When it comes to buying paper, catalogers have more alternatives than ever before. Thanks to the Internet, catalogers can now buy paper via Web portals and online auctions. Boston-based PaperExchange.com, for instance, which launched last year, enables mills, printers, and publishers to anonymously offer their paper overstocks and smaller job lots to the highest bidder.
Yet among the mailers contacted for this story, not one was buying paper online. And among the 139 participants in Catalog Age’s 2000 Benchmark Report on Production, Print, and Paper (October 2000 issue), just one bought paper from a source other than a printer, a paper broker, or a mill.
That’s not to say catalogers won’t change their paper-buying habits in the future. “We may consider buying online in the future,” says Jeff Savastano, director of advertising services at Merrimack, NH-based PC Connection, “but only if a Web-based method can offer the same advantages we presently receive through a broker. For now, we are in a wait-and-see mode.”
More knowledge, more power
For certain, the Web has provided catalogers with a greater ability to research paper prices and suppliers. Los Angeles-based ForestWeb, for instance, which launched in January 2000, is a portal for the forest products industry, providing paper pricing and other industry information. Catalogers can use the site as a research tool to help them shop for better deals or to negotiate with suppliers.
It’s similar to how consumers use the Web when shopping for autos: They may not buy a vehicle online, but from Websites they can gather information regarding markups and competing dealerships to enable them to negotiate more knowledgeably — and ultimately strike a better deal.
“When you look at the e-commerce model, you see that the end user has access to a lot more information,” says Verle Sutton, editor/publisher of Schaumburg, IL-based Reel Time, which covers paper trends. “And when you have that kind of access, it gets highly competitive.”
By arming paper buyers with so much knowledge, these Websites may help drive overall paper prices downward somewhat during the next few years, or at least force some suppliers to offer buyers better deals, predicts Jim Colwell, marketing director at Catawba, SC-based paper mill Bowater. “These companies are not making a large impact now,” he says, “but they are providing a great deal of information.”
How viable an alternative?
Colwell believes that more buyers will turn to online sources for paper during the next few years, in part because of the continuing consolidation among paper suppliers. Last year alone saw the merger of International Paper and Champion International, and Repap with a wholly owned subsidiary of UPM-Kymmeme.
“Consolidation is allowing suppliers to better control excess capacity, which in turn allows for more stable pricing in the short term,” Colwell says. But in the long term, this capacity control coupled with less competition will likely increase paper prices — sending mailers in search of new, cheaper options.
But others doubt that catalogers will fully embrace online paper buying. The lion’s share of catalogers buy their paper from a printer: 81%, according to Catalog Age’s 2000 Benchmark Report on Production, Print, and Paper, a figure unchanged from the previous year.
For one thing, because of the volume they buy, printers can get better pricing from the mills than can smaller catalogers. And it’s not just the price that’s better, says Addis Hilliker, vice president of supply chain management for Menasha, WI-based printer Banta Corp.: “We get the best grades of paper from the mill because of the amount we buy.”
Some say that another alternative — paper brokers — provide better prices still. Mike Fosso, creative director at Colchester, CT-based business-to-business recreational products supplier S&S Worldwide, uses a broker to avoid paying the paper markup that printers charge to cover their handling and preparation costs. He also likes the control using a broker gives him. “When the market for paper get tight,” he says, “[your broker] has leverage with a mill.” Brokers typically buy large volumes of paper from a variety of mills, working on commission from the mills.
Bidders and buyers at PaperExchange.com don’t have to pay a markup either, according to the company. The online auction site collects its fees from the sellers.
The convenience factor
But printers contend that neither brokers nor online facilitators provide the sheer convenience that they do. For that reason alone, David Hewitt, president of Hanover, NH-based Dartmouth Printing Co., doesn’t feel threatened by online paper alternatives.
“We do short runs [typically 10,000-100,000 pieces] for the smaller cataloger,” Hewitt says, “and it’s valuable to them [to buy paper through the printer] because they don’t have to worry about paper-buying negotiations.”
For all those reasons, says Jeff Borysiewicz, president of $3 million Ocoee, FL-based Corona Cigar Co., “It makes sense for us to let [printer] Quebecor World buy the paper for us. And when they quote a job for us, they break out the paper costs,” allowing him to see exactly how much the printer is charging.
Borysiewicz, whose company mails 1.3 million catalogs a year, says he has “mills calling me a couple of times a week asking if I’d like to make a change” and buy paper directly from them. But Corona Cigar has no intention of buying paper directly anytime soon. By having Norcross, GA-based Quebecor buy its paper, the cataloger doesn’t assume managing the inventory nor the risk if a paper shipment doesn’t arrive on time. And Borysiewicz says he likes the one-stop shopping element: “It’s one less vendor I have to deal with.”