If you believe that what’s good for big business is good for America, then this year’s Catalog Age 100 should give you reason to cheer. Seventy of the 100 largest players in the industry, as calculated exclusively by Catalog Age, benefited from year-over-year increases in offline and online catalog revenue.
That’s a 17% improvement from last year, when 60 of the 100 largest catalogers enjoyed annual sales growth. And it’s a vast turnaround from two years ago, when only 46 of the companies saw year-over-year catalog and Internet revenue increases.
Of the remaining 30 companies on this year’s ranking, nine had flat sales. And of the 21 that suffered declines in catalog sales, several of them more than offset those shortfalls with sales growth in other channels. This leads us to one of the four major trends apparent among this year’s top catalogers.
Trend #1: Channels galore
The mantra among the Catalog Age 100 companies appears to be “the more channels, the merrier.” Marketers that sell exclusively via catalogs and the Web, such as apparel and home goods mailers Redcats USA and Blair Corp., are clearly in the minority.
Coldwater Creek is an example of a multichannel marketer that saw direct sales fall but total revenue rise. The Sandpoint, ID-based women’s apparel company is increasingly emphasizing retail over catalog — cutting circulation, especially to prospects, in favor of opening stores. So while its combined catalog/Internet sales dipped 6%, to $324.2 million, its total revenue increased nearly 10%, to $518.8 million. Just as important, net income soared 33%, to $12.5 million.
A business-to-business example is CDW. Yes, the Vernon Hills, IL-based computer reseller’s catalog and Internet sales fell nearly 7%, to an estimated $2.74 billion. But revenue generated by the company’s sales force climbed 132%. CDW’s total 2003 revenue exceeded $4.66 billion, a 9% improvement from 2002.
CDW is an exception in that it breaks out to some degree revenue generated by the sales force from revenue generated by the catalog and Internet. Merrimack, NH-based computer reseller PC Connection is another exception. It carefully delineated its $212.1 million in “self-service” Internet sales and $93.0 million in catalog-generated revenue from the nearly $1.01 billion garnered by outbound telemarketing, field sales, and government contracts.
For most b-to-b marketers, though, the sales force is such an integral part of the direct division that they don’t distinguish (at least in their SEC filings and other public records) a sale made by an account executive carting a catalog to a client from an order booked online.
Broomfield, CO-based Corporate Express North America is a case in point. The office supplies marketer credits its entire 2003 revenue of nearly $4.46 billion to “direct.” Corporate Express touts its “integrated sales effort” — a phrase that pops up throughout the annual reports and filings of numerous other companies as well — with outbound telemarketing and account sales characterized as “direct” along with Web and inbound call center orders.
Account executives and field sales teams aren’t options for consumer catalogers. But retail is. And last year saw several direct-only stalwarts venture into retail. Apparel cataloger The Territory Ahead, one of the titles owned by West Chester, OH-based Cornerstone Brands, opened its first store, in Chicago, in September. Another Cornerstone brand, home accessories title Frontgate, opened its first store, in an Atlanta mall, in November. That same month, Home Decorators Collection, one of the two titles owned by Hazelwood, MO-based Knights Direct, opened its first nonoutlet store, in Hazelwood.
Trend #2: Moving ’em online
Though many marketers classify multiple channels as equal elements of direct sales, some channels are more equal than others. When it comes to accepting orders, catalogers continue to steer customers away from the labor- and cost-intensive call center and toward the Internet.
Corporate Express, for instance, introduced online procurement system E-Way two years ago. Last year, 43% of its orders (excluding those of business furniture and other items not available via E-Way) came from the system. And Michael Dell, founder/chairman of Round Rock, TX-based computer manufacturer/marketer Dell, this past May told the Austin (TX) American-Statesman that “we think over 85% of our customers use Dell.com in some way in the purchase process. Over 85% of our revenues are touched by Dell.com.”
B-to-b marketers aren’t the only ones shifting a plurality of sales to the Web. At New York-based apparel cataloger/retailer J. Crew Group, online sales outnumbered call center and mail order sales last year. The company took in $111.6 million in sales via its Website compared with $61.9 million via the call center and mail.
Trend #3: Brave new markets
How do you grow when you already dominate your market segment? If you’re Dell, you expand into new segments. In September 2003, shortly after shedding “Computer Corp.” from its corporate name, Dell entered the consumer electronics market, introducing a line of roughly 30 home-electronics products, including high-definition TVs, gaming systems, and software. Also in September, Dell launched Dell Music Store, which enables users to download one track or an album at a time straight to a PC; the music can be listened to on the Dell DJ, a hard-drive-based MP3 player. Dell launched microsites for its Dell Music Store and home electronics products, followed in late October with a 32-page Dell Beyond catalog.
Continuing its evolution from an apparel-only marketer, New York-based Redcats USA (formerly known as Brylane) introduced gifts title BrylaneHome Wishes in August 2003. It was the company’s third home-goods catalog, following BrylaneHome Kitchen (2002) and Brylane Home (1999). By growing its home and gifts business, the company expects to better leverage its house file of 7 million 12-month buyers.
Along similar lines, San Francisco-based cataloger/retailer Williams-Sonoma expanded its Pottery Barn cash cow in April 2003 with the launch of the PBteen catalog. Selling furniture and home accessories for teens, the brand took in nearly $50 million in sales in its first 10 months, exceeding expectations. A previous Pottery Barn extension, Pottery Barn Kids, continues to grow more than four years after its 1999 debut, reaping sales of more than $400 million last year.
Cornerstone Brands’ Frontgate catalog is another font of spin-offs. In March 2003 it debuted Grandin Road, which sells slightly lower-priced versions of Frontgate’s upscale home, patio, and garden products. Frontgate’s previous spin-offs include gifts book Gentlemen’s Domain and The Ultimate Grill. Within 12 months Grandin Road had more than 100,000 buyers in its house file. Another Cornerstone book, apparel and home decor title Garnet Hill, is debuting a spin-off of its own, Growing Up with Garnet Hill. Selling children’s apparel and bedding, the new catalog will mail in time for the fall/holiday season.
Consumer catalogers Blair Corp. and Crutchfield Corp. are looking to business buyers for growth. Best known for selling value-priced apparel and home goods to baby boomers and seniors, Warren, PA-based Blair in June 2003 launched a wholesale subsidiary, Alleghany Trail Corp., to sell value-priced sportswear to retailers. And in October, Charlottesville, VA-based Crutchfield mailed its first corporate-sales catalog. Like Crutchfield’s consumer book, the b-to-b spin-off sells a broad array of consumer electronics.
Trend #4: Buying into a new business
Rather than launch spin-offs and create brand extensions, a number of Catalog Age 100 companies entered new markets the old-fashioned way: by buying businesses that already had a foothold in those segments. Though hardly a new trend, strategic acquisitions appeared to be more prominent this year than they had been during the previous two years.
For example, to boost its share of the Apple computer market, CDW acquired the North American assets of bankrupt rival Micro Warehouse in September 2003 — and at a fire sale price to boot. CDW estimated that 75% of Micro Warehouse’s corporate and public-sector companies were not part of CDW’s house file. The acquisition also gave CDW an entry into the Canadian market.
Also in September, St. Paul, MN-based Patterson Cos. entered the physical rehabilitation market by buying AbilityOne Products Corp. The price it paid for AbilityOne, in relation to operating profit, is comparable to the multiple that Patterson had paid to enter the veterinary market by acquiring Webster Veterinary Supply in July 2001.
The December 2003 purchase of office supplies cataloger/retailer OfficeMax by Boise Cascade Corp. signaled a seismic shift for the latter. Once best known as a pulp and paper manufacturer, Boise is now focusing exclusively on marketing office supplies. Just last month it announced that it was selling all of its paper and forestry assets to a company formed by Chicago investment bank Madison Dearborn Partners and changing its corporate name to OfficeMax.
On a smaller scale, Direct Marketing Services Inc. (DMSI) bought its way to a more upscale audience by purchasing the Charles Keath gifts and women’s apparel book from The Mark Group in October. DMSI’s other catalogs, such as HomeVisions, target lower-middle- and middle-income consumers. “We are in the midmarket price range with our Home Visions catalog,” DMSI president/CEO Dave Milgrom told Catalog Age last year. “Now we have an opportunity to reach more-affluent buyers.”
METHODOLOGY
The Catalog Age 100 was compiled by the Catalog Age staff through public records, datacard analysis, and input from financial analysts and sources within the offline and online catalog industry.
To put all the companies on the same playing field, sales figures are for the calendar years 2003 and 2002. A number of companies report their results on a fiscal year different from the calendar year. When the fiscal year varied from the calendar year by more than one month, Catalog Age backed out the financial data to obtain calendar-year sales.
To ensure the accuracy of all statistics, Catalog Age tried to contact executives at each company. Many catalogers couldn’t or wouldn’t confirm sales totals; others didn’t return phone calls or otherwise couldn’t be reached. In those cases, as well as when companies provided only approximate sales figures, an asterisk indicates that the figure is an estimate. In some cases, Catalog Age figures for 2002 differ from those reported last year, due to updated information.
Wherever possible, revenue figures are net of sales taxes and other extraordinary fees, such as shipping and handling income. Because of accounting differences, however, some figures may include that extra revenue.
Several business-to-business marketers, such as Fisher Scientific International, Boise Cascade Corp., and Henry Schein, use telemarketing or direct response to augment or complement their print and online catalogs. Unless indicated, the Catalog Age 100 sales figures include all direct channels for those marketers because the catalog is the main, driving sales vehicle and because the ancillary channels are integrated so firmly with the catalogs. When the companies, such as PC Connection, broke out their catalog sales from their telemarketing revenue, we did so as well.
For parent companies such as Staples, Office Depot, and Mattel, the sales figures listed are for their catalog/internet divisions only. Likewise, for cataloger/retailers such as The Talbots and Coldwater Creek, sales figures are only for the companies’ direct division, unless otherwise indicated.
Special thanks to intern Alyson Papalia and freelance reporter Andrew Grossman.
Down but Not Out…
Of the 21 companies in the Catalog Age 100 that saw year-over-year direct sales decline, eight nonetheless enjoyed an increase in total annual revenue. For computer reseller CDW and New England Business Service, field and distributor sales more than compensated for the direct shortfall. For apparel cataloger/retailers Coldwater Creek, The Talbots, and J. Jill Group, store sales rose more than direct sales declined.
Several of the companies that suffered drops in total revenue are competing in very tough markets. Networking product and services provider Black Box Corp. was hit hard by the recession and cutbacks in capital expenditures among businesses. Last year its revenue fell nearly 17%, to $595.5 million from $630.5 million in 2002. Compared with the $808.6 million in sales it netted in 2001, last year’s revenue was down 35%. Nonetheless, Black Box has managed to remain in the black.
Industrial supplies mailer K+K America also felt the effects of reduced corporate spending, though to a far less degree — its year-over-year sales dipped less than 1% in 2003. Educational and agricultural products marketer The Aristotle Corp., which gets about 85% of its revenue from schools and educators, blamed its 1.6% decline in annual sales on state budget deficits that led to cuts in school spending.
For several other catalogers, the reasons for their declining sales were internal rather than external. Sales at gifts and home products cataloger Lillian Vernon Corp. had been falling for several years. Its 2003 total revenue of $183.9 million was down 20% from 2002’s $230.9 million and down 25% from $259.8 million in 2001. Almost immediately after buying the company in July 2003, ZelnickMedia and Ripplewood Holdings started reviewing multiple aspects of the business, from circulation to merchandising.
Apparel cataloger/retailer J. Crew Group has suffered an identity crisis of sorts for the past few years, as its trademark preppy-meets-trendy tailoring lost favor among consumers. Between 2001 and 2003, total sales tumbled nearly 12%, to $688.3 million. New leadership here, too, is intent on reversing the situation. Since joining J. Crew in January 2003, CEO Millard “Mickey” Drexler has reduced inventories along with catalog circulation and put renewed emphasis on merchandise quality and styling. In summarizing last year’s results, Drexler has pointed out that newer offerings were well received by customers — so much so that demand for some items outweighed supply during the fourth quarter, a pattern that continued into this year.
And while we hate to kick a cataloger when it’s down, we’d be remiss to not mention the woes of Spiegel Group. Having filed for bankruptcy protection in March 2003, it slashed circulation and closed a number of its Eddie Bauer stores. Combined catalog/retail sales dropped 23% last year; direct sales plunged 33%. Now that two of the company’s three divisions, Newport News and Spiegel Catalog, have been sold, industry observers are waiting to see whether the new owners will reverse the declines or focus on improving profits at the expense of revenue growth.
— SC
Getting and Spending
Major acquisitions involving Catalog Age 100 companies in 2003…
| Buyer | Acquisition | Month |
|---|---|---|
| Brady Corp. | Tiscor | Jan. |
| School Specialty | Sunburst Video | Feb. |
| Zones | Corporate PC Source | March |
| Blyth | Miles Kimball Co. | April |
| Airgas | Delta Safety Supply | May |
| The Aristotle Corp. | Haan Crafts Corp. | May |
| School Specialty | Select Agendas | May |
| Henry Schein | Colonial Surgical | June |
| NEBS | Safeguard Business Systems | June |
| Taylor Corp. | G. Neil Cos. | July |
| Zelnick Media/Ripplewood Holdings | Lillian Vernon Corp. | July |
| ASAP | Stylin’ Concepts | Aug. |
| Broder Bros. | T-Shirts & More | Aug. |
| Alloy | Delia’s Corp. | Sept. |
| Brady Corp. | Brandon International | Sept. |
| Broder Bros. | Alpha Shirt Holdings | Sept. |
| CDW | Micro Warehouse North America | Sept. |
| Patterson Cos. | AbilityOne Products Corp. | Sept. |
| DMSI | Charles Keath | Oct. |
| Henry Schein | American Medical Services | Nov. |
| Blyth | Walter Drake | Dec. |
| Boise Cascade Corp. | OfficeMax | Dec. |
| Interline Brands | Florida Lighting | Dec. |
| Taylor Corp. | Eimecke Collection | Dec. |
| …and this year so far | ||
| NEBS | Stephen Fossler Co. | Jan. |
| School Specialty | McGraw-Hill Education children’s publishing group | Jan. |
| Crosstown Traders | Monterey Bay Clothing Co. | Feb. |
| Airgas | Interstate Welding Sales Corp. | March |
| Fisher Scientific Intl. | Oxoid Group Holdings | March |
| Potpourri Group | Young Explorers | March |
| Clayton, Dubilier #38; Rice | VWR International | April |
| Fisher Scientific Intl. | Dharmacon | April |
| McKesson Corp. | Moore Medical Corp. | April |
| Taylor Corp. | Executive Greetings | April |
| Universal Screen Arts | Signals, Wireless | April |
| Brady Corp. | EMED | May |
| Deluxe Corp. | NEBS | May |
| Patterson Cos. | Caesy Education Systems | May |
| Patterson Cos. | Medco Supply Co. | May |
| Newport News Holdings Corp. | Newport News | June |
| Sigma-Aldrich Corp. | Tetrionics | June |
| Wasserstein & Co. | Bear Creek Corp. | June |
| Spiegel Catalog Holdings Corp. | Spiegel Catalog | July |
But Wait, There’s More!
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