What matters most, now

With the price of postage, paper and raw goods, plus the recessionary economy, multichannel merchants should be very worried about pricing.

They are: Increasing price and discount pressure was the top issue for respondents to Multichannel Merchant’s Benchmark Report on Critical Issues and Trends. More than half (57%) ranked it a key marketing concern.

What else is keeping merchants up at night? The prospect of finding prospects, rated a leading concern by 36%, and rising catalog distribution costs, including postal (26%). The fourth-ranked concern, determining the most effective mix of marketing media and promotional offers (23%), was the top issue in last year’s survey.

The top merchandising and operations issues this year also reflected the cost pressures: Inventory forecasting was ranked the more pressing issue by 58%; it was the leading concern in the 2007 survey as well.

Almost as many (55%) cited the rising costs of package delivery — no surprise, given the spike in fuel costs this past year. Last year’s survey ranked the issue third.

The third merchandising/operations concern — ranked critical by 33% — was the rising cost of raw goods. That’s yet another offshoot of the high gas prices.

Rising costs and the dwindling economy also played a role in the top management issue facing respondents: the need to reduce costs without reducing offerings/services — also the leading issue in the 2007 report. The second concern, determining the optimal allocation of resources, held its spot from last year as well.

CLICKS AND BRICKS

Most respondents (80%) have an e-mail marketing campaign, 10% do not, and another 10% don’t but are considering it. Of those that do e-mail marketing, 52% said e-mail response rates have increased (up from 46% in the 2007 survey), 18% said they’ve decreased (vs. 15% last year, and 30% said they remained the same, compared to 39% who said the same last year.

More than a third (37%) of respondents have full-price stores. About the same percentage (35%) operate catalog outlet stores. How many full-price stores do respondent companies operate? A mean of 2.8.

The merchants without full-price stores are in no rush to get into retail. Most of them (82%) plan to stay out of retail altogether.

MONEY MATTERS

More than half (55%) said they met or exceeded their profitability goals the previous year. But that’s quite a tumble from 70% in the previous two surveys.

How many fell short of their profitability expectations this year? Just over 45% — compared to 29% in last year’s study. And of those respondents, 17% said they fell short by more than 10%.

At least the revenue snapshot held steady: 62% of this year’s respondents said they met or exceeded their revenue expectations the previous year — the same as in the prior survey. How is this year looking? For the first half of 2008, 15% of respondents said they exceeded profit expectations, down from 25% in last year’s report.

About 33% met profit goals, compared to 42% from 2007. Even worse, more than half (52%) missed profit expectations, compared to 33% last year.

The picture is even bleaker for sales results. More respondents (52%) fell short of revenue expectations than met or exceeded them (48%). Last year, 39% missed the revenue mark.

Tm be more specific, 23% said they exceeded revenue goals for the first half of this year vs. 27% of respondents last year, and 25% met expectations compared with 34% in the 2007 survey.

As for the future, 17% of respondents said 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, compared to 26% who said the same in last year’s report.

Survey respondents have significantly dialed down their expectations. Eighteen percent said they expect revenue to grow at a faster rate than in the past two years, compared to 48% in the 2007 study.

Nearly a quarter (24%) of respondents expect revenue to remain flat, while 13% expect sales to decrease.

TO SELL OR NOT TO SELL

Will the grim economy result in a selloff or a spate of mergers and acquisitions activity? It’s hard to say.

More than a quarter (26%) of respondents this year said their company had been considering selling or actively exploring a sale. But that’s down from the 33% of respondents last year who said their company had been considering selling.

About 34% said they have not considered selling their business, but they have been approached about selling by a bank, another cataloger or another type of company. That’s way up from the 11% that said the same in last year’s study.

As for deals in the coming year, 10% of this year’s survey respondents said they are considering expanding their company through a merger or acquisition in 2009, compared to 20% in last year’s study. Eighteen percent of this year’s respondents said they have been considering a merger or acquisition in 2008.

The top-five: MARKETING ISSUES

Increasing price pressure/discounting pressure 57%

Finding prospects 36%

Rising catalog distribution costs, including postal 26%

Determining the most effective mix of marketing media and promotional offers 23%

Making customer acquisition efforts more profitable 21%

Do you have any full-price stores (excluding outlet stores)?

Yes 37%
No 63

The top-five: MERCHANDISING AND OPERATIONS ISSUES

Inventory forecasting 58%

Rising costs of package delivery 55%

Rising costs of raw goods 33%

Rising customer service expectations 26%

The availability of fresh or unique merchandise 25%

The top-five: MANAGEMENT ISSUES

Need to reduce costs without reducing offerings/services 78%

Determining the optimal allocation of resources 45%

Improving the effectiveness of the company’s/division’s organizational model 33%

The difficulty in finding experienced staff 33%

Difficulty in securing additional or continuous financial support 30%

Have you or your company’s management recently considered expanding through a merger or acquisition?

Yes, in 2009 10%
Yes, in 2008 18%
Yes, in 2007 6%
No 66%

METHODOLOGY

On Oct. 15, Penton Media e-mailed invitations to participate in an online survey to 9,793 subscribers of Multichannel Merchant magazine. The invitation contained a link routing respondents directly to the questionnaire. Respondents were offered a chance to win one of four $50 Amazon.com gift certificates. A follow-up e-mail was sent on Oct. 22. Of 9,722 deliverable e-mails, 102 surveys were completed, for an effective response rate of 1%.

The top-five MARKETING ISSUES

Increasing price pressure/discounting pressure 57%

Finding prospects 36%

Rising catalog distribution costs, including postal 26%

Determining the most effective mix of marketing media and promotional offers 23%

Making customer acquisition efforts more profitable 21%

The top-five MERCHANDISING AND OPERATIONS ISSUES

Inventory forecasting 58%

Rising costs of package delivery 55%

Rising costs of raw goods 33%

Rising customer service expectations 26%

The availability of fresh or unique merchandise 25%

The top-five MANAGEMENT ISSUES

Need to reduce costs without reducing offerings/services 78%

Determining the optimal allocation of resources 45%

Improving the effectiveness of the company’s/division’s organizational model 33%

The difficulty in finding experienced staff 33%

Difficulty in securing additional or continuous financial support 30%

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