Charles Dickens was referring to the French Revolution when he wrote “It was the best of times, it was the worst of times,” but the description applies to the past holiday selling season as well.
Carey Leahey, a senior economist with Deutsche Bank Securities, was widely quoted as saying that holiday 2002 would be “one of the weakest shopping seasons in 30 years.” A report by Redbook Research indicated that seasonally adjusted retail sales in December were up just 1.3% from December 2001, short of the already modest 2.1% increase that had been expected and the lowest year-to-year increase since 1970.
And several established catalogers, including Harry and David parent Bear Creek Corp., Ross-Simons, and Levenger, admitted to falling short of plan.
But then there’s Eileen Schlagenhaft, catalog marketing director for Cushman’s Fruit Co., who declares, “We are dancing in the aisles over here,” because holiday sales were 10% ahead of 2001’s and 5% ahead of plan.
And Hanna Andersson president/ CEO Philip Iosca, who says, “If someone offered me a choice between having the Christmas results we had in 2002 for the next 10 years or take your chances, I would choose the former.”
And Richard Thalheimer, founder/chairman/CEO of cataloger/retailer Sharper Image Corp., who in a statement extolled his company’s “robust holiday sales.”
All of which raises the question, What distinguished the winners from the losers this past holiday season?
Seeking the unique or old-fashioned
In some ways, says Dennis Bissig, group vice president of brokerage for Hackensack, NJ-based list firm Mokrynski & Associates, catalogers had it rougher than brick-and-mortar retailers this past season because “the world was on sale.”
Retailers faced with sluggish sales can quickly cut prices. But although they can use e-mail to offer last-minute promotions, catalogers generally can’t use their primary sales tool — the print book — to promote late price changes. And because so many retailers were frantically chopping prices throughout December, Bissig says, “even the most ardent catalog shoppers went to the malls.”
Jewelry and tabletop items cataloger Ross-Simons found that to be the case. “Customers responded to our promotions more than ever,” says Cindy Marshall, vice president of marketing for the Cranston, RI-based company. “Our problem was, we didn’t have as many out there. We had more than we did last year, but given the economic climate, customers were looking for the best bargains.”
Ross-Simons ended up less than 5% short of plan. That plan had been revised downward earlier in the year, and the company had reduced fourth-quarter circulation 10%, scaling back prospecting and mailing to fewer inactive house file names.
Because they historically haven’t been able to compete with retailers on price, consumer catalogers tend to differentiate themselves with their products instead. Unfortunately, Mokrynski’s Bissig says, “there hasn’t been a lot of hot merch this year.” There were no strong trends or must-have items on a par with the Razor Scooters of seasons past.
Nonetheless, catalogers with a large percentage of unique or proprietary merchandise, such as San Francisco-based Sharper Image, fared better than most. The company’s preliminary revenue for Dec. 1-Dec. 24 was a record $111 million — a 28% jump from the previous year. That followed November sales of $56.8 million, a 33% increase from November 2001. Catalog sales for Dec. 1-Dec. 24 were up 40% from the same period of ’01, while Internet sales were up 68%. Roughly 75% of Sharper Image’s product line of high-tech gadgets is private label or proprietary.
Madison, WI-based Guild, which sells high-end artisan gifts, attributes much of its 16% rise in holiday sales to its unique merchandise, says spokesperson Thane Ryland. And because the items it sells aren’t available elsewhere, Ryland adds, Guild felt no need to offer discounts, protecting its bottom line.
Cushman’s Fruit Co. distinguishes itself from the myriad competing fruit and gift basket mailers with its signature HoneyBell, a cross between a Dancy tangerine and a Duncan grapefruit. Catalog marketing director Schlagenhaft says the West Palm Beach, FL-based company “benefited from a lot of Christmas gift sales of the item.”
Similarly, sales of Portland, OR-based Hanna Andersson’s signature striped long johns were very strong, says president/CEO Iosca, contributing to the company’s more than 20% increase in holiday sales. The children’s apparel cataloger sells only its house brand of clothing, and that exclusivity certainly helped the company exceed plan.
Despite such success stories, merchants apparently found it tougher to pick product winners this year. Relatively strong spring sales may have led them to buy items better suited for an improving economy and upbeat consumers than for the continuing recession and a populace jittery about the possibility of war.
“In tough times, sales of teddy bears and other cuddly soft things always do well,” says Joan Litle, president of Lowell, MA-based merchandising consultancy The Catalog Connection. So do products that bring to mind a simpler, better time. Litle singles out cataloger/retailer Williams-Sonoma as a marketer in sync with the zeitgeist. The food and kitchenware marketer heavily promoted old-fashioned candies such as chocolate-dipped pretzels and chocolate-covered mints packaged in equally old-fashioned tins.
New Brighton, MN-based cataloger Historic Sales offers a product line with a nostalgic appeal that is also, if not unique, certainly difficult to find elsewhere. The company sells books, videos, and gifts for enthusiasts and history buffs in its Historic Aviation and Historic Railroad titles. Catalog and Internet sales were up “in the very strong double digits” from holiday 2001, says president Rick Apple.
Old-time wares, from Dippity-do styling gel to chenille bedspreads, are also the stock in trade of Manchester Center, VT-based Vermont Country Store. And the general merchandiser’s president, Bob Allen, said the cataloger did “very well” during the holiday, finishing “on or ahead of plan.”
The strong and steady holiday sales were especially welcome since “for most of the year, we had been somewhat soft,” Allen says. From holiday 2001 through the third quarter of 2002, Vermont Country Store was about 5% below plan. But once the cataloger began mailing its 2002 holiday books in early October, business perked up.
Better late than never
A late surge in business also helped L.L. Bean make up for an earlier sales shortfall, says Rich Donaldson, spokesperson for the Freeport, ME-based apparel and outdoor gear cataloger. December sales alone were “double digits” above those for December 2001. As a result Bean was able to meet its plan for the fourth quarter, despite sluggish fall sales.
Bean’s offer of free shipping contributed mightily to its strong December, Donaldson says. But so did its Web business. E-commerce sales were so numerous that “on some days we serviced twice the transaction volume as the same days last year,” he notes. Luckily Bean was ready to handle such an increase in volume thanks to new front-end systems for customer service reps and increased Web capacity.
The Web — and improvements it made to its Website prior to the holidays — helped cataloger/retailer Mark Shale exceed plan as well. The Chicago-based marketer of men’s and women’s apparel ended the season “far ahead of plan by high single digits,” says copresident Steve Baskin. The company boosted circulation of its three-year-old catalog 40%, but it has also seen “a big shift in Web orders,” Baskin says. “Last year we had some problems with the Web, and this year we worked out all of the kinks.”
For certain, the Internet has changed ordering patterns. Even before Web orders made up a significant portion of catalogers’ business, mailers were noticing that consumers were buying closer to Christmas each year. But Todd Simon, senior vice president of Omaha Steaks, says that business peaked especially late for holiday 2002.
“Our orders were bunched up over the last 10-15 days of the season, much more so than in the past,” says Simon. “In fact, if you’d asked me on Dec. 12 how sales were, I’d have been shaking my head. But by Dec. 20, everything was fine.” The Omaha, NE-based food mailer met its plan for holiday 2002, which called for low single-digit growth.
“We are seeing a last-minute procrastination of shoppers too,” says Tracy Lamb, marketing director for Delray Beach, FL-based Levenger, which sells writing tools and related gifts.
Levenger ended the holiday up 4%-5% from last year, based on a “slight bump” in circulation, but a few percentage points below plan. Part of the problem may have been that the company mailed its holiday book in September — too early given the trend toward last-minute shopping, Lamb says.
In fact, Hanna Andersson, Mark Shale, and Vermont Country Store were among catalogers that didn’t begin mailing their holiday books until October, which may have enabled them to get the attention of later shoppers. And Chicago-based food marketer Lobster Gram mailed catalogs four times during the holiday season, rather than twice as it had in the past. That strategy, says cofounder Dan Zawacki, contributed to its 34% rise in holiday sales, a significant improvement upon the 10% increase the company had planned on.
Business was so robust, Zawacki says, that he feared he hadn’t purchased enough inventory. “Luckily I have tremendous vendors who were able to accommodate my needs,” he says. Besides, he notes, “that’s a good problem to have.”
Not-So-Jolly Christmas for Corporate Sales
You probably received far fewer gift baskets and paperweights from clients and vendors this holiday season than in years past. And while you may have been disappointed, catalogers that rely on corporate sales for a significant portion of their business were downright dismayed.
“The corporate sales sector took a hit again this year,” says Richardson, TX-based catalog consultant Tony Cox, who works with a dozen food marketers. “Since sales have been slow for businesses themselves, companies have raised the bar on whom they give gifts.”
Medford, OR-based Bear Creek Corp., the $400 million-plus parent company of the Harry and David food catalog and the Jackson & Perkins horticultural title, felt the pinch, admits spokesperson Bill Ihle. Business-to-business sales represent 10% of the cataloger’s business. Like consumers in general, Ihle says, businesses were very cautious this year.
Todd Simon, senior vice president of Omaha Steaks, tells a similar tale. “We’ve struggled” with the corporate gifts business, he says. “Our same loyal customers come back year after year, but they’re not placing as large orders as they used to. Their financials can’t handle the expense this year.” Fortunately, the food cataloger’s consumer business enabled it to meet its plan, which called for low-single-digit growth.
Despite the unwelcoming economic environment, Carson, CA-based food gifts marketer Mrs. Beasley’s launched a 28-page business-to-business spin-off catalog in the fall — a decision that CEO Ken Harris doesn’t regret. “It was clear business-to-business was driving my sales and profitability,” Harris says. With the help of database services provider Abacus, the $22 million Mrs. Beasley’s realized that 70% of its catalog buyers were business customers, as were 90% of its online customers. Mrs. Beasley’s had assumed that b-to-b sales made up 50% of its business.
In addition to mailing a targeted b-to-b book, Mrs. Beasley’s expanded its product line to include wine, cheese, and gourmet snacks as well as its core baked goods; it also increased the page count of its consumer catalog from 28 pages to 36. All of the changes contributed to the company’s 16% increase in catalog sales.
Holiday 2002 at a Glance
|Art Institute of Chicago (gifts)||on plan|
|Bear Creek Corp. (food, plants)||“below expectations”|
|Bronner’s Christmas Favorites (Christmas decor)||direct sales up 10% and ahead of plan|
|Caraluzzi’s (food)||10%-15% above plan|
|Cushman’s Fruit Co. (food)||up 10% and 5% ahead of plan|
|Eden Baskets (food)||up on flat circ|
|The Fruit Co. (food)||up 15%-25% on 100%-plus circ hike|
|Guild (gifts)||up 16%|
|Hanna Andersson (children’s apparel)||up more than 20% and ahead of plan|
|Historic Sales (books and videos)||up “in the very strong double digits”|
|Levenger (writing tools)||up 4%-5% and a few percentage points below plan|
|L.L. Bean (apparel, outdoor gear)||December sales “double digits” above previous year’s|
|Lobster Gram (food)||up 34%, well above planned 10% increase|
|Mark Shale (men’s and women’s apparel)||ahead of plan by high single digits|
|Mid-America Direct (auto accessories)||up 8% and on plan|
|Mrs. Beasley’s (food)||catalog sales up 16%|
|Omaha Steaks (food)||met plan, which called for low single-digit growth|
|Ross-Simons (jewelry, tabletop items)||short of plan by low single digits|
|Sharper Image Corp. (high-tech gifts)||December catalog sales up 40%, Web sales up 68%|
|Vermont Country Store (general merchandise)||“on or ahead of plan”|