Kids Stuff’s Growth Strategy

Aug 01, 2001 9:30 PM  By

It’s been rough going for North Canton, OH-based Kids Stuff. Annual sales for the children’s products mailer, which mails Perfectly Safe, The Natural Baby Catalog, and Jeannie’s Kids Club, decreased 5% last year, to $15.9 million from $16.8 million in 1999. What’s more, Kids Stuff posted a net loss of $3.4 million, compared with income of $48,058 for ’99. More recently, in early June, the company laid off six people in its marketing department, or 18% of its workforce.

CEO William L. Miller blames the company’s woes in part on the Internet. “We discovered that our catalog was driving 90% of the Internet business, but only one out of two of the catalog customers driven to the Web actually ordered once they got there,” he says. The Web accounted for $3.2 million, or 20%, of the company’s sales last year. All of Kids Stuff’s properties, including its online-only LittleFeet catalog, share a Website.

But while shopping-cart abandonment may have contributed to Kids Stuff’s problems, it doesn’t explain why those customers didn’t try to order via phone instead. In fact, some believe that circulation problems are the cause of the sales decline. More than a year ago, “the company’s mailing list was drying up, and response was starting to suffer,” says Eric Barker, director of marketing for Independence, OH-based automotive accessories cataloger Stylin’ Concepts, who was the director of marketing at Kids Stuff before leaving in April 2000. “I think that Kids Stuff was overprospecting in some areas and not exploring areas that could have been profitable.”

For his part, Miller admits that Kids Stuff may have been trying to acquire new customers too aggressively. “We were overprospecting, but this is a kids’ business — it’s a moving target. You acquire customers, and they don’t last long before they grow out of our product, so the churn rate is very high. You’re constantly having to prospect.” The company’s total circulation is 8 million.

But Miller insists that circulation strategies are only part of Kids Stuff’s problems. “The bottom line is that everything took a quantum drop down for us last year. We were prospecting at $1.20 per book, and all of a sudden it looked like $0.90 per book,” Miller says.

A CASH INFUSION

Despite the difficulties in selling children’s products and the increasingly competitive marketing climate, Miller has no plans to shift Kids Stuff’s focus or to sell off any of the company’s titles. In the children’s market, he says, “we’re very strong in prenatal to age three, and we want to keep that.” It helps that in July, Kids Stuff a secured $3 million line of equity credit from New York-based Cornell Capital. With the funds, Miller says, he hopes to be able to rehire most, if not all, of the employees that were recently laid off.

The cataloger also plans to introduce a new Web strategy in September. The Website will offer a broader line of products, including items not available in the print catalogs. “We need to make the Internet like a separate catalog with its own strategies and parameters, and not try to blend our catalog business entirely with it,” Miller says. Kids Stuff also plans to work with an Internet database marketer to track its Website’s traffic and customer buying habits to get a better sense of how to position the company’s Website and catalogs, he says.