Mailers downplay sluggish economy
Just six months ago, consumer confidence was nearly at a record high, unemployment was almost at a record low, and the economy was flourishing. So many catalogers, understandably, started planning for a boffo holiday season.
But in March, both interest rates and gasoline prices started to rise. The shake-out among e-commerce companies and worries about rising interest rates contr ibuted to a shaky situation on Wall Street. By June, according to the Conference Board, consumer confidence had dropped 6.9 points from May, to 138.8. The Expectations Index posted an even sharper drop from May, down 7.7 points, to 111.2 in June. Yet while a number of mailers began to feel the effects of the slowing economy during the second quarter, most of the catalogers contacted by Catalog Age insist that they are still bullish on the holiday season.
“We’re ignoring talk of an economic downturn,” says Scott Hartle, president of Rod’s Western Place, a Columbus, OH-based purveyor of Western wear and saddlery. Hartle is sticking with his plans to increase the circulation of his holiday catalog.
So is Michael Driscoll, president of gifts catalog Cashs of Ireland. “I’m optimistic about the fall/holiday season,” he says. “We will increase circulation 10%-15%. The spring season did well, and I’m expecting an increase for fall/holiday.”
Consumer catalogers aren’t the only ones blase about the economy. “We’re not concerned,” says Deborah Valadares, catalog specialist, customer communications, for office products marketer Avery Dennison. “We are planning to increase our catalog circulation. We don’t expect a downturn to affect us much, since we’re such a large company, and we sell primarily business to business.”
“We’ve increased circulation 33%,” says John Pitzen, general manager of Wine Country Gift Baskets. The Fullerton, CA-based mailer, which does about 90% of its sales from November to January, is primarily business-to-business, but about 35% of sales come from consumers. “We still see this as a prosperous economy,” Pitzen says.
Even if catalogers’ worst fears are realized and the economic slowdown were to turn into an outright recession, a number of catalogers insist that they would not be affected. “We’re recessionproof,” claims Lou Mishoulam, vice president of Chicago-based food gifts cataloger Lobster Gram. “I’ve been doing this for 15 years, and during a recession, people who still have money want to show it off.”
“Children’s clothing is not as economically sensitive as some luxury items,” contends James W. Klaus, president of Richmond, VA-based Children’s Wear Digest, which sells upscale children’s apparel. “We have some protection from an economic slowdown. And our Just Girls catalog offers lower-priced, nonbranded private-label clothes. So if we have problems with the high end, this gives us an alternative venue.”
Indeed, Lewis Shapiro, vice president/general manager of Blair Corp., says the Warren, PA-based apparel mailer’s new Crossing Pointe book will succeed even if the economy nosedives. “By the nature of its moderate prices, Crossing Pointe is positioned to survive swings in the economy.”
But some catalogers aren’t quite sure what to expect. Design Toscano president Michael Stopka was surprised at the strong spring sales for the home decor and gifts cataloger: “Even after the stock market tanked in April/May, our response was about the same.” In fact, Stopka says, during that time the Arlington Heights, Il-based cataloger sold more of its higher-priced items, “so we were on or above plan.” As for fall/holiday, Stopka will boost circulation 10%-15% “because secondary drops are becoming a good source of buyers.”
Then again, Design Toscano conducted some A/B split cover tests around the same time, “and all of them were off,” Stopka says. “We went from a $140 average order to $120” with the test covers. Although Stopka attributes the falloff to a lackluster cover design, he admits that the economic conditions this spring “maybe gave some customers pause about spending.”
According to San Francisco-based catalog consultant John Lenser, consumers did indeed start cutting back on spending earlier this year. “About half of our clients took a major pounding in the drops that occurred either the week before or after April 15,” he says. Ironically, Lenser blames this in part on 1999’s economic success. Because of the huge run-ups in stock portfolios last year, many consumers had to write the IRS larger checks in April to cover capital gains. This had a “chilling effect in the catalog drops occurring at that time,” he says. “We found that some response rates turned down as much as 30% below plan.”
Although most mailers seem unfazed by the prospect of a downturn, they should expect some additional hurdles to mailing this fall: the Summer Olympics, which begin in September, and the U.S. presidential election in November. These events tend to reduce catalog response because they divert attention away from shopping.