Critical Issues and Trends

Dec 01, 2007 10:30 PM  By

Increasing competition from manufacturers and retailers entering the catalog and Web selling channels was ranked the second most pressing marketing concern by 28% of respondents to Multichannel Merchant’s Benchmark Report on Critical Issues and Trends. The increasing number of competitors in a specific product market was also a worry, cited by 26% of respondents, and tied for third place as a marketing issue is the challenge of finding prospects.

It’s interesting that the top-two concerns didn’t even make the top-five marketing issues in last year’s survey.

What was the No. 1 concern this year? Determining the most effective mix of marketing media and promotion offers, as the top marketing issue in 2007 by 36% of respondents. Last year the No. 1 marketing concern was finding prospects.

Just under 24% of respondents ranked rising distribution costs — including postal — a top marketing concern this year, down from 29% in 2006. That’s a bit of a shock considering the massive rate hike mailers had to swallow this past May, with average postage increases of 20% to 25%, and as high as 40% for some unlucky catalogers.

Inventory forecasting was once again the most pressing merchandising and operations concern among the total respondents, as 50% cited it. Along those lines, the ability to rapidly restock and rebuy merchandise was a key challenge for 38%. Rising package delivery ranked third in this area, as 37% named it as one of their top-three merchandising/operations concerns, though this is down from 45% last year.

As for management factors, the need to cut costs without reducing offerings and services remains top of mind, with 68% of the total survey respondents declaring it among their top-three management issues. Determining the optimal allocation of resources was the second most cited management concern, with 54% ranking it among their top three. This is up slightly from 49% last year.

FOCUS ON FINANCE

Seventy percent of survey respondents this year said they’d met or exceeded their profitability goals the previous year, nearly the same percentage as last year’s survey. Twenty-nine percent this year said they fell short of profitability forecasts for 2006.

Looking at revenue, 63% of this year’s respondents say they met or exceeded their revenue expectations the previous year. That’s down from 74% of last year’s participants, 70% of respondents in 2005, and flat with 2004′s survey results. But at least it’s up from 51% who met or exceeded sales in the 2003 study.

When it comes to beating revenue expectations, smaller merchants fared better than larger marketers this year. Of respondents with sales of less than $10 million, 17% say they exceeded revenue expectations by more than 10%. Just 9% of respondents with sales of $10 million or more exceeded sales expectations.

Among the b-to-c merchants surveyed this year, 71% say they met or exceeded their profit goals in 2006, up from 59% in last year’s study. Just 52% of the b-to-b respondents say they met profitability goals, compared with 83% last year.

As for the first half of 2007, 25% of respondents say they exceeded profit expectations, 42% met profit goals, and 33% missed profit expectations. Sales results fared slightly worse: While 27% of respondents exceeded revenue goals for the first half of this year, 34% met expectations, and 39% missed the mark.

GROWING PAINS

Where do merchants think their business is heading? Twenty-six percent of respondents say they expect their company’s revenue to grow at least as much during the next 12-24 months as it did during the previous two years. That’s down sharply from 70% of last year’s respondents.

But nearly half the respondents this year (48%) expect future sales growth to outpace that of the recent past, compared to only one-third that said the same last year. And 26% of this year’s participants expect sales to grow at the same rate going forward as they have during the past two years, compared with 37% of last year’s respondents.

To grow their businesses, respondents with print catalogs say they promote their books via their own Websites (60%), e-mail (48%), solo mailers and other noncatalog forms of direct mail (26%); banner ads on other Internet sites, space ads, and trade magazines (all 14%) round out some of the most popular media.

To promote their Websites, 71% of respondents this year say they use e-mail, 51% use their catalog, 40% rely on paid search, and 30% use solo mailers and other noncatalog forms of direct mail.

M&A MADNESS


The aforementioned postal rate increase had many industry watchers predicting a flurry of mergers and acquisitions as fewer mailers would be able to survive on their own. What are respondents seeing or predicting about M&A?

Thirty-three percent of respondents this year say their company had been considering selling, 47% say they have not and had never been approached about selling. About 11% say they have not considered selling their business, but they have been approached about selling by a bank or another type of company. (Eight percent say they don’t know or aren’t sure.)

But there’s a good chance we may see more selling in the coming year. Twenty-percent of this year’s respondents say they are seriously considering expanding their company through a merger or acquisition in 2008, while 4% say they are considering M&A in 2007, and 7% say they thought about merging with or acquiring another company in 2006.

Let the dealmaking begin.

METHODOLOGY


On Sept. 19, Penton Media e-mailed invitations to participate in an online survey to 12,359 subscribers of Multichannel Merchant selected on an nth-name basis. The invitation contained a link routing respondents directly to the questionnaire. Respondents were offered a change to win one of four $50 Amazon.com gift certificates. Follow-up e-mails were sent on Sept. 26 and Oct. 2. Of 11,150 deliverable e-mails, 147 surveys were completed, for an effective response rate of 1.3%.

Top marketing concerns


Determining the most effective mix of marketing media and promotion offers 36%
Increasing competition from manufacturers and retailers entering catalog and Web marketing 28%
The increasing number of competitors in my specific product market 26%
Finding prospects 26%
Keeping our creative presentation fresh 25%
Managing multiple marketing channels 24%
Top merchandising and operations concerns


B-to-b respondents
Inventory forecasting 61%
Rising cost of raw goods 37%
Rising cost of package delivery 34%
Ability to rapidly restock and rebuy merchandise 34%
Need to integrate the operations for multiple channels 34%
B-to-c respondents
Inventory forecasting 49%
Rising cost of package delivery 41%
Availability of fresh or unique merchandise 41%
Ability to rapidly restock and rebuy merchandise 38%
Rising customer service expectations 36%
Top management concerns


The need to cut costs without reducing offerings and services 68%
Determining the optimal allocation of resources 54%
Improving the effectiveness of the company’s/division’s organizational model 46%
Difficulty in finding experienced staff 34%
Difficulty in securing additional or continuing financial support 22%
Do you plan to create customized catalogs for specific customer segments in the next 12 months?


Yes 33%
No 43%
No, but we are considering it 24%
If you don’t have stores, what are your plans regarding retail?


To stay out of retail 76%
To test store openings slowly 16%
To move aggressively into retail 8%