CATALOG AGE 100: Behind the Numbers

Aug 01, 2002 9:30 PM  By

Catalogers had better hope that what goes down must come up. For 42 of the companies on this year’s Catalog Age 100, year-over-year direct sales declined. In comparison, only 14 of last year’s Catalog Age 100 had suffered a drop in annual catalog and Internet revenue.

Then again, that sales at so many of the industry’s largest players fell isn’t a shock. In fact, the surprise might be that despite the recession and the events of Sept. 11, 58% of the catalogers on the list held steady or even grew their businesses.

The woes of specific market sectors accounted for a number of the sales declines. In addition, some catalogers sacrificed revenue for profitability, selling titles and curtailing mailings in hopes of improving the bottom line. And of course, some catalogers suffered from increased competition, questionable marketing decisions, and plain old bad luck.

Catalogers in the computer and IT sectors were among the hardest hit in terms of sales. Top-ranking cataloger Dell, IBM (#2 on the list), Micro Warehouse (#11), PC Connection (#18), PC Mall (#26), Zones (#32), and Black Box Corp. (#56) suffered a drop in annual revenue. Only CDW Computer Centers (#5) and MicronPC (#20) could boast of sales growth, and that was in the single digits.

How did CDW and MicronPC manage to buck the trend? Both made a point of homing in on institutional buyers and small and midsize businesses. So while CDW’s overall revenue for the year increased 4.3%, its sales to the government and educational institutions jumped 63%.

The other computer marketers have caught on. For instance, this past April, both Micro Warehouse and PC Mall established subsidiaries devoted to the public sector market. And PC Connection, which began targeting the government back in 1993, when it purchased ComTeq Federal, acquired another government supplier, MoreDirect, in March.

Catalogers selling other types of technical and industrial products also felt the pinch of cost-cutting among corporations. Andrew Corp. (#21), Tessco Technologies (#67), and Keithley Instrument (#97) were among those hit by the woes of the telecommunications and electronics industries.

Sales of office supplies suffered too. Just ask Staples (#8), the parent company of office supplies cataloger Quill; Boise Cascade Office Products Corp. (#39); and office furniture mailer The Mosher Cos. (#100). And slashed advertising budgets crippled ad agencies, which account for nearly two-thirds of business at Getty Images (#41). As a result, sales at the marketer of stock images and digital graphics dropped 7%.

Sacrificing sales for profits

Several of the top catalogers intentionally curtailed their sales, getting rid of less-profitable mailings in hopes of growing earnings. General merchandise marketer J.C. Penney Co. (#7) cut circulation dramatically enough to result in a nearly 20% tumble in catalog and Internet sales — a decline that the company has said was in line with expectations.

Another general merchant, multititle mailer Spiegel Group (#15), became less willing to offer house credit to less-affluent prospects and customers. Waving away a portion of its potential audience contributed to an almost 10% drop in direct sales for the parent company of Eddie Bauer, Newport News, and the Spiegel catalog.

Tighter credit for customers of its Fingerhut catalog also contributed to the 36% plummet in catalog and Internet sales for Federated Department Stores (#17). That wasn’t the only factor, though. Having grown disenchanted with the Fingerhut division, which it had acquired just three years ago, Federated had reduced circulation even before announcing in January that it would wind down, if not sell, the business. Federated also folded its Macy’s print catalog and all but eliminated direct sales from its Bloomingdale’s Website.

Last year multititle mailer Hanover Direct (#35) cleaned house, selling its Improvements catalog to HSN and shutting underperforming books Kitchen & Home, Kitchen & Garden, and Turiya. The relentless flow of red ink persuaded Hanover to focus on its core brands: plus-size women’s apparel title Silhouettes and bedding and home decor catalogs Domestications and The Company Store. So while sales slid 12%, the company slashed its net loss to $5.8 million from $80.8 million the previous year.

Similarly, multititle mailer Knight’s Direct (#84) folded its Knight’s Limited apparel catalog and Shoe Studio footwear book last year, as well as put apparel book Papillon on hiatus (the last edition mailed in April 2001, though the company hasn’t officially shut the catalog). The result: a 7% drop in revenue. Knight’s is now focusing on its home furnishings catalog Home Decorators Collection, apparel and home products title Soft Surroundings, and women’s clothing book City Spirit.

Bigger and better

Enough focusing on sales declines. There was plenty of growth among the Catalog Age 100 companies too.

Some of the catalogers grew their business in large part by acquiring other catalogers. Wholesale apparel cataloger Broder Bros. (#40) acquired Full Line Distributors; Doctors Foster & Smith (#89) bought a rival pet supplies cataloger, Pet Warehouse, which had sales of roughly $25 million; School Specialty (#24) bought Premier School Agendas from Franklin Covey.

Brylane (#16) lifted its sales by expanding its product line. Best known as an apparel cataloger (its titles include Chadwick’s of Boston and Roaman’s), Brylane may soon be just as well known for selling home goods. Expanding its Brylane Home catalog contributed to a 10% lift in revenue. The company is so pleased with the book, this year it spun off Brylane Kitchen.

And a number of catalogers grew their businesses organically. Improved merchandising contributed to the nearly 16% sales growth at apparel and home goods mailer Lands’ End (#13). Merchants at home decor cataloger/retailer Pottery Barn and its Pottery Barn Kids spin-off were on a winning streak as well: Those catalogs, along with the flagship title, led Williams-Sonoma (#25) to improve sales more than 7%. Of course, the so-called nesting trend, which many felt was reinforced following Sept. 11, contributed to Williams-Sonoma’s solid sales as well.

Coming up

Looking ahead, at least one company on this year’s Catalog Age 100 list won’t be on next year’s: Lands’ End, which has been sold to Sears, Roebuck & Co. (#37). Then again, expect to see Sears among the top 20 catalogers, if not among the top 10.

Conversely, Federated Department Stores will likely slide to the bottom of the chart, if it remains on the list at all. Not only did it sell Fingerhut in June, but it has the Fingerhut subsidiary catalogs — among them Brownstone Studio and Arizona Mail Order — up for sale. And if apparel and gifts mailer The Mark Group (#98) closes its Mark, Fore & Strike book to focus on its Boston Proper brand as planned, it could slip off the chart as well.

Among those waiting in the wings are multititle gifts marketer 1-800-Flowers.com, which had catalog sales of roughly $120 million last year, and home decor cataloger/retailer Crate & Barrel, which is projecting 2002 direct sales of $140 million.