Spiegel’s `big book’ racks up big losses

After nearly two years of restructuring, the Spiegel catalog is still three years away from turning a profit, according to president John Irvin. And some observers believe it will remain in the red until it abandons its general merchandise “big book.”

The $769.2 million Spiegel general merchandise catalog, which represents 27% of $2.84 billion parent firm Spiegel Group, hasn’t posted a profit since 1994, when the catalog’s sales reached $1.2 billion. Not coincidentally, 1994 was also the last year the parent firm, which also operates the Eddie Bauer and Newport News catalogs, was in the black (see chart below).

To reduce overhead, the Spiegel catalog laid off 125 people in 1997-15% of its Downers Grove, IL, headquarters staff-and shut two of its three telemarketing centers following the holiday season. The streamlining reduced second-quarter selling, general, and administrative expenses more than 38% from last year.

Irvin isn’t relying just on cost cust. “We will replace many of our catalogs with more focused and better targeted books,” he says. The 86-page spin-off Elements, for instance, which launched last month, sells only private-label products.

That’s fine, but Kevin Silverman, managing director of Chicago investment banking firm Everen Securities, says Spiegel is “moving too slowly on cutting back its big books.” For instance, its fall/ winter 1998 book still ran to 512 pages. Spiegel’s executives “seem to be moving in very little baby steps” in turning around the business, Silverman says.

“If you want to be in apparel, be in apparel; if you want to be in hard goods, be in hard goods,” says another industry observer, who requests anonymity. “But if you want to be in everything, you’re fighting progress-it just can’t happen anymore. The market demands segmentation.”

In late August, Federal Trade Commission (FTC) administrative law judge James P. Timony ruled that, by selling consumers’ credit histories to marketers without consumers’ knowledge or consent, credit information bureau Trans Union is in violation of The Fair Credit Reporting Act. The ruling stems from a 1992 complaint in which the FTC accused Chicago-based Trans Union of selling information such as estimated individual incomes, mortgages, and auto loans. The ruling doesn’t prevent companies from selling that data, but requires prior consumer consent to do so. Timony notes that Trans Union’s competitors, which include Experian and Equifax, sell similar data, but their data is gathered through public records and by other company-owned divisions, such as Experian’s Metromail group, which inform consumers that the data may be sold.

Observers don’t believe the decision will hurt direct marketers. “The direct marketing industry is used to working with Experian and Equifax without renting the level of information in question, so there’s nothing marketers have to give up or do differently,” observes Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association.-LD

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.