Slumps and Surprises

Going into the spring selling season, catalogers were already contending with the lingering dismal economy and a particularly harsh winter in many parts of the country that delayed thoughts of spring. Then, of course, the war with Iraq began in mid-March.

“The war has the attention of consumers, and I think it is going to make them conservative this spring,” says Jack Schmid, president of Shawnee Mission, KS-based catalog consulting firm J. Schmid & Associates.

But for many mailers, the months and weeks leading to the war had been even worse. “The uncertainty of the crisis in Iraq, not the war itself, was impacting sales,” says Graham Kinsman, co-owner of gardening supplies cataloger Kinsman Co.

Indeed, after lower-than-expected winter sales, Piperville, PA-based Kinsman enjoyed a March surge in business, with sales exceeding those of last year. Kinsman says he kept circulation flat but pushed the mailing schedule back one month, dropping the spring catalogs on Feb. 27. Customers have been making purchases later than usual this spring — a trend that Kinsman feels results from the bitter winter faced by the northeast and the mid-Atlantic states.

Water sports cataloger Overton’s experienced a similar sales pattern, says director of marketing Brian Moen. Customers were distracted by the situation in Iraq in February, when the war was still being debated, he says, but sales rebounded in March, after the war began, and are now tracking to plan. Additionally, “in February the average order was down and more recently, we are seeing it bounce back,” says Moen.

Overton’s plan calls for only modest growth. Sales of new boats are down this year, but the Greenville, NC-based cataloger isn’t too concerned. Overton’s is betting that many people will fix up and add features to their existing boats, so it’s looking for sales to pick up even more in late spring through summer.

We’ve got winners

One big winner among the mailers interviewed is Lilliput Play Homes, a catalog of outdoor playhouses for kids. The Finleyville, PA-based company, which has an average order of $4,000, has seen a 50% increase in Web and catalog sales. Spring is traditionally the company’s strongest season, says owner/CEO Steve Chernicky. And though sales were down in the Northeast throughout the winter months — which Chernicky attributes to the bitter weather — steady sales in the Southwest more than compensated for the loss.

Still, the economy and world affairs prompted Chernicky to play it safe. The company scrapped plans to increase advertising by at least 10%, instead keeping its advertising budget in line with last year’s. And Chernicky, who does not prospect via list rentals, will continue to send the 16-page catalog only to requesters rather than invest in finding new names.

“I’m still not certain this [spring increase] is for real,” Chernicky says. “I’m still going to be cautious.”

Perhaps Lilliput could increase sales even more by selling miniature flags and flagpoles to accompany its play houses. Many marketers have found that the war has increased demand for patriotic merchandise.

For instance, sales of “USA”-emblazoned hats and Marine bobble-head dolls have contributed to a 20% increase in spring sales for Bethel, CT-based Star Struck. The company added a page of such items to the spring book. “It was a tough decision for us to sell more of these items in the catalog, since we didn’t want to seem like we were benefiting from the war,” says director of operations/sports director Jason Scheets. The company also increased its mailing quantities in the low single digits, he adds.

In addition, Star Struck benefited from launching a catalog celebrating the great American pasttime: the New York Mets catalog, which sells autographed memorabilia and items such as car magnets, tire covers, and streets signs embossed with the baseball team’s logo.

Military equipment and apparel mailer U.S. Cavalry too has benefited somewhat from the war in Iraq and the growing concern over bioterrorism. Its stores, strategically located across from Fort Campbell and Fort Knox, both in Kentucky, have seen an 84% increase from soldiers and other military personnel snatching up uniforms, hats, boots, and other items, says president/CEO Randy Acton.

Further, the Radcliff, KY-based company’s government contract business has increased 25%. But because U.S. Cavalry’s catalog sales have remained flat, on flat circulation, spring numbers are “not quite up to budget,” Acton says.

The price is right

Not all gains were tied to patriotism, of course. Some bargain-hunting consumers simply responded to low prices and discounts. At Sierra Trading Post, a closeout apparel cataloger based in Cheyenne, WY, spring sales are 10% above plan, up in the low double digits, says executive vice president/chief financial officer Gary Imig. The company reaped the benefits of a strategy that included a 5% increase in circulation and a 5% cut in prices, which “cost us some of our operating margin,” admits Imig.

Mount Vernon, WA-based Charley’s Greenhouse & Garden Supply is also finding that buyers are more price-sensitive. “Consumers are now putting a lot of thought behind higher-price-point items, which has taken a toll on the average order value,” says CEO Vern Frol. The company estimates that average order values have dipped as much as 5%. But sales are tracking along the company’s conservative growth projection, and Frol expects to see single-digit growth later this spring.

Since last year may have been an anomaly after the Sept. 11 terrorist attacks made a bad ecomony worse, Charley’s is using its 2000 sales as a benchmark for its true sales gains. “We are finally above those 2000 numbers after the setbacks of the economy starting in late 2001,” Frol says.

Milwaukie, OR-based children’s educational toys marketer Museum Tour “is really concentrating on our pricing in the tough economy,” says spokesperson Barb Lund. The cataloger’s spring sales are flat with last year’s, but its average order has decreased slightly. As a result, all new products are being priced with narrower margins; in instances where vendors are discounting to encourage sales, Lund says, Museum Tour will pass on those discounts to its customers.

Need, not price, is the biggest motivator for customers buying from the San Diego-based As We Change catalog, says its marketing manager, Liz Duffy. Because the company sells health products for menopausal and post-menopausal women, the sales don’t seem to follow the ebb and flow of the economy at large, she contends. As a result, the catalog has been achieving its plan for robust spring sales, with circulation up 5%-8%, depending on the drop.

In fact, Duffy says, because As We Change specializes in personal care that make people feel better, “we see that we are helped more than we are hurt by the state of the world,” she says.

Toning it down

But for some, there’s no question that the economy and the war have put the brakes on spending. South Whitley, IN-based Stumps, which mails school decorations titles P, Prom and Party, and Spiritline, reports that sales are flat — which mean that the books are performing below forecast.

“In the school sector, I think it is difficult for fundraising,” says Wendy Moyle, Stumps’ executive vice president. “Also, it is not the year to have a flashy prom, when recent graduates are fighting overseas.” Moreover, some of those event budgets are coming from schools with their own financial problems.

Luckily, Stumps has two consumer gifts and decorations titles — Celebration Fantastic and Shindigz — to balance out the disappointing b-to-b sales. “When people aren’t traveling, as they are not as much these days, they seem to entertain more,” Moyle says. Instead of taking an anniversary cruise, for instance, they might throw a party to celebrate, “so we reap the benefits of that. This is similar to what we saw during the Gulf War,” she notes. The two consumer catalogs are each ahead of last year’s revenue by double digits and are meeting projections. (For more on how other business catalogers fared, see “B-to-B Doing Better” on page 24.)

Gladstone, NJ-based Beval Saddlery planned for flat sales; instead, sales fell 5% from spring of last year. President Mark Walter notes that the economy may finally be taking a toll on the catalog’s upscale customers.

Another potential problem: Beval sources 10%-20% of its equestrian saddles and accessories from France, and Walter is concerned about anti-French sentiment here after France failed to back the U.S. in the war in Iraq. “We’ve actually been extremely successful with French products, and while I haven’t seen a direct impact yet, I am concerned about it going forward,” Walter says. As a result, he has been looking to source more products from England and Italy and to reduce the percentage of French products in the catalog.

For Berne, IN-based Dynamic Resource Group, owners of sewing and crafts titles Annie’s Attic and Clotilde, sales for 2003 started 2%-3% higher than they had been the previous year, says catalog marketing director George Hague. But two weeks into the war with Iraq, March sales were down 10%-15% from what they were in March 2002. Altogether, the company’s first quarter was down 6% from what it was last year.

Like Kinsman Co., Dynamic Resource Group anticipated the start of the war and delayed sending out its Annie’s Attic spring sale drop by one week. The plan backfired, however, as the mailing arrived at homes just as the bombs began to fall. Of the two catalogs, Hague says Annie’s Attic, which has an older demographic of middle-age-plus women, suffered a greater sales decline. That’s because this title’s audience tends to be hesitant in spending money in times of bad news, he says.

Golf products marketer Golfsmith also considered delaying spring mailings — not because of the war but because the harsh winter delayed the golf season in some of its key markets, says director of e-commerce and direct marketing Bob Hermansen. “We found out through our printer, Quebecor, that some catalogers were asking about holding up their mailings that were already at sectional center facilities en route. We considered doing that as well to delay the mailings later into spring, but we found that they had all decided not to hold them and went forward, so we did too.”

Austin, TX-based Golfsmith did roll some of its circulation from each mailing to later into the season because of the weather. Hermanson would not provide specifics, but he describes sales as “difficult” now. “We’re doing a lot of promotions because of the economy and the war.” While Golfsmith didn’t plan for the weather, “we did plan for the war, but we expected it to be done with quicker,” he says.

You might think that the war and the weather would have prompted some people to take comfort in sweets. But direct response sales for Carson, CA-based baked-good marketer Mrs. Beasley’s were up 12% vs. last year for January and February, while March sales were down 11%. About 10% of the March sales shortfall was the calendar impact of Easter coming three weeks later this year, says CEO Kenneth Harris.

Strength in Mrs. Beasley’s wholesale and corporate logo businesses have more than compensated for the direct response shortfall, however. Harris says that overall sales are up 30% for January/February and 21% in March. “We have seen the softness in our everyday gifting business as people aren’t in the mood to send ‘thank you,’ ‘just because,’ and ‘get well’ gift baskets,” although birthday- and baby-themed baskets are holding up, he says.

Indeed, many considered flat sales a victory. North Webster, IN-based Bart’s Watersports expected — and got — flat sales, says Mike Wilson, general manager for the water sports products marketer. Still, Wilson hopes that flat sales in some of the slower months will lead to sales gains by June — typically the cataloger’s biggest month. But all things considered, flat spring sales “are not something we’re going to complain about,” Wilson says.

Where can you hear Spiegel Catalog president/CEO Geralynn Madonna, Alloy chairman/CEO Matt Diamond, School Specialty president/CEO Dave Vander Zanden, and Crosstown Traders president/CEO Steve Lightman talk about industry trends?

Only at the Annual Catalog Conference 2003 Power Forum. Cosponsored by Catalog Age and the Direct Marketing Association, the Annual Catalog Conference runs June 1-3 in San Francisco. For more information, visit www.catalogconference.com or call 800-927-5007.

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