Seeking even faster growth

Jun 01, 1998 9:30 PM  By

Based on projections for U.S. business at large, Catalog Age estimates that annual b-to-b catalog revenue growth will average at least 8%-10% through 2001-far outpacing the 6%-7% revenue growth anticipated for the consumer catalog segment.

And this estimate may even be conservative, considering the 26%-plus growth rate enjoyed by the b-to-b catalogs on the Catalog Age 100 list (see August 1997 issue).

As further evidence of the promise of the business-to-business catalog market, witness the growth in the b-to-b list rental revenue: Ralph Drybrough, senior vice president at Direct Media, notes that the Greenwich, CT-based list firm’s b-to-b list revenue increased 27% last year, “which is our biggest annual increase going back to 1992. And we project at this point that we’re going to enjoy an increase in that range for 1998.”

A number of trends continue to drive the growth of the b-to-b catalog market, including corporate decentralization, the need for faster service and greater efficiency, the rising cost of the purchasing process and the sales call, and the advent of electronic commerce.

Jeff Germanotta, first vice president of Milwaukee investment banking firm Robert W. Baird & Co., notes that the need for efficiency will drive more industrial suppliers in particular to buy via catalog. “You’ll see more industries recognize that it’s inefficient to buy multiple products from multiple distributors,” he says. “Buyers will get their supplies from catalogers that offer all the products they need with strong customer service and fast delivery instead.”

At your service Certainly service, most agree, will be a key element of any b-to-b cataloger’s strategy as the industry moves forward. Catalogers such as rapidly growing $438 million MSC/ Sid Industrial Tool, which analysts expect to reach $575 million in sales this year, are working harder to perfect service in an attempt to build long-term customer relationships.

For MSC, which mails a 4,000-plus-page annual catalog containing 330,000 SKUs of every imaginable piece of hardware, improved customer service means more than just finding ways to satisfy its customers beyond its 99% fill rate. MSC will be “adding another 40,000 SKUs this year, and probably reaching millions of SKUs by 2001 if we need to,” says senior vice president of marketing Chuck Moyer. “People come to us because it’s convenient and they can get everything they need right away.”

A.W. Direct, a $15 million Berlin, CT-based cataloger of towing, recovery, and service vehicle accessories, is also looking to position itself on service. President/coowner Patrick Thibadeau says he hopes to increase his customers’ lifetime value by opening regional distribution centers, which not only will speed up delivery but will also reduce shipping charges to customers.

Who’s hot…and who’s hotter

As for which business markets present the best growth opportunities, a number of occupations are expected to grow very rapidly over the next few years. For instance, employment growth projections by the Bureau of Labor Statistics indicate that the service/repair market could become even more lucrative: The number of service technicians, according to the bureau, will rise from 21.3 million in 1996 to 25.1 million in 2006, while the number of craft and repair personnel will rise from 14.4 million in 1996 to 15.4 million in 2006.

Jacksonville, FL-based Barnett, a $160 million plumbing supplies cataloger, is cited by several b-to-b observers as being in prime position to take advantage of this growth. “Barnett is expanding its customer base to more plumbers and will target additional occupations in areas such as the LP gas industry and janitorial services,” says Germanotta, who expects Barnett’s sales to reach $200 million for fiscal 1998 (ending in June) and $244 million for fiscal 1999.

Barnett has grown its product line from 8,500 SKUs in 1996 to 11,800 SKUs in ’98. Spun off in an initial public offering from Waxman Industries two years ago, Barnett has also used strong cash flow to finance a more targeted flyer and promotional mailing program. Mailings of sale flyers have increased from 2.5 million in ’96 to 7 million this year. Such aggressive mailing efforts have helped improve Barnett’s annual sales growth from 15% to the high-20% range this year and most likely over the next few years as well, Germanotta says. “This is the key way Barnett is opening up and penetrating new customer segments efficiently.”

Mixed media As b-to-b marketers move into the 21st century, experts predict that competition in cyberspace for the business buyer will escalate rapidly over the next few years. Many observers say that the entire business-to-business market will be challenged by increasing numbers of manufacturers and startup firms selling exclusively over the Internet as we move toward 2001.

“The Amazon.com type of Website, in which anybody with broad-based products offers an enormous array of products, will become pervasive in b-to-b,” says Stephen Horne, vice president/managing director of database consulting services for compiled list provider Dun & Bradstreet. “At the same time, some big retailers, such as Costco, Sam’s, and Home Depot, will make some inroads online into b-to-b, which hasn’t happened before.”

A multichannel marketing strategy is likely to remain the best way to battle the Internet-only interlopers and the consumer retailers hoping to make it big in b-to-b. From the time the Internet took off in the early ’90s, doommongers have been predicting that the end of the print catalog was near. But the paper-and-ink book will continue to be part of the business-to-business marketer’s arsenal, along with direct mail, outbound telemarketing, the Internet, and in some cases, field sales teams. Such a mix, the pros say, offers the most options to the largest field of prospects.