Thanks in large part to last year’s huge postal rate hike, Flax Art & Design is a direct merchant no more. The San Francisco-based retailer quietly folded its print catalog last April and suspended its e-commerce business in October.
Founded by Herman Flax as an art supplies store in 1938, Flax Art & Design mailed its first catalog in 1984 and launched a Website nine years ago. So what happened?
“Fundamentally, the catalog side of the business wasn’t profitable for us,” says CEO Howard Flax, who is the founder’s grandson. A 2005 catalog redesign “did provide us with expected successful results and certainly improved things, but didn’t improve things enough.”
Last year’s significant postal rate hike proved to be the “final straw,” Howard Flax says. “It would’ve increased our postal costs by 30%, or a net increase of 10 cents per book. That made our decision much more clear-cut.” It may have survived, he notes, “but family dynamics went in another direction.”
Howard’s brother and vice president of marketing, Craig Flax, who handled the catalog production, left the company last spring for another business venture.
“My brother and I were itching to move on,” says Howard Flax, who is now working in an interim capacity and plans to leave the company for a new executive leadership position by the spring. Store manager Ron Ansley will assume the president’s title after Howard Flax departs the company. (Their father, Philip Flax, is staying on as chairman.)
Closing the direct business was largely about not being able to make the numbers work after postage went up in May. Why didn’t Flax keep its e-commerce site and try to drum up online sales?
Matchback software had proved that “99% of our Web business was the direct result of a catalog solicitation,” he says. “So we knew upon abandoning the distribution of the catalog, that there would be a significant drop-off in Web business.”
The merchant made an effort to create new partnerships to see if the Web component could be self-sustaining, he notes. “We were pretty darn close, but not quite there. The numbers didn’t work out.”
Flax had bought the T. Shipley and Reliable HomeOffice catalogs out of bankruptcy in 2002, and in April it purchased cards and gifts Website Sparks.com. What happened to those businesses?
Shipley is being sold to a undisclosed multititle direct marketing company; Reliable Home Office was sold to National Business Furniture in 2005. And Sparks.com, Howard Flax says, “was primarily an acquisition for inventory. We shut down the site in 2005.”
What does the future hold for Flax Art & Design? “We will focus on the store,” he says. “We’re returning to our roots, probably expanding the arts and crafts assortments, becoming more adaptable. We’re getting a bit more dialed in with the community.”
Will Flax ever sell direct again? “I never say no chance,” he says. “But there is nothing on the drawing board short term.” A lot of customers were sad to see the catalog go, he adds. “We haven’t mailed a catalog in nine months. There was a lot of disappointment, particularly during the holidays.”