Pressured by its bank to turn a profit this year, books and gifts mailer Chinaberry in early June laid off president Gary DeMaine. Ed Ruethling, an owner of the $8 million cataloger and former vice president of marketing, has assumed DeMaine’s position.
“It was very clear we needed to affect operating expenses,” says Ruethling, who with his ex-wife, Ann, owns a majority share of the company. “Consolidating Gary’s position was one way to do that, along with the elimination of his salary.” In addition to the namesake catalog of children’s books, Chinaberry mails the Isabella catalog of spiritual-themed books and gifts.
DeMaine, who’d had to lay off director of marketing Mel Concors in March, says that Chinaberry “had a difficult first half of 2003. We pushed for growth, and the sales-to-marketing costs are putting extra pressure on this year’s profit forecasts. We have made as many general and administrative cost cuts as we could, and it is better for Chinaberry to keep the operating management team together and lay me off.”
Facing increasing competition from behemoth booksellers such as Amazon.com and Barnes & Noble, Chinaberry had flat sales in 2001 and 2002. This year, the company bumped up circulation modestly from 2.9 million in 2002 to 2.95 million. It has trimmed 150,000 catalogs from its summer circulation and will add 200,000 books to its holiday mailing.
“We’re just pulling in, consolidating, meeting our bank covenants — which is what drove us to this point,” Ruethling says. “For loans, the bank has certain requirements, one of which is we need to be profitable this year.”
For 2003, plans call for Chinaberry to trim $130,000 in costs. In addition to eliminating DeMaine’s salary, the company on Sept. 1 will increase its shipping-and-handling charges to bring in an additional $18,000 for the year. “It’s not much, but it helps make up for the United Parcel Service fuel surcharge,” Ruethling says. By year’s end, “we plan on being profitable by at least 1.5%-2% net profit of gross.”
Beyond the cuts are some increases and improvements. For the black-and-white Chinaberry catalog, the company plans to roll out a four-color book for holiday, following a summer test of half color and half black-and-white. “Last year, we did head-to-head testing of paper grades,” Ruethling says. “This year, we’re also cutting pages slightly to decrease costs, from 136 to 120 pages. Printing fewer pages pays for the color, “so it’s a wash,” he says, “but with a slight savings in postage.”
Overall, the changes should result in slow growth. “That’s the way it will stay until things improve in the general economy,” Ruethling says. “It’s too hard and too expensive to try swimming upstream now.”