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.
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.
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.
Apparel, home goods, and gifts merchant Norm Thompson Outfitters, which includes the Solutions and Sahalie titles, is acquired by Golden Gate Capital
Henry Schein, a distributor of dental, medical, and veterinary supplies, acquires NLS Animal Health
1-800-Flowers.com acquires Fannie May Confections Brand
The Home Depot buys Home Decorators Collection from Knights Direct
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
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
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
Broder Bros., a multibrand distributor of imprintable sportswear, buys fellow distributor Amtex Imports for about $6.8 million
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
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
Electronics components distributor TTI, parent company of cataloger Mouser Electronics, is acquired by holding company Berkshire Hathaway
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
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
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
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
|American Hotel Register||50|
|Army & Air Force Exchange||83|
|Automotive Specialty Accessories and Parts||94|
|Bass Pro Shops||60|
|Black Box Corp.||33|
|Crate & Barrel||50|
|Direct Marketing Services Inc.||87|
|Doctors Foster and Smith||83|
|Eddie Bauer Holdings||75|
|Federated Department Stores||45|
|Fingerhut Direct Marketing||69|
|Harry & David Holdings||54|
|J. Crew Group||67|
|J.C. Penney Co.||14|
|Lillian Vernon Corp.||90|
|McMaster-Carr Supply Co.||63|
|MSC Industrial Direct Co.||23|
|Neiman Marcus Group||43|
|Northern Tool & Equipment||66|
|Oriental Trading Co.||50|
|Production Tool Supply||74|
|Recreational Equipment Inc. (REI)||98|
|Sears Holding Corp.||16|
|Sharper Image Corp.||95|
|Sierra Trading Post||76|
|Thermo Fisher Scientific||10|
|Thompson & Co.||81|
|Tiffany & Co.||92|
For a downloadable list of the MCM 100 Winners click here