Whether you’re launching a catalog or growing an established business, the question remains the same: Do employees equate to expenses or revenue? Creating a staff for your catalog should be more about a roadmap to profitability than an exercise in expense reduction. ▪ With any catalog business, the basics are merchandising, marketing, operations, and finance (accounting). There are, of course, many supporting functions as well, such as human resources and information technology.
When evaluating in which department to make your next hire, keep two questions in mind: Where is the greatest potential? Where is the greatest need? Determining the greatest potential is a matter of recognizing the return on investment for an immediate payback.
Merchandising matters
One mistake that start-ups make is underestimating the importance of merchandising experience. If you don’t know what an assortment plan is or how to establish margin goals by category, then you need to consider hiring that experience.
In the beginning usually one person — maybe two — is responsible for merchandising But when it is time to plan the third season, two people cannot plan the assortment, keep inventory levels appropriate, conduct the analysis, monitor vendor performance, ensure quality control, build forecasts, establish the pricing policy, support multiple channels, and handle all the day-to-day assignments. Hiring a merchant who has inventory planning experience would bring an immediate payback.
By way of example, a $40 million fashion-apparel cataloger can be staffed with a merchant, three buyers (one for each merchandise category, assuming there are three), and an assistant for each buyer who builds the analysis, works with vendors, makes the rebuys, and monitors the shipments to the distribution center.
But a new or small cataloger most likely cannot afford a merchandising staff of that size. You need to determine how to maximize minimal resources. If you can employ only one person to handle all the merchandising tasks, you need to reduce the variables. Instead of three categories, for instance, reduce them to one. If you must keep three merchandise categories, then reduce the number of vendors. The point is to help minimize the duplication of work performed by one person. And keep in mind this rule of thumb: Adding an experienced merchant to your staff will add a point of margin to your bottom line.
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Question: How many categories do you offer in your catalog? Do you have a one-to-one relationship between merchants and categories? Do you have enough analysis to make data-driven decisions by category? Does your inventory level reflect current catalog activity, with 70% of inventory for current and future catalogs?
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Answer: If you’ve answered “no” to any of these questions, it’s time to consider beefing up your merchandising department.
Marketing mayhem
“Marketing” is one of the most ambiguous department names. For smaller catalogers, “marketing” often connotes catalog creative and production, circulation planning, analysis, Website maintenance, printing, mailing, forecasting, list rentals, catalog requests, database, promotions, and anything else that relates to the customer, whether current or prospective.
No matter the size of your catalog company, you must have at least one dedicated person responsible for the marketing function. The customer file is the most important asset of a company, and ensuring profitability with the customer file isn’t a part-time job.
Catalogers often think of customer activity in terms of “getting the customer” and “keeping the customer.” “Getting the customer” is translated into customer acquisition. One person should be responsible for finding new customers, building the circulation plans, conducting the analysis, managing and renting the customer file, creating promotions, developing catalog request programs, and growing the new-to-file customers. Most catalog start-ups, by definition, must be highly focused with customer acquisition.
For established catalogers, an additional employee should be dedicated to “keeping the customer,” which is necessary for sustained profitability and continued customer file growth. Knowing how frequently to contact the customer, with what medium (catalog, e-mail, bounce-back catalog, sale catalog, postcard), and when to contact them is critical. In addition to managing circulation and contact strategies, this individual typically also handles planning and analysis, forecasting, bindery instructions, and often print production tasks.
And don’t forget the Internet. From affiliate programs to paid-for-performance search engine optimization, a cataloger needs someone with Web-specific skills and experience to manage online marketing.
As your company grows, develop the team into functional marketing areas, with a leader for the department and at least one person each for “getting the customer,” “keeping the customer,” and the Website. It’s also important to have a strong analyst to support the marketing department.
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Question: Do you set customer acquisition goals to offset the attrition rate of the customer file? Do your Web marketing strategies complement your print catalog strategies? Do you forecast orders and sales by catalog?
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Answer: If you’ve answered “no” to any of these questions, adding to your marketing resource would probably boost your company’s profitability.
Operations opportunities
Outsourcing call center and even distribution center functions is often the best solution for catalogers with annual sales of less than $40 million. But if your company is nearing that threshold and reaching a comfortable profitability plateau, it’s probably time to weigh bringing these functions inhouse.
If the decision were strictly a numbers game, simple math would dictate the answer. Complicating the issue, however, is the overall value of a dedicated staff with consistent product knowledge and training and integrated systems with marketing, finance, Internet, merchandising, and customer service.
When it comes to call center staffing, review the hourly statistics to determine your total talk time and the total number of calls. Keep in mind that total number of calls includes, in addition to order calls, customer service calls, questions about products, requests for catalogs, and inquiries about order status. It is not unusual to have 35% of all calls classified as nonorder calls.
Having these metrics helps calculate how many call center associates you’ll need every hour. Of course you can also ask your third-party provider how many employees serviced your account.
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Question: Has your preliminary research revealed an opportunity to save money? Would your customers benefit from company-trained and -developed staff?
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Answer: If you’ve answered “yes” to either question, you should research a transition plan for migrating outsourced operations functions inhouse.
Fiscal functions
Smaller catalog companies tend to outsource their accounting and finance functions. New catalogers in particular tend to lack expertise in dealing with payroll and taxes. What’s more, you can easily outsource these responsibilities without disrupting business. As the company grows, the accounting function can expand to help with vendor relationships, marketing pro forma statements by catalog effort, and determining cost allocations across all departments.
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Question: Do you have the expertise to handle all accounting functions? Do you know at what threshold FICA caps? Is the current workload a full-time equivalent?
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Answer: If you’ve answered “no” to any of these questions, consider outsourcing accounting and finance functions.
Hiring vs. reassigning
Balancing the expense of adding employees against the payback isn’t always a matter of simple math. Too often companies isolate the expense column and don’t broaden their vision to anticipate the benefits of hiring the expertise. A common pitfall among start-up catalogers is to try to “reassign” a current employee with additional responsibilities, even though the employee lacks the expertise.
One way to decide whether to hire or reassign an employee is to ask yourself, What can I teach: the skill set and expertise, or the culture and our process? If you personally can teach the skill set and expertise, then reassign an employee. If not, your best bet is to hire the expertise and teach the new employee about your organization.
Gina Valentino is vice president/general manager of J. Schmid & Associates, a catalog agency/consultancy based in Shawnee Mission, KS.