Attack Aftermath: Back to Business

Last year at this time, catalogers were basing their plans and projections on how business had been 12 months prior. But following the Sept. 11 terrorist attacks in which four airplanes were hijacked and crashed, companies can no longer rely on precedents as guidance for marketing strategies, hiring plans, and revenue and profit expectations, since the attacks had no precedent.

As is typically the case during national crises, catalog response plunged immediately following the attacks and stayed down for several days. “Any time an issue or an event occupies the headlines for more than a day, you see a drop in response,” says Dick Hodgson, of Westtown, PA-based catalog consultancy Sargeant House. “Any time people are glued to the television, there’s less time for them to look at catalogs. I remember that during the televised Watergate hearings in 1973, response rates fell more than 50%.”

Catalogers reported similar declines in business for Sept. 11 and the following few days. From Sept. 11 through Sept. 13, Absolute Amenities, a Jacksonville, AR-based cataloger of home and fitness products, did one-tenth the business it would have normally, says owner Walt Smith. At apparel and outdoor gear cataloger L.L. Bean, sales were off close to 60% on Sept. 11, says spokesperson Rich Donaldson; the $1.11 billion mailer finished the week about 30% below plan.

On track before the attacks

Although marketers were worried about tumbling consumer confidence and spending prior to Sept. 11, many catalogers were on or even above plan, and looking forward to a strong fall/holiday season. Freeport, ME-based L.L. Bean had been “trending slightly ahead of last year,” Donaldson says. The catalog division of York, PA-based tableware marketer Pfaltzgraff was on plan up to Sept. 11, “but then we were down about 25% the week of the attack,” says Marsha Everton, vice president of stores and direct marketing.

August had been the best month in the history of Santa Barbara, CA-based travel accessories cataloger Magellan’s, says chief operating officer Bob Manning, with sales 100% over forecast. But then the $25 million mailer suffered a 60%-70% drop in phone volume on Sept. 11.

As of Sept. 10, art supplies cataloger Dick Blick was 20% ahead of plan, and its sister title, home and garden supplies catalog Alsto’s, was about 1% ahead of plan. “We had a huge Monday [Sept. 10],” says Lanny Rosenbaum, vice president of sales and marketing for the Galesburg IL-based Dick Blick Holdings, which owns both titles. Although the catalogs’ phone orders rebounded quickly, Internet orders were down 70% for two weeks afterward.

But for catalogers that had been performing below expectations prior to Sept. 11, the short-term sales declines are likely to echo in disappointing year-end numbers. For instance, fall sales at Originals Casualwear, a cataloger of women’s apparel based in Drayton, ND, were already down about 4% from plan. The week of Sept. 11, sales were down 20%, and as of late September they were down about 13% from plan, says president Cheryl Gjevre. She’s projecting holiday sales and total annual sales to fall 5%-10% short of projections.

As of early September, year-to-date sales at Sturbridge Yankee Workshop were down 10%-15% from plan, says John Alexander, chief financial officer for the Portland, ME-based home furnishings catalog. Alexander attributes at least 5%-7% of that decline to the company’s 20% cut in circulation. “But after the attack, we saw calls drop from around 400 to around 200 a day.” One bright spot for the $20 million-$25 million cataloger: “By the Monday after, call levels were returning to normal.”

Indeed, by two weeks after the hijackings, sales at most of the companies contacted by Catalog Age had edged up to near-normal levels. “The day of the attack we saw call volume drop about 75%,” says Beverly Holmes, spokesperson for apparel and home goods cataloger Lands’ End, “and we’ve seen it come back every single day since then. In the past, with the Challenger [space shuttle] explosion, the Oklahoma City bombing, and the Gulf War, we’ve seen a drop-off in call volume, but it comes back in its own time.”

Now what?

Of course, catalogers are hoping that “its own time” is sooner rather than later. Several factors, however, suggest they may have to wait awhile. For one thing, unlike the Challenger explosion, the Oklahoma City bombing, and even the Gulf War, the effect of terrorist attacks is rippling throughout the entire economy. The post-attack halting of all U.S. air traffic and the pervasive fear of air travel has led to massive layoffs: 30,000 at Boeing, 20,000 each at American Airlines and United Airlines, 12,000 at Continental Airlines, 11,000 at US Airways, and 10,000 at Northwest Airlines — and that’s just as of press time and only in the aviation sector.

For another, the sheer devastation, the loss of lives, livelihoods, and property, far exceeds that of any other event in U.S. history. Also, the attacks have led to military action, prompting the U.S. to launch an attack on Afghanistan on Oct. 7. Many fear this could lead to additional terrorist activity.

Then there’s the matter of timing. None of the other events thus far occurred during what is the busiest season — if not a make-or-break season — for most consumer catalogers.

Combine all those factors and it’s anyone’s guess how much holiday shopping consumers will be doing this year. Some catalogers, expecting a subdued selling season, are cutting their losses by reducing circulation.

Adam Strum, chairman of wine accessories cataloger Wine Enthusiast, slashed holiday circulation across the board 9%, to 4 million. He describes the move as “gut-wrenching, because when it comes to prospecting, I’m an aggressive son of a gun.” For the two weeks following the attacks, sales at Hawthorne, NY-based cataloger were 32% below plan, though they began picking up Sept. 21. “Luxury goods aren’t usually affected by slowdowns or recessions,” Strum says, “but this is something completely different.

Alsto’s has cut back its prospecting by 10%, says vice president Rosenbaum, although it has made no changes to the Dick Blick circulation. And upscale apparel cataloger/retailer Mark Shale may reduce prospecting in the weeks ahead, says president Steve Baskin. The Woodridge, IL-based company launched its catalog just two years ago and had been looking to add to its house file this season.

Walt Smith of Absolute Amenities wanted to cut his November circulation 30%-40%, but the 400,000 copies had already been printed, so he opted to mail them all. He has halted all Internet advertising, however.

Sitting tight — for now

So far, all L.L. Bean has done in terms of circulation is delay the drop of its holiday book. The catalogs, which were scheduled to mail Sept. 11, were already in the Postal Service’s bulk mail centers (BMCs) the day of the attacks. Although one-third were already on their way to the local post offices, Bean was able to postpone delivery of the remaining books for another week.

Other than that, says Donaldson, “we’re going to sit pretty tight with the existing media plan.” The company was assuming that sales would remain soft for up to five weeks after Sept. 11.

Numerous other catalogers are also holding off on making drastic changes to their circulation plans. In fact, Bill Dean, founding partner of San Francisco-based catalog consultancy W.A. Dean and Associates, cautions against slashing circulation or pulling back promotions. “In all my years of direct marketing, I’ve never seen a business win by taking a ‘hunker down’ mentality,” he says. “They might survive this down period, but they won’t win.”

In that vein, although Strum did cut Wine Enthusiast’s circulation, he is hoping to make up for some lost sales by offering incentives or discounts to his house file. Likewise, although Magellan’s is cutting holiday circulation 30%, it is sending out e-mails and press releases highlighting its safety and security products, such as luggage locks and water purifiers, says COO Manning. Sales of those products soared up to 300% in the weeks following the attacks — enough to lead Magellan’s to repaginate its holiday book to emphasize the items.

Multititle apparel and home goods mailer Brylane is “busy thinking about how to translate providing the best possible value into specific offers,” says president/CEO Russell Stravitz. “We’re certainly doing all the things that retailers should do when demand is sluggish. If lowering prices is necessary, we’ll do that. Commitments to suppliers have been made. But there are many flexible points in terms of price, presentation, and some costs that would allow us to respond to lower sales if the season turns out that way.”

In the meantime, the New York-based cataloger, whose titles include Chadwick’s of Boston, Lerner’s, and Roaman’s, is focusing on customer service. Backorders can be costly at the best of times; in this environment, when every order counts, Brylane is trying to ensure that it has enough inventory in stock.

Bringing the store to the customer

Dina Dubey, marketing director for St Johnsburg, VT-based food gifts book Maple Grove Farms of Vermont, thinks that the season might be brighter for catalogers than for brick-and-mortar retailers: “Given the circumstances, people may be afraid to shop in large malls or in large groups of people.”

Such thinking isn’t farfetched, says Pam Danziger, president of Unity Marketing, a Stevens, PA-based research firm. “Consumers might be more driven to buy from other channels, such as catalogs, the Internet, and home shopping television. Before the attacks, many people had a fear of sharing their credit-card information online. But that fear is much smaller than the fear of losing one’s life.”

Few catalogers would hazard a guess as to whether a fear of malls would help their holiday sales, or even predict whether this Christmas would be a blue one. “Nobody has a crystal ball,” says Bean’s Donaldson, “so we’re reluctant to say that the fall season is a washout at this point.”

Indeed, most mailers — and probably most marketers at large — probably echo the sentiment of Joel King, sales manager for Charles City, IA-based food cataloger King’s Nature Ranch: “For the fall/holiday season, we’re prepared for the worst, and hoping for the best, and expecting to end up somewhere in between.”

Business As Usual

Within days of the terrorist attacks, President Bush was urging Americans to try to get back to business as usual. For some catalogers, that mandate was a simple one.

At outdoor sporting goods cataloger/retailer Cabela’s, business was back to normal less than two weeks after the attacks, says communications manager Joe Arterburn. The same is true for computer cataloger Micro Warehouse. “We haven’t seen any material decrease or any major effect,” says Laurence Midler, senior vice president/general counsel for the Norwalk, CT-based company. And Ben Saukko, spokesperson for multititle general merchandiser Fingerhut Cos., says sales were on plan throughout September.

Laying Off on Layoffs

Despite uncertainty regarding volume during the next few months, most of the mailers contacted by Catalog Age say they’re not planning to scale back staffing just yet.

One exception is women’s apparel cataloger Originals Casualwear. In response to the overall decline in sales and in anticipation of missing sales projections by up to 10%, president Cheryl Gjevre will be cutting the hours of part-time workers.

Freeport, ME-based L.L. Bean, which normally doubles its workforce for the holidays with part-time workers from October through December, hasn’t told any of those employees not to report to work. “The only thing we did was suspend all future employment offers until we get a better idea of the holiday impact,” says spokesperson Rich Donaldson.

Bean typically recruits for holiday help throughout fall. This year, “we’ve eased up on that process,” Donaldson says. “We’re interviewing but not offering start dates. Instead it’s ‘we will call you as thing open up.’”

A Surprising Sales Surge

As a wholesaler/retailer, Cottura president/co-owner Jim Zimmerman views the retail environment from both sides of the fence. Since the Sept. 11 attacks, retailers have been cutting back on orders from his company, which sells Italian ceramic tableware and decor. But “surprisingly enough, since Sept. 11 [the direct-to-consumer business] is 20% ahead of last year for the month,” Zimmerman says. “It’s fewer people, higher volume.”

After a few “dead days, Sept. 14 was phenomenal,” Zimmerman says. So was the following week. “People are buying big items,” he notes. “I’m as surprised as anybody else; I’m not in the buying mood.”

If sales do fall slack, though, Zimmerman’s not likely to be stuck with too much overstock. The economic malaise of earlier this year had led him to pare his inventory 25% and reduce the number of SKUs he carried. “We’re in a good stock position this year,” Zimmerman says. “All the catalog merchandise is either here or on a boat to come here.”

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