Postal and paper costs, disintermediation weigh on mailers’ minds
Asked what their greatest challenges and concerns are, business-to-business catalogers cite the Internet as both an opportunity and a threat.
Of course, like consumer catalogers, b-to-b mailers are concerned by rising paper prices and the prospect of a hefty postage increase early next year. But the prospect of disintermediation – eliminating the reseller as more manufacturers sell directly to end users – looms large as businesses grow more comfortable with e-commerce.
Postal and paper
But while disintermediation is a cause of long term concern, b-to-b catalogers are more immediately worried about rising paper and postage costs. In many cases, they have even greater cause for alarm than their consumer brethren, considering how much larger their books can be.
Take electronics components cataloger Black Box Corp. “Five years ago, our catalog was 225 pages; now it’s 1,348 pages, because we’ve had a lot of growth off our new products,” says Pru Harris, director of worldwide merchandising for the $330 million mailer. “We want to keep growing despite the increased cost of producing and mailing the catalog. We still feel that people use our print catalog more than they use the Internet, so cutting pages isn’t our philosophy.”
In fact, Black Box is capitalizing on its recent growth by increasing the catalog’s size and circulation, so offsetting the rise in paper costs – while gearing up for next year’s postage hike – will be a challenge. “Right now, I don’t have an answer for cutting our costs,” Harris says. (In the past, the company has changed to a lighter paper weight to reduce costs.)
Edmund Scientific, a $42 million science tools cataloger, is already mulling a switch to lighter weight paper, says president Robert Edmund. “We’re also looking at new strategies to break up our larger catalogs to more specialized versions to cut paper and postage costs.” Edmund currently mails three catalogs: Scientifics, Industrial Optics, and Electronic Imaging Components.
Uniforms cataloger WearGuard is even more proactive. In light of the increase in paper prices, which have jumped as much as 17% since September and are expected to rise again in July, the $420 million unit of uniforms and foods manufacturer Aramark is decreasing catalog circulation this year. Rather than prospecting as heavily as it has in the past, the Norwell, MA-based WearGuard is mailing a larger portion of its books to its higher value customers.
“We have a very positive outlook,” says vice president of sales Tom McDermott, “because we’ve cut our catalog circulation 30% this year, but so far our dollars per customer have risen 15% over last year, so we’re very pleased.”
The Internet
As the cost of producing and mailing print books continues to climb, many b-to-b catalogers are seeking ways to maximize the potential of the Internet. For instance, Chicago-based Newark Electronics, a cataloger of electronic components, is hooking up with Internet firms. “We’re building alliances with customers and with key suppliers in the industry, such as Intelisys and Ariba,” says director of business development Judy Jacobson. By becoming a part of Intelisys’s and Ariba’s worldwide procurement networks, Newark gains greater exposure to potential customers than it could solely through its own Website.
“Our challenge is to keep up with the high level of change and momentum in e-commerce,” says Jacobson. The growing emphasis on electronic channels is “a more risky but exciting game for us,” because of the uncertainty regarding, among other factors, the Internet’s return on investment.
Edmund Scientific is taking advantage of the virtually unlimited space of the Internet. “Our site allows us to do things we were unable to in our catalog because of costs,” Edmund says. “For instance, with technical products, we can put more in-depth product information on our site than we can afford to do in our catalog. We’re finding that more customers want additional specifications for our products, and we’re referring them to our site.”
To truly capitalize on the Web’s potential as a sales channel, however, Edmund Scientific is investing in improving its inventory system this year. “That’s the key to our future success. We recently started a major project to revisit and revamp all the ways we forecast and buy merchandise,” says Edmund, although he won’t share specifics.
Disintermediation
Unfortunately for catalogers, they’re not the only ones to have discovered the benefits of selling online. “In the past, some manufacturers needed catalogers to market their products, but now a lot of them are doing it online” and selling directly to the user instead of using a reseller, Edmund says. “Now any customer can go on the ‘Net, conduct a search, and find all the companies making a particular item.”
Edmund hopes that his company can fend off the threat by capitalizing on its catalog expertise. “We have the potential to manage inventory better and fulfill more quickly” than online-only marketers, he says. “The reality is, anybody can market something online. The hard part is having the inventory and quickly fulfilling the order. A lot of manufacturers are not set up to process online orders quickly because they don’t have good inventory systems.”