’s, Intimate Appeal, Lew Magram, Monterey Bay Clothing Co., Old Pueblo Traders, Regalia, Willow Ridge

DIRECT MARKETING SERVICES INC. includes Charles Keath, Home Visions, Montgomery Ward, Popular Club Plan, Room for Kids

HANOVER DIRECT includes Company Kids, The Company Store, Domestications, International Male, Silhouettes, Undergear

IAC/INTERACTIVECORP. includes Alsto’s, Ballard Designs, Frontgate, Garnet Hill, Grandin Road, Home Focus, Improvements, IOS, Isabella Bird, Smith + Noble, The Territory Ahead, TravelSmith

INTERLINE BRANDS includes Barnett, Copperfield Chimney Supply, Hardware Express, Leran, Maintenance USA, Sexauer, SunStar Lighting, U.S. Lock, Wilmar

K+K AMERICA includes Alfax, Dallas Midwest, C&H Distributors, Conney Safety Products, Hubert, National Furniture Business

PATTERSON COS. includes Masune First Aid & Safety, Medco, Sammons Preston, Webster Veterinary

POTPOURRI GROUP includes Back in the Saddle, Catalog Favorites, Expressions, In the Company of Dogs, Nature’s Jewelry, NorthStyle, Pyramid Collection, the Stitchery, Serengeti, Whatever Works

SCHOOL SPECIALTY includes ABC School Supply, Abilitations, Brodhead Garrett, Childcraft, Delta Education, Frey Scientific, Hammond & Stephens, Sax Arts and Crafts, Sportime

STAPLES includes Quill Corp., Smilemakers, and Medical Arts Press

SWISS COLONY includes Ashro Lifestyles, Durdy Looks, Ginny’s, Midnight Velvet, Monroe & Main, Room for Color, Seventh Avenue, The Tender Filet, Through the Country Door

W.W. GRAINGER includes AW Direct, Ben Meadows, Gempler’s, Lab Safety Supply, Rand Materials Handling

Let’s make a deal

Below are some of the most notable mergers, acquisitions, and divestitures involving Multichannel Merchant 100 companies during the past 18 months.

JANUARY 2006

  • K+K America, a multititle merchant of industrial, safety, and restaurant supplies, acquires National Business Furniture

  • The Lab Safety Supply division of W.W. Grainger acquires Rand Materials Handling Equipment Co.

FEBRUARY 2006

  • Apparel, home goods, and gifts merchant Norm Thompson Outfitters, which includes the Solutions and Sahalie titles, is acquired by Golden Gate Capital

MARCH 2006

  • Henry Schein, a distributor of dental, medical, and veterinary supplies, acquires NLS Animal Health

APRIL 2006

  • 1-800-Flowers.com acquires Fannie May Confections Brand

  • The Home Depot buys Home Decorators Collection from Knights Direct

MAY 2006

  • Gifts, housewares, and toys cataloger Lillian Vernon Corp. sold by Direct Holdings Worldwide to Sun Capital Partners

  • Office Depot buys Allied Office Products

  • Apparel cataloger/retailer The Talbots acquires women’s apparel cataloger/retailer J. Jill Group for $517 million

JUNE 2006

  • Henry Schein acquires the direct marketing divisions of Darby Group Cos.’ medical and laboratory supplies business for $51.5 million

  • MSC Industrial Direct Co. acquires J&L Industrial Supply for $349.5 million

  • The majority of Oriental Trading Co., a cataloger of party goods, novelties, and gifts, is acquired by private equity firm the Carlyle Group

AUGUST 2006

  • Aramark Corp., whose direct division includes public-safety gear cataloger Galls, is taken private by an investment group led by chairman/CEO Joseph Neubauer

  • Two more apparel titles, A.B. Lambdin and Carabella Corp., are acquired by Golden Gate Capital

  • Apparel and home goods mailer Redcats USA acquires the Sportsman’s Guide, a cataloger of outdoor gear and golf equipment, for approximately $239 million

  • Multititle mailer the Swiss Colony acquires Ashro Lifestyles, a cataloger of apparel and accessories targeting African-American women

SEPTEMBER 2006

  • Broder Bros., a multibrand distributor of imprintable sportswear, buys fellow distributor Amtex Imports for about $6.8 million

OCTOBER 2006

  • Computer reseller CDW Corp. acquires IT services provider Berbee Information Services Corp.

  • Golden Gate Capital Corp. acquires apparel mailer Haband Co. and Venus, which sells swimwear via its flagship title and winter undergarments via its WinterSilks brand

NOVEMBER 2006

  • Collegiate Pacific acquired the remaining shares of rival Sport Supply Group that it did not already own for roughly $24 million

  • Multititle mailer Hanover Direct agrees to a cash merger with its largest shareholder, Chelsey Direct

  • W.W. Grainger’s Lab Safety Supply division acquires Professional Inspection Equipment and Construction Book Express

JANUARY 2007

  • Electronics components distributor TTI, parent company of cataloger Mouser Electronics, is acquired by holding company Berkshire Hathaway

FEBRUARY 2007

  • Brady Corp. acquires Clement Communications, a direct marketer of safety-related posters and newsletters

  • Guitar Center, the parent company of cataloger Musician’s Friend, acquires multititle cataloger the Woodwind & the Brasswind out of bankruptcy for $29.5 million

APRIL 2007

  • Apparel and home goods mailer Blair Corp. acquired by Appleseed’s Topco, a unit of Golden Gate Capital

  • Pet supplies mailer Doctors Foster and Smith agrees to buy Web merchant Neeps

  • Food gifts merchant Harry & David Holdings sells its horticultural brand, Jackson & Perkins

MAY 2007

  • CDW Corp. agrees to be bought by equity firm Madison Dearborn Partners for $7.3 billion

  • VWR International, which sells laboratory supplies, also agrees to be bought by Madison Dearborn Partners

  • Staples acquires American Identity, a distributor of corporate branded merchandise

JUNE 2007

  • Lab Safety Supply buys McFeely’s Square Drive Screws

  • Ingram Micro acquires DBL Distributing for $96 million

  • Home Depot sells its HD Supply business to three investment firms

Alphabetical Index
1-800-Flowers.com 38
Airgas 39
Allied Electronics 68
American Hotel Register 50
Appleseed’s Topco 40
Aramark Corp. 59
Aristotle Corp. 82
Army & Air Force Exchange 83
Automotive Specialty Accessories and Parts 94
Bass Pro Shops 60
Black Box Corp. 33
Blair Corp. 57
Blyth 86
Brady Corp. 50
Broder Bros. 32
Cabela’s 27
Catalog Holdings 42
CDW Corp. 3
Charming Shoppes 56
Cintas Corp. 34
Coldwater Creek 62
Collections Etc. 71
Collegiate Pacific 79
Corporate Express 6
Crate & Barrel 50
Crutchfield Corp. 76
DBL Distributing 70
Delia’s 93
Dell
Deluxe Corp. 31
Digi-Key Corp. 35
Direct Marketing Services Inc. 87
Doctors Foster and Smith 83
Eddie Bauer Holdings 75
Federated Department Stores 45
Fingerhut Direct Marketing 69
Foot Locker 65
Guest Supply 37
Guitar Center 61
Hanesbrands 90
Hanover Direct 58
Harry & David Holdings 54
Henry Schein 5
Hewlett-Packard Co. 13
Home Depot 30
IAC/InterActiveCorp. 15
IBM 2
Interline Brands 44
J&R Electronics 73
J. Crew Group 67
J.C. Penney Co. 14
K+K America 49
L.L. Bean 26
Lillian Vernon Corp. 90
Limited Brands 24
LTD Commodities 46
Mattel 55
McMaster-Carr Supply Co. 63
McNichols Co. 100
MSC Industrial Direct Co. 23
NBTY 80
Neiman Marcus Group 43
Newport Corp. 96
Northern Tool & Equipment 66
Office Depot 8
OfficeMax 7
Omaha Steaks 72
Oriental Trading Co. 50
Patterson Cos. 17
PC Connection 20
PC Mall 29
PetMed Express 97
Potpourri Group 83
Premier Farnell 36
Production Tool Supply 74
Recreational Equipment Inc. (REI) 98
Redcats USA 21
Restoration Hardware 78
School Specialty 28
Sears Holding Corp. 16
Sharper Image Corp. 95
Sierra Trading Post 76
Sigma-Aldrich Corp. 19
Staples 4
Swiss Colony 48
Systemax 18
Talbots 64
Taylor Corp. 40
Thermo Fisher Scientific 10
Thompson & Co. 81
Tiffany & Co. 92
TTI 88
United Stationers 9
Urban Outfitters 99
VWR International 11
W.W. Grainger 25
Wayside Technology 89
Wesco International 12
Williams-Sonoma 22
Zones 47

For a downloadable list of the MCM 100 Winners click here