Flax Breaks Out of the Art Mold

Artists’ materials cataloger/retailer Flax Art & Design has evolved into something that its late founder, Herman Flax, likely never envisioned. Since September, the company has acquired two catalogs — neither of which sells art supplies — and a greeting cards e-commerce business, to continue propelling the company in its new direction.

One of four brothers who emigrated to the U.S. from Eastern Europe near the turn of the 20th century, Herman Flax, who died in 1958, established a small art supplies store in San Francisco in 1938. (Interestingly, his three brothers also started art supplies stores — Sam in New York, Myer in Los Angeles, and Louis in Chicago. Each business remains independently owned, however.) The Flax Art & Design catalog launched in 1984.

Since then, the company’s product line has expanded to include what vice president Howard Flax, Herman’s grandson, calls “creatively inspired gifts in addition to artists’ materials.” Along with easels, drafting tables, and paints, Flax Art & Design sells decorative and gift items such as cutting boards that resemble Impressionist paintings and ties adorned with replication da Vinci sketches.

Howard Flax says desktop publishing necessitated the company’s change in merchandising strategy. Before computers became an integral element in commercial art, 50% of Flax Art & Design’s business came from sales of letterset, drafting supplies, and other manual art-production tools. But when desktop publishing came along, “all that revenue dried up, and we had to look for other categories,” Flax says. “So we’ve gone from a pure art supplies business to a broader specialty marketer.” Today gifts make up more than half of Flax’s mail order business.

An eclectic mix

The company’s recent acquisitions make more sense when put into this context of expanding into broader markets. With its September 2002 purchase of the T. Shipley and Reliable HomeOffice catalogs out of bankruptcy, Flax Art & Design has gained entry into the small office/home office market. T. Shipley sells business gifts and accessories such as briefcases, wallets, and clocks; Reliable HomeOffice sells office furnishings.

And in April, Flax strengthened its commitment to the gifts sector by purchasing Sparks.com, a Web-only marketer of greeting cards and gifts. Flax is operating all three catalogs and the Sparks Web business independently, though the company will benefit from operational and marketing efficiencies.

“These were perfect fits,” says Howard Flax. “We’re not actively seeking acquisition opportunities, but we do look for ways to improve our market position or operational efficiencies. Our recent acquisitions fit those criteria, with T. Shipley and Sparks complementing our core gift business, and Reliable providing us with off-peak demand.” While the Flax and T. Shipley catalogs are primarily fourth-quarter businesses, Reliable’s order curve peaks during the first and third quarters.

The Flax catalog customer base, 75% of whom are women, has an average household income of $75,000 and up; the Reliable customer base, 55% of whom are women, has an average household income of $70,000 and up; T. Shipley customers, 60% of whom are men, has an average household income of $60,000 and up. Most Sparks.com buyers are women; they have an average household income of $60,000.

Although the T. Shipley customer has a lower average income level than the Flax customer, Flax executive officer Martin McClanan says there’s great potential for more higher-income customers with Shipley in the long run. “We expect the demographics to be more higher end from people who shop Shipley for $400 briefcases than those who shop Flax for a $30-$40 set of water colors or arts and crafts,” he says.

Further, McClanan says, “Shipley also has a large corporate client base, which can transfer to products sold in Flax catalogs and stores.” Flax fetches a $70 average order, while Shipley has a $100-plus average order and Reliable a $130 average order.

Dormant since last fall, Shipley and Reliable mailed new books in May with 30% and 20% new products, respectively. Both of the acquired catalogs had few new product introductions in 2002. This year’s new merchandise, McClanan says, “is designed to keep the assortment fresh and interesting for the customer.” For instance, the Shipley title contains several new leather goods and personalized products, while new Reliable items include desk sets and storage accessories. Product overlap between the catalogs is “minimal,” he adds.

As for Sparks.com, “it was something that made logical sense for us to add to our portfolio,” McClanan says. “Cards are a most natural complement to gifts.” Flax can take customers who’ve just bought gifts “and get them to add a card to their purchase,” he says, by prompting customers of the catalogs’ Websites to visit Sparks as they’re finishing the ordering process.

Separate but with crossover

Despite their synergies in their related product lines and customer bases, the four properties will retain their distinct identities, McClanan says. “The only cross-merchandising will take place at checkout pages of their Websites,” he says, “to give customers opportunities to visit sister companies.”

On the other hand, names will be free-flowing throughout the company. “Where a customer appears to be a good prospect, we’ll certainly take advantage of cross-marketing our database for catalog mailings through data modeling — as we do for any prospecting,” says McClanan, who won’t reveal circulation figures. The company will look at those types of customers who have been successful prospects in the past and the degree to which they could be good prospects with other Flax catalogs based on recent buying behavior.

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