The 10 BEST Cost-Cutting Ideas of All Time

Jun 01, 1999 9:30 PM  By

In the catalog business, shrinking margins and increased competition can eat into profits, so every penny counts. Whether it’s shaving a few bucks off a mailing list or whittling a few cents off your production costs, such savings add up. And as there’s no reason to believe that reducing expenses won’t be as important in the 21st century as it has been in the 20th, we’ve canvassed a number of catalogers to come up with the top 10 (in no particular order) cost-cutting ideas of all time.

THE TOP 10 1. Implementing digital technology. Digital technology allows catalogers to adapt and store the data they use to produce their print books for use in other formats. Chicago-based automobile products cataloger J.C. Whitney, for one, uses digital imaging so that it can repurpose the product shots from its print catalog for its Website, says Ed Bjorncrantz, vice president of marketing. (For more information on digital technology, see “The 10 best production breakthroughs,” p. 185.)

2. Changing a catalog’s trim size. Seeking to offset escalating postal bills and production costs, many catalogers have altered their book’s trim size. Back in ’91, for instance, when the slim-jim (6-1/8″ x 11″) was the maximum trim size the U.S. Postal Service allowed to qualify for lower letter mail rates, a number of catalogers switched to that format. Then, in ’96, when the USPS implemented its reclassification plan and there was no longer any benefit, from a postage standpoint, to mailing a slim-jim, many catalogers, such as swimwear mailer A.B. Lambdin, switched back to a standard size. The moral: It pays to be flexible.

3. Switching to catalog self-covers. When print shops evolved from sheet-fed to web-offset machines in the late ’60s and early ’70s, catalogs were able to print much larger signatures, or forms. Whereas a typical form had been eight pages, printers could now economically produce 16-page and even 24-page forms. This capability proved especially useful a decade or so after web-offset printing became commonplace, when paper prices began to rise sharply. Anxious to reduce paper costs, catalogers stopped using a more expensive grade of paper for a four- or eight-page cover form and instead began to print the cover on the same paper and as part of the same signatures as the inside of the book.

“Self-covers can save catalogers 10%-20%,” says Carol Swanson, marketing manager at Maple Grove, MN-based commercial printer Banta’s Catalog Group.

4. Indeed, at Englewood, CO-based The Feel Good Catalog, which sells comfort and relief products, “we are now printing our catalog with two 24-page signatures, rather than printing 40 pages plus an eight-page cover,” says marketing manager Beth Cooke. “Beginning in March, we saved $24,000 in printing costs compared to the way we used to print the catalog.”

5. Producing a catalog on a Macintosh computer. With the introduction of the Apple Macintosh computer in 1984, most mailers found that catalog production costs fell dramatically. “I saw my production costs decrease from $1,300 per page without the Mac to less than $300 per page with the Mac,” says consultant Don Libey, then the owner of office products and business forms cataloger Streamliners. “We got away from hiring expensive board artists. It cost us about $83,300 the old way to produce a 64-page catalog, and $19,200 with the Macintosh.”

6. Co-mailing catalogs. The first catalog co-mailing, in 1983, put together 18 business-to-business catalogers, including RapidForms, Streamliners, and WearGuard. None of these catalogers, Libey says, could mail at the carrier route sort level at 100%. “But when you put all 18 together, we had such massive volume and address flexibility, we all could qualify for the lowest postal sortation costs. And that was at a time when most catalogers were paying increased paper and postage costs,” Libey says.

Drop-shipping merchandise. Fulfilling orders directly from the supplier “eliminates the middleman,” says Ruth Owades, president of San Francisco-based floral cataloger Calyx & Corolla, which drop-ships flowers from the growers directly to the customers.

7. Because catalogers don’t have to inventory drop-shipped goods, it also frees up valuable warehouse space and shifts some of the fulfillment costs to the product manufacturer. Many catalogers opt to drop-ship large, heavy items, such as furniture, that take up a lot of room and are expensive to ship, as well as products that need to be engraved or personalized by the manufacturer.

8. Importing merchandise directly from the overseas manufacturer. As your catalog grows, “direct importing can be a major cost-cutting strategy,” says catalog consultant John Lenser, “provided you’re sensitive to the volume requirements needed and the niche your catalog is in.” Giftware and home decor mailers such as Exposures, Pottery Barn, and Gump’s have found that by directly importing merchandise from overseas manufacturers-and eliminating wholesalers-the cost of merchandise can drop dramatically.

Manchester, VT-based cataloger Orvis, for one, has been direct-importing floor coverings, watches, and furniture from overseas manufacturers for the past three years, says Frances Atherton, product development specialist for Orvis’s gifts and home books. Overseas manufacturing “has proved to be a valuable cost-cutting strategy,” she says.

Diversifying-or switching-parcel carriers. Now that some warehouse management software systems can calculate the most inexpensive carrier for packages, based on weight and destination, many catalogers no longer restrict themselves to one parcel carrier for standard catalog package delivery.

And even those that do have found that keeping abreast of the ever-changing rate schedules among carriers can make switching from one to another pay off. “The best idea for cutting costs I’ve had is shifting package delivery from United Parcel Service to the U.S. Postal Service with a consolidator,” says Jack Rosenfeld, president of Medfield, MA-based gifts cataloger Potpourri Collections. The consolidator trucks the packages from the warehouse to destination delivery units (DDUs); from there the Postal Service sends the packages to the recipients. “I’d estimate the savings at about 20%-35%,” Rosenfeld says.

9. Using cooperative databases. The co-op database-in which multiple list owners merge their house files, giving each participant access to all of the names-rose to prominence in the early 1990s. Since then, it’s had a tremendous impact on how a number of catalogers obtain their names, as well as how much they pay for those names.

According to Gina Valentino, director of marketing for Chicago-based women’s apparel catalog Barrie Pace, “It costs us about 6 cents per name to use a co-op database, which includes modeling and a profile that matches our best customer.” With traditional prospecting, she says, you end up paying a base charge of at least $100/M, or 10 cents a name. And that base price doesn’t include selects, such as gender (another $5/M), recency, frequency, and monetary ($10/M-$15/M), and product ($30/M).

“The total cost of renting is at least $145/M, but with a cooperative database, I pay about $60/M,” Valentino says. “And because of the niche market we’re in-high-end women’s apparel-I can’t go to one source and get 100,000 names without adding a bunch of overlays. But with the cooperative database I can get those names relatively cheaply.”

10. Negotiating. Just by using their leverage as a client, catalogers can receive quantity discounts on merchandise or skip paying the inbound freight costs on goods. “But too often, catalogers forget to exercise the negotiating leverage they have,” says consultant Joan Litle, president of Lowell, MA-based The Catalog Connection. “It’s important that the cataloger and the vendor work in partnership so that neither party leaves the bargaining table feeling they gave away the keys to the bank.”

* Going green. Recycling materials and using energy-efficient lighting help save the Earth while saving you money.

* Automating. From bar codes to voice mail, machine is often cheaper than man.

* Modifying the order form. You can tweak the trim size, reduce the paper grade, lose the envelope, or drop the order form altogether.-MDF