The Year in Review: 2005

There are two year-end traditions you can count on from the media: a review of the year that’s ending and predictions for the coming year. We’ll leave the prognosticating to the pundits. But before 2005 ebbs away, let’s take a look at the biggest industry stories of the year:

The headline: IAC/Interactive Corp. buys Cornerstone Brands.

The story: The parent company of home-shopping network HSN, IAC agreed in March to buy multititle mailer Cornerstone Brands for $760 million, or roughly 11.5 times earnings (see “Cable Access” ). Cornerstone’s stable of upscale decor and apparel books—among them Frontgate. Garnet Hill, and The Territory Ahead—might have seemed at odds with HSN’s more moderately priced offers. But the home-shopping networks are no longer the bastion of knockoffs and cheesy collectibles. HSN, for instance, sells exclusive apparel from designers such as Diane con Furstenberg and name-brand home goods from Wolfgang Puck and Royal Doulton.

The aftermath: “The integration of Cornerstone Brands is under way with a number of products now being tested on HSN and in anticipation of increased cross-selling in 2006,” according to a November release from IAC. And perhaps inspired by the IAC/Cornerstone deal, Liberty Media, the parent company of home-shopping network QVC, in December purchased Provide Commerce, whose brands include cataloger/etailer ProFlowers and food merchant Cherry Moon Farms.

The headline: M&A&M&A&M&A…

The story: While the IAC/Cornerstone deal garnered the most attention from investors and analysts, it was hardly the only major deal of the season, let alone the year. In February private equity firm EdgeStone Capital Partners bought Specialty Catalog Corp. ( “Specialty Catalog Sold to Equity Firm” ), whose brands include wigs and accessories titles Paula Young and Especially Yours. Private equity firm JH Partners in March acquired 75% of AmeriMark Direct ( “JH Partners Takes a Stake in AmeriMark” ), whose women’s apparel, jewelry, and cosmetics titles include Windsor Collection and Anthony Richards. Later that month another private equity firm, Reliant Equity Investors, bought multititle gifts, toys, and crafts mailer Paragon Gifts Holdings ( “Paragon Gifts Sold” ). In April, $499 million cataloger/retailer Brookstone signed a definitive agreement to be sold ( “Trio Agrees to Buy Brookstone” ). And on May 2, upscale merchant Neiman Marcus Group agreed to be sold to investment firms Texas Pacific Group and Warburg Pincus for $5.1 billion ( “Neiman Marcus: $5.1 Billion Baby” ). Several weeks later apparel retailer Charming Shoppes agreed to buy $460 million women’s apparel cataloger Crosstown Traders ( “Charming Shoppes Buys Crosstown Traders” ).

The aftermath: Deal making didn’t stop during the second half of 2005: MRO merchant Interline Brands bought ventilation distributor Copperfield in July ( “Interline Brands Buys Copperfield” ); Infinity Resources added Video Collection to its stable of video and music titles ( “Infinity Resources Acquires Video Collection” ); women’s apparel cataloger/retailer Appleseed’s bought competitor Tog Shop (l “Appleseed’s to buy The Tog Shop” ) and was in turn purchased by Spiegel/Newport News parent company Golden Gate Capital Corp., which at the same time acquired fellow women’s apparel merchant Draper’s & Damon’s ( “Spiegel Parent Buys Appleseed’s and Draper’s & Damon’s” ); and German powerhouse Takkt, whose North American properties include Conney Safety Products and material handling supplier C&H Distributor, agreed to buy National Business Furniture ( “National Business Furniture Agrees to Be Acquired” ), to name a few.

The headline: USPS seeks a rate increase.

The story: On April 8, the U.S. Postal Service filed for a 5.4% postal rate increase ( “USPS Makes Its Rate Case”). Given that only six months earlier observers were predicting a hike of as much as 18%, mailers greeted this relatively modest increase with something akin to relief. What’s more, many held out hope that Congress would repeal the law requiring the USPS to deposit more money into a retirement fund and that the repeal would lead the Postal Service to retract its request for a rate increase ( “Postal Reform: The Saga Continues” ).

The aftermath: Postal rates will be increasing an average of 5.4% effective Jan. 8 ( “Postal Update: Rate Hike Approved, Reform in Limbo” ). Once again, Congress didn’t manage to pass postal reform legislation. And those in the know expect the USPS to file another, larger rate case during the first half of 2006.

The headline: Paper prices continue to rise.

The story: Throughout the first three quarters of 2005, low supply plus high demand resulted in steady increases in paper prices ( “Paltry Paper Supply Pushes Prices Up” ; “More Price Hikes to Come” ).

The aftermath: Though prices were fairly stable through the fourth quarter, a number of mill closures in the U.S. and Canada may lead to further price hikes as supply remains tight.

The headline: E-mail authentication is no longer just a concept.

The story: Yahoo!, Microsoft, and AOL, among other ISPs, moved ahead with sender authentication solutions that will affect marketers’ ability to get e-mail delivered. ( “Keeping It Real: What E-mail Authentication Means to You” ). As a result, marketers who choose to ignore authentication will soon find even their customer service e-mails ending up in consumers’ junk folders.

The aftermath: In October the Direct Marketing Association voted to require members to use e-mail authentication. But e-mail services provider Skylist estimates that 50% of all e-mail marketers still don’t authenticate their messages.

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