Tough Times for Nonprofit Catalogers

Catalog sales are expected to increase 6% this year, according to the Direct Marketing Association, to $132.8 billion. But for the most part, catalogs associated with not-for-profit groups won’t be so lucky: The DMA expects their sales to rise a scant 2% this year, to $1.2 billion.

“Nonprofit organizations have been experiencing some real challenging days this year,” says Neil Denton, executive director of the Washington-based Alliance of Nonprofit Mailers. “It’s the dual hit of the depressed economy and some leftover effects of 9/11. The difficult time is reflected in many of these firms’ bottom lines and their fundraising efforts.”

Of course, for-profit catalogers are suffering from the same fallout. But in several ways, the not-for-profit catalogers have it worse. For one thing, their postal costs have increased by a greater percentage than those of their for-profit counterparts. In March 2002, postage for nonprofits that presort mailings by carrier route rose an average of 6.5%, compared with 6.2% for other catalogers. Perhaps that difference doesn’t seem significant, but many nonprofits were still recuperating from 1999’s rate hikes, in which postage for nonprofit catalogs jumped nearly 10% while rates for other catalogs increased 1.2%.

Trying to curb rising costs, nonprofit catalogers are making “hard decisions all the time,” Denton says. “We’ve seen many mailers reduce page counts or are now only mailing to their house file to weather the storm.”

Increasing mail costs were one reason Washington-based Smithsonian Catalogue reduced its page count 24%, from 64 to 84 pages, beginning with its spring 2002 catalog. On top of cutting back on the number of pages, “we evaluated each aspect of the business and made a strategic decision to outsource fulfillment,” recalls Susan Boghosian, director of marketing and strategic planning. In June 2002, Smithsonian outsourced its catalog call center and fulfillment operations to Plano, TX-based PFS Web. The Smithsonian Institution receives about 70% of its funding from the federal government. The organization relies on Smithsonian Business Ventures — which includes the catalog, the Internet, and the museum stores — as well as charitable donations for the remainder of its funding.

Nonprofit catalogers aren’t the only ones cutting back on expenses. Consumers are too — and the expenses they’re cutting back on include nonessential items, such as the gifts sold by most not-for-profit mailers, and charitable contributions. Many nonprofit catalogers use donor names as a major source of prospects, so with donations falling off, fewer new names are available.

Larry May, president of May Development Services, a division of Greenwich, CT-based list firm Direct Media, estimates that there are 5% fewer donor names out there for nonprofit mailers to rent. “Things are tougher now,” he says. “The ’90s were wonderful, but it’s a different time now.”

“Donor lists are another source of names for us,” says Terri Breslin, circulation manager for Reston, VA-based National Wildlife Federation, a nonprofit cataloger that supports the environmental foundation. Since National Wildlife uses donor names predominantly for mailings in the holiday season, Breslin is just beginning to evaluate holiday mailings.

Merchandise restrictions

Because of their nonprofit status, catalogs associated with charitable organizations cannot always hop on certain merchandising trends, no matter how much money they might generate. To maintain their nonprofit status as 501 C-3 corporations under the tax code of the Internal Revenue Service, nonprofit mailers can sell only merchandise that pertains to the organization’s purpose for being.

“Every item we put in the catalog must be traced back to our mission statement,” says National Wildlife Federation’s Breslin. “That’s how we’re able maintain our nonprofit status. There might be a [new merchandising] opportunity out there, but if the product doesn’t support our mission, we can’t put it in the catalog.”

With exclusives such as its $19.95 Songbirds Fringed Rug and its $99.95 Butterfly Mosaic Table, the National Wildlife Federation manages to offer unique product yet stick to its mission. The book’s top sellers for the summer have been items such as weathervanes, hummingbird feeders, and tapestry throws, all related to the organization’s Backyard Wildlife Habitat program, Breslin says.

Success stories

While merchandising restrictions make business more challenging for not-for-profit catalogers, merchandise has also enabled some mailers in the sector to thrive despite the tough economy. Case in point: Gallup, NM-based Southwest Indian Foundation, a not-for-profit organization that supports Native Americans through catalogs, a Website, a gift shop, and donations, which has grown every year for the past 12 years, reports CEO William McCarthy.

Southwest Indian Foundation, which took in $21 million last year, mails a 108-page catalog of jewelry, Native American handcrafts, books, and music. Proceeds from the catalog go to build homes, support orphanages, and provide drug and alcohol counseling for Native Americans. For the fall season, McCarthy plans on boosting the catalog’s page count to 120.

Why is the Southwest Indian Foundation catalog doing so well right now? “I think our offer is one other folks haven’t seen before,” McCarthy says. “We really work hard to find unique merchandise.” Such items include the $59.00 Ceremonial Sioux Fan and the $21.00 Scented Moccasin Candle set.

SERVV International is also enjoying an unlikely sales growth. The Madison, WI-based organization, whose acronym stands for Sales Exchange for Refugee Rehabilitation Vocation, is a nonprofit organization that helps the poorer denizens in developing countries such as Ghana and Kenya. According to president Bob Chase, its sales have increased 17% for the first five months of the year.

The alternative trade organization markets its products through a catalog, a Website, and a wholesale operation. SERVV advances the money to groups, such as cocoa farmers in Ghana, in exchange for merchandise sold in the catalog.

As is the case with the Southwest Indian Foundation, SERVV’s edge may be the unique home decor and gift items the catalog sells, such as handpainted ceramics from Vietnam and handmade papers from Bangladesh. Still, admits Chase, the organization is having a harder time bringing in new names to its housefile. The mailer, which rents lists of catalog buyers and of donors, also uses consumer cooperative database Abacus as a source of prospects.

Doing Well, Doing Good

Yes, Milwaukie, OR-based educational and gifts cataloger Museum Tour is a for-profit organization, so the fact that its response rate rose 4.2% last year was of no matter to museum-affiliated nonprofit catalogers — except for the 22 museums that the catalog helps support.

Museum Tour’s mission is to support and improve the financial position of not-for-profit affiliates by including products from their institutions. The affiliates receive a percentage of sales on every piece of merchandise sold in the book. Many of the nonprofit institutions involved with the cataloger are stuggling, says Museum Tour founder/president Marilynne Eichinger. Nonprofits are seeing lower donation amounts, “and at the same time many states are cutting back funding,” Eichinger says. The first wave of cutbacks at most struggling museums include gift-shop staff, which in turn can hurt product sales.

The Museum Tour catalog, which debuted in 1996, now mails 1.2 million copies annually. And last year “we’ve had the best year ever,” says Eichinger, which means more money going back to the nonprofit institutions in Museum Tour’s network.
MDF

What’s for Sale

Perhaps even more so for nonprofit mailers, unique merchandise can make or break a catalog. Here are a few distinctive offerings from not-for-profit catalogers:

  • Astronomical Society of the Pacific: Mars Topography Globe ($99.95)
  • Dharma Communications — The Monastery Store: “One Thousand Buddhas of Peace” ($2,400), original sculptures by John Knutila
  • National Gardening Association — Gardening with Kids: Seed Identification Kit ($39.95)
  • Save the Manatee: Manatee Beach Towel ($17.95)
  • The Smithsonian Catalogue: God of Happiness Sculpture ($125) that “recalls similar carved Chinese figurines” in the museum’s Asian ethnological collections

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