Holiday mailings will rise – but not to beat the rate hike
Indicators point to a heavy load of catalogs in mailboxes this holiday season. Consider that respondents to the Benchmark 2000 survey on lists plan large circulation increases this year – of the 77% reporting circulation growth, three out of five plan to mail more than 4% more catalogs this year than they did in 1999. This is unsurprising, considering postal rates are poised to increase by as much as 15% early next year, giving catalogers only a few more months to prospect heavily before the cost of customer acquisition goes up.
But while the mailers we spoke to are keenly aware of their climbing postage costs, few will admit to boosting holiday circulation to take advantage of lower postage.”Our prospecting for the holiday season hasn’t been affected by [the January postal rate hike],” says Kurt Wettlaufer, director of circulation for Charlottesville, VA-based mailer Crutchfield. “But after our winter-spring mailing in the last week of December, we’ll definitely pull back on the rate at which we grow. We’ll still increase circulation because we’re in a growth mode, but we won’t be increasing acquisition mailings by nearly as much as we did this year.”
Wettlaufer says the consumer electronics mailer will rein in prospecting as a direct result of the higher postage, as well as rising paper costs. “Postage is our biggest expense, followed very closely by paper. If mailing costs continue to rise, marketers will be driven away from the paper catalog toward new media. It may escalate the trend toward Internet shopping,” he says.
By contrast, Youngstown, OH-based cataloger Nashbar, which mails the Bike Nashbar and Spike Nashbar sports catalogs, isn’t letting the postal rate hike affect its circulation. It has done more prospecting this year, and is planning to mail even more books next spring, says marketing manager Kim Lehere. “Our goal is to focus on growth, and we can’t allow postal rates to affect that. But I still think the rate hike stinks, and it’s going to push people to market through their Websites.”
The cost of doing business
Other mailers remain stoic about the impending rate hike. “Postage is the normal cost of doing business, and from time to time, prices go up,” says Charlotte LaComb, spokeswoman for Dodgeville, WI-based apparel mailer Lands’ End. “The rate increase won’t have an effect on our circulation plans.” Many catalogers evidently share Lands’ End’s point of view, considering that more than three-quarters of list survey respondents (see page 63) say they plan to increase their catalog circulation in 2001 over this year.
Liz Plotnick, chief operating officer of Delaware, OH-based Gooseberry Patch, also says the looming postage hike won’t affect her plans this year or in 2001. She expects the gifts cataloger will increase customer acquisition mailing 57% this year – including during the holiday season – in order to fuel the 30%-50% sales growth she projects for the company in the coming years. “We certainly don’t like the postal rate increase, but if we cut back on prospecting, we stop growing,” she says.
General merchandiser Spiegel factored in the likelihood of a 2001 postal rate increase when the Downers Grove, IL-based company planned its titles’ 2000 circulation strategy. Although its flagship catalog and apparel book Newport News will expand their holiday prospecting efforts, Spiegel spokeswoman Debbie Koopman says the decision had less to do with postage than with the titles’ natural growth cycles. “Prospecting will be up, although not as a reaction to higher postage. It’s an effect of long-term planning,” she says. Also, “part of the repositioning and top-line growth that led to the Spiegel catalog’s success last year came from circulation increases that will continue this year.”
Part of Spiegel’s 2000 initiative for Newport News is to increase top-line growth, “so circulation will be higher to both house file and customer acquisition lists,” Koopman says. But the company’s apparel and home products catalog Eddie Bauer will keep circulation flat through the end of 2000.
At San Francisco-based The Celebration Fantastic, chief operating officer Bill Luth says the gifts catalog wouldn’t take a postal rate hike into consideration when planning circulation. “We make our circulation decisions based on the cost per name or per segment,” Luth says, explaining that the company makes model-based projections of its marketplace and factors in all marketing costs – including postage – up to a year ahead of time.
Thus, Luth sees no reason to adjust Celebration Fantastic’s mailing plan. “I don’t see us shifting any of our mailings out of January and into December, for instance. Hopefully we can find a way to make up for the increased costs by identifying more profitable segments of our house file.”
Jeffrey Parnell, CEO of Northbrook, IL-based Eximious, says his gifts catalog won’t mail more heavily in the fourth quarter, but it may scale back some of its early 2001 circulation, particularly to prospects. “We’re really not making any changes to our fourth-quarter circulation plans. We’re primarily a fourth-quarter business, anyway.”
Parnell says the only change Eximious might see as a result of the postal rate increase could be some belt tightening in its first and second quarter mailings. “We have a rather substantial spring mailing, and we’ll reduce the volume, though not dramatically. We’ve known that this increase was coming for some time. It’s unfortunate, but we’ve been planning for it,” he says.
Charlotte LaComb remembers Lands’ End’s reaction to the 1995 postal rate increase. “In 1994, when we knew there were far heavier increases on the way, everyone, including Lands’ End, stepped up their acquisition to beat the paper and postage hikes. But then there was too much in the mail at once,” LaComb says. As a result, consumers were inundated by catalogs, and response rates dropped.
Bruce Kimmel, vice president of Cresskill, NJ-based list firm NRL Direct, remembers exactly that phenomenon. “Everyone thought, `Let’s build up our house files while the going is good,’ but with everyone in the mail at once, response rates suffered.” After the 1995 postal increase kept mailers at bay, Kimmel’s business suffered, too. “But it wasn’t because of the increased cost of prospecting; it was the lousy fall holiday season.”
Hopefully mailers will learn from the past, Kimmel says. “Catalogers have to ask themselves, `do we want to be in the mail with everyone else and beat the cost increases, or do we want to mail smarter?’” So far, NRL hasn’t seen a surge of prospecting from clients caused by the impending postage increase, but Kimmel expects to see an unusually heavy fall holiday mailing season nonetheless.
Although North Canton, OH-based Kids Stuff, the parent company of children’s safety catalogs Natural Baby and Perfectly Safe, plans to increase prospecting slightly, CEO William Miller agrees with Kimmel’s warning. “When you prospect heavily to avoid a postal rate increase, you wind up being overly optimistic about your prospecting results. Then, if those results aren’t there, you’ve blown your entire year,” Miller says.
Overall, Kids Stuff’s total circulation will stay the same compared to last year’s holiday season, and may even drop slightly. “We’re not tremendously reliant on the fourth quarter, and the Internet is definitely playing a part in our circulation planning,” Miller says. “I wouldn’t be surprised to see our Internet revenue make up 20% of sales this year.” (Kids Stuff reported net sales of $16.7 million in 1999.)
As Kids Stuff sees the sales balance shifting to the Web, “we’ll tend to use a cutoff that’s higher than before,” Miller says. For instance, “we might mail based on projected revenue of $1.20 per book instead of $1.10.”