Signs of Life

Nov 01, 2009 10:30 PM  By

No one is expecting a blockbuster holiday, and that’s good — we’re not likely to get one. But the sentiment for many by the end of the summer was that we have hit the bottom of the economic meltdown. That means, hopefully, things can’t or won’t get any worse. They may even be on the upswing as the stock market, consumer confidence and retail spending are showing signs of perking up.

September was actually a fairly decent month for retailers, “particularly in light of the past 10 months or so,” says Neil Stern, a retail analyst and senior partner for retail consultancy McMillan Doolittle. Retailers are running tighter businesses with better cost and inventory controls, which should lead to improved margins and profits, he says.

It also helps that merchants have lowered their expectations considerably — and that last year was such a disaster for many that comparisons to those numbers make this year’s results look okay.

Bill LaPierre, senior vice president of list firm Direct Media Millard, says about 75% of his company’s clients are reporting sales above plan. But he points out that last fall, clients in segments across the board were down 20% to 30%.

As a result, fall sales for 2009 were forecast to be another 20% to 30% lower. And those same clients also cut their circulations in that same 20% to 30% range by slicing marginal names and trimming back prospecting, LaPierre says.

Ross-Simons, for one, met its fall plan, but the jewelry and home decor merchant’s results reflected a 30% reduction in planned circulation. Vice president of marketing Larry Davis says this significant drop in circulation was offset by an increase in mailings to take advantage of the U.S. Postal Service’s summer “mail sale.” For the first time, the USPS ran a postage reduction program for Standard Mail from July 1 through Sept. 30.

Most of Ross-Simons’ increase was in August, “and then we had a big bump in late September,” Davis says. The summer sale was “great,” he adds: “We were able to add about 10% of marginal circulation to our mail plan.”

But like many marketers, Ross-Simons is moving some print spending online. “Our prospecting efforts in the mail have been replaced by increased dollars spent on natural search and paid search,” Davis says.

Better than expected

Fall sales for women’s apparel merchant Boston Proper came in above its plan, with increases in the single-digit range over last year, says president Sheryl Clark. “We were very pleased with the customer response based on the challenging retail environment,” she says.

Boston Proper’s goals for the fall season were to improve productivity through better merchandise choices and upgrade the look and feel of the catalog with lower density, Clark says. “We feel that the new elevated creative of our catalog, the strong fashion, age-appropriate point of view and its new Website all contributed to the success of the fall season.”

The site, which was unveiled in April, was redesigned to provide an easier shopping experience for customers, she says. Enhancements to the shopping experience include a perpetual shopping cart, calculation of tax and shipping in the shopping cart, color change on the product detail page, and sorting by relevance, size, color and price.

Boston Proper’s marketing plan didn’t change from last year, Clark says, “however, we made slight reductions in circulation. We continue to invest where we have successful return on investment,” namely, the Web channel.

But while the merchant has made modest increases in spending on its search and affiliate programs, Clark says, “we do not view these as a shift away from our catalogs or other marketing vehicles, but rather as the natural growth of these programs as they develop organically.”

Fall sales were 11% above plan, or up in the single-digit range compared to last year for outdoor gear and apparel cataloger/retailer The Orvis Co. He would not reveal specifics, but vice president of multichannel marketing John Rogers says the merchant’s circulation was down, “with the biggest cuts on the prospecting side.”

Orvis focused on processes to reactivate older customers and to increase reactivation circulation, he says. “And we continued to invest aggressively with online marketing across a wide array of programs,” he says, though he would not elaborate on the programs.

What’s more, Orvis has “managed our inventory very conservatively in 2009, so with regard to promotional strategy this fall, we were not forced to sacrifice margin to drive velocity,” Rogers says.

Kassie Rempel, owner/founder of shoes merchant SimplySoles, says overall fall sales were down 3%. But sales from core customers (repeat buyers who have made at least one purchase in the past 12 months) jumped 10%. “We’ve been focusing on our core customers, providing them exceptional service and offers to maintain their interest and loyalty.”

SimplySoles made substantial changes to its marketing plan, Rempel says, because the budget had taken a hit during the recession. “While catalog prospecting had previously been profitable for us, in fall/winter 2008 we had severe losses on a failed prospecting campaign that was in place long before we could adjust to the economic downturn.”

For the first time in SimplySoles’ existence, “on a catalog contribution-margin basis, we lost money on sending our catalog to potential buyers who just didn’t buy,” Rempel says.

This year, SimplySoles cut back its catalog prospecting by more than 80% compared to fall 2008. “We’re starting to see positive prospecting results, though,” Rempel says, “so we’ll begin to increase our catalog prospecting slowly over the next few months.”

Getting aggressive

Though the climate seems to be improving, it’s still a struggle to get customers to spend. This has inspired many to tweak their strategies and crank up the promotions. Northern Safety, a cataloger of industrial supplies, saw fall sales drop 20% to 25%, says president Neil Sexton. “The economy is the primary reason,” he says, which has meant “fewer big catalogs, more small ones.”

Sexton says Northern Safety increased its use of 68- and 100-page mailers and decreased the use of 500- to 800-page books. Prospecting was cut slightly as the company was more aggressive with its e-mail campaigns and name gathering.

Sexton says the company cut circulation about 10%, with more total pieces mailed at a lower cost. “The use of comailing and trim size reduction allowed us to mail the same or more quantities for less. We’re looking for every opportunity to mail more while maintaining online spending from last year.”

One of the biggest promotional differences this year, Sexton explains, is there are more “premium/gift with purchase” items than in the past. “We’re also more promotional with discounts and free gifts in e-blasts,” he says.

For certain, catalogers are breaking out the promotions early. Ross-Simons is “maintaining a very aggressive promotional and pricing plan,” Davis says. The merchant has adopted free shipping across the board and increased discounts up to 30% for customer acquisition campaigns.

But some merchants are being more cautious about offers, especially free shipping, based on lessons learned last year. SimplySoles began offering free shipping on all orders in November 2008, “when sales were nearly at a standstill,” Rempel says.

Starting in March 2009, the company increased its free shipping threshold to orders of at least $50, and then again in June to orders of at least $75. “We realized that while we may lose a few customers, we simply can’t make money offering free shipping on items below a certain threshold,” Rempel says.

Children’s apparel merchant CWD Kids is trying not to make the mistake of slashing prices aggressively. Rather than eliminate higher price points altogether, CWD Kids infused some lower price points in hopes of keeping its customers, says president Jim Klaus.

“We’ve tried to be conscious of price, but our higher-end merchandise is selling well, maybe because other higher-end sellers in our segment have cut back,” he says. “At the same time, we did not eliminate the higher-end [goods], and that market has not gone away.”

CWD Kids’ sales for August and September fell about 10% from last year on a 10% drop in circulation. But Klaus says sales were up slightly for the first 10 days of last October compared to the period last year.

The holiday outlook

As for the holiday season, the National Retail Federation released a rather dismal forecast of a 1% decline in retail industry sales, to $437.6 billion. While this number falls significantly below the 10-year average of 3.39% holiday season growth, it sure beats last year’s 3.4% drop in holiday sales.

That 1% forecast stands to make 2009 the worst retail sales year in the past 30 years, says McMillan Doolittle’s Stern. “For 2010, there will be a full year of bad calendar comparisons and, hopefully, an economic turnaround. Most forecasts, ours included, put 2010 in the black with a 2% to 3% uptick.”

Some mailers are more optimistic. “Everyone in the industry is making doomsday projections — reporting a lousy fall and anticipating an even worse holiday season,” says Casey Cochran, senior manager of print and retention for personal care products company Murad. “We’re actually boosting our response rate, revenue and contribution,” with fall sales up 4% over last year, she says.

The company’s third-quarter catalog and direct mail business was up 16.5% over 2008 and 26% above plan. Catalog circulation is down 10% for the year, but Murad increased it 6% in the third quarter, Cochran says.

Most of Murad’s growth has been in direct mail, but Cochran says the catalog “continues to be our biggest revenue generator in print.” And with its increasing costs and constant changes to postal regulations, the catalog “is also our biggest challenge.”

“We’ve had to be extremely strategic about everything to make our catalog profitable — from list selection and messaging, to design and merchandising,” Cochran says. “There isn’t one magic bullet; you need a whole firing squad.”

Most would agree that catalogers need an arsenal to compete these days. But LaPierre of Direct Media Millard thinks some mailers aren’t even using the tools they have. Too many catalogers have not implemented multichannel plans, he says.

Catalog merchants are also not responding to the customers’ last-minute buying habits, LaPierre says. “Catalogers are continuing to mail very early in the season,” he says. He cited the National Wildlife Federation, which mailed a holiday card catalog in July, as an example.

“The National Wildlife Federation offered a pricing incentive for Christmas card orders placed before Aug. 31,” LaPierre says, and that’s just too early these days. “That’s the way people bought 25 years ago — not how they buy today.” — Additional reporting by Tim Parry.

Slow start for back-to-SCHOOL sales

The back-to-school buying season got off a slow start, likely due to Labor Day falling on Sept. 7. CWD Kids’ back-to-school sales, which include August and September sales, sank about 10% from last year, according to company president Jim Klaus. But, Klaus says, those results coincide with a 10% drop in circulation, which included older buyers and prospects.

Klaus says CWD Kids made up for the circulation cuts with more aggressive e-mail marketing, including remails. “If we sent an e-mail on a Monday and it had a very good response rate, we’ll send it again on Wednesday to the segment that did not open the e-mail or the ones that opened it and did not buy,” he explains. “We found this works better with the segment that opened the e-mail, because they had an interest in the first place, but had a reason to not buy.”

School uniforms cataloger French Toast saw a single-digit increase in its fall sales, according to president Michael Arking. “Back-to-school started out slow due to the late Labor Day weekend,” he says. “Sales were behind in August but rebounded in September.”

Catalog circulation remained flat, Arking explains. “We focused more of our budget (more than 20%) on natural search.”

Arking believes French Toast had a lift because of the increased visibility of school uniforms on television, in magazines, motion pictures and music videos. “It seems that school uniforms are in fashion, believe it or not,” he notes. “We have been receiving a number of calls from producers for product.” — JT

Murad catalog has reactivation covered

As many catalogers pull back on prospecting to keep costs down, they’re desperately trying to reactivate customers. Skin, hair and body care company Murad managed to increase sales 4% over last year, in part due to a strong reactivation catalog, says Casey Cochran, senior manager of print and retention.

Cochran cites the company’s fall reactivation catalog cover as “unlike any we’d ever done before.” The cover features a “Lost Customer” ad, similar to a lost pet sign, and invites the lost customer to “please return to Murad” and claim their reward (a sampler collection of the brand’s premium skin creams as a gift with purchase).

Murad mailed the catalog the second week in September to nearly 400,000 inactive customers, Cochran says. Most were customers who hadn’t been active in six months to two years, “but we went as far back as four years in some cases.”

This fall reactivation catalog produced a 12% increase in sales over its fall reactivation catalog in 2008, though Murad did up circulation 9% for this year’s drop. Feedback from customers about the cover was overwhelming, Cochran says. “Rarely do customers comment about the cover of a catalog — but this one has definitely resonated with our customers,” she says. — JT