Among the U.S. catalogs mailing overseas, consumer books command most of the media attention. Yet it’s the business-to-business mailers that have made the most impact on international cataloging. Since the early 1990s, U.S.-based b-to-b catalog companies have revolutionized the European market, creating new competition and improving service standards.
With very few exceptions, most European b-to-b catalog businesses in the ’80s were nowhere near as aggressive as their U.S. counterparts. Mailing more than two catalogs a year was thought to be wasteful and likely to “annoy” customers. Customers had little choice in products, guarantees didn’t exist, and 24-hour delivery was available only at a significant premium, if at all. Moreover, most existing U.K. catalogs had little understanding of database-driven strategies. Then the Vikings-or rather, Viking Office Products-landed in the U.K.
Just months after Los Angeles-based office supplies mailer Viking entered the U.K in 1990, the traditional office supplies channels-large wholesalers-were complaining of unfair competition and forecasting that Viking’s international venture would never last. How wrong they were. Soon they were in awe of Viking’s aggressive marketing and its philosophy of winning customers on price and keeping them through fantastic service and frequent mailings.
Mailing an estimated 12 million catalogs a year in a market with about 1.8 million registered businesses, Viking reportedly broke even in the U.K. during its first year; when it launched in Germany a few years later, it reportedly showed a profit after 18 months. As in the U.S., Viking was not the cheapest option; customers just thought it was. And after years of lackluster service, U.K. customers appreciated the high levels of service offered and the convenience of buying from a catalog.
A 17-year veteran of the catalog industry, mainly in the b-to-b sector, I founded the U.K. Business Mailers Group for Britain’s top business catalogs-many of which have stateside parents-in 1991. But I first came in contact with U.S. catalogs in 1988, when I became head of marketing for the U.K. division of Seton Nameplate, a Branford, CT-based marketer of identification products such as safety signs, tags, and ID plates.
Even before Viking launched in Britain, my stateside counterparts simply couldn’t believe the response rates, growth, and profits we were achieving at Seton in the U.K. For my part, I couldn’t understand why more U.S. b-to-b mailers weren’t chomping at the bit to come over. If anything, Britain and the rest of Northern Europe are more suited to mail order than the U.S. is.
In the U.K., for example, you can feasibly offer next-day delivery at competitive rates throughout the country. Measuring just 730 miles from top to bottom, with a population of 60 million people, the U.K. offers a dense population within one time zone. Likewise, from Germany it’s possible to offer next-day delivery to the many countries it borders, including Denmark, Belgium, the Netherlands, France, and Austria.
Other U.S.-based business catalogers-such as computer products marketers Black Box Corp., Micro Warehouse, and Global DirectMail Corp.; medical products mailer Henry Schein; and paper products suppliers Day-Timers and Paper Direct-have launched in one or more European countries with significant degrees of success. Still, it’s a relatively brave few that realized they could grow and reap profits internationally by taking a customized, local approach-and putting in lots of hard work.
Seton Nameplate Back in 1984, Seton Nameplate president Richard Fisk decided that the way to succeed overseas was to prospect heavily, set a three-year target to break even, recruit expertise locally, and provide in-depth training. He also believed that the international division needed a significant degree of autonomy to develop a sense of ownership and entrepreneurial spirit.
In fairly rapid succession, Seton launched operations in the U.K. (1985), Canada (’87), Germany (’89), and France (’90). Fisk’s theories proved successful. By 1997 Seton had expanded its catalog business to Italy, Belgium, the Netherlands, Australia, and Brazil.
The U.K. division of Seton experienced fantastic growth. Response rates surpassed expectations, and the business grew from $1.5 million in ’88 to $34 million by 1998. Although $34 million may be small potatoes by U.S. standards, when you realize that Seton’s U.S. sales didn’t hit the $60 million mark until 1998, after more than 40 years in business, it is a quite impressive benchmark and indicative of what can be achieved.
And after breaking even in ’88, Seton U.K.’s profits were proportionately much greater for the next nine years than its U.S. profits. Although relatively few response lists were available in the U.K., by 1998 we were mailing 6 million catalogs a year and had built a customer and inquirer database that exceeded 400,000 names. We used the same mailing strategies as b-to-b catalogers in the States-mostly compiled lists and controlled trade circulation lists-which few business mailers in the U.K. were doing at the time.
Today, Seton’s U.K., Germany, and Netherland businesses are outstanding successes, with Canada, France, and the others performing to or above expectations. Every international launch provided a new set of challenges, from the lack of prospect lists in Italy and the high postage rates in Germany to the exorbitant importation duties in Brazil. But to date, Seton has never had a failure on the international front.
Global DirectMail Unlike Viking and Seton, Global bought-rather than launched-its entry into Europe. About nine years ago, the company acquired HCS, a small U.K. computer supplier formed by a number of former employees of computer supplies cataloger Inmac.
A few years after buying HCS, Global took over computer supplies cataloger Misco, which already had several divisions throughout Europe. While in Global’s case the strategy worked well, because the existing employees were already catalog-oriented, taking over an existing concern and even entering into a joint venture can be tricky if the other company can’t get into the “mail order” culture.
After purchasing HCS, Global negotiated a tremendous deal to have an impressive distribution center built for it at reportedly very little, if any, cost in a regionally assisted area in Scotland-in other words, an area where the government provides companies with loans and other incentives to set up businesses and create jobs. A number of areas throughout the U.K. offer regional assistance, which can substantially reduce set-up costs.
Is there room for more? You bet! There are still many opportunities and gaps in the market throughout Europe. I would shy away from some of the southern European countries, however, such as Italy and Spain, which have underdeveloped mail order infrastructures and scant regulation. In Italy, for instance, debt collection is a common problem, as are catalog and parcel delivery and finding lists.
On the other hand, while France has a number of very strong local players, it still offers great potential, since buyers there are used to mail order. And although small in population, the Netherlands, Belgium, Austria, Switzerland, and the Scandinavian countries are surprisingly catalog-oriented. Netherlanders, for instance, are used to the convenience of picking up the telephone to order products. At Seton Nameplate, our response rates from the Netherlands were among our highest ever.
Australia was another winner for Seton, with response rates double what we achieved in Britain. Australian culture resembles that of both the U.S. and the U.K.; it also adopts both European and U.S. safety standards. Getting there is arduous, with a 24-hour flight, and shipping goods there is expensive, but it’s likely to be worth the trip.
Although you will have to tailor your approach and offer for various overseas markets, you may be surprised to find that the basic business formulas for cataloging apply around the world.
U.S. marketers aiming to succeed overseas can learn from Viking Office Products’ approach, which was based on the following 10 points:
* Employ local merchants to source products and negotiate with vendors.
* Employ local operations experts.
* Use your U.S. team to perform database analysis of results and determine marketing strategies.
* Negotiate locally on list costs and all other products and services.
* Prospect aggressively.
* Use loss leaders to create the perception of low pricing and, as a result, build a database of first-time buyers.
* Mail aggressively to customers, using diverse catalogs and product offers.
* Establish a state-of-the-art distribution and call center.
* Maintain a near-100% inventory from the outset.
* Offer unbeatable service and benefits.
While U.S. companies provided the catalyst for the growth of the European b-to-b catalog market, a number of homegrown companies are making a splash.
French industrial equipment cataloger Manutan produces 14 catalogs throughout Europe. With consolidated sales of more than $310 million, the company includes Manutan in France, Key Industrial Equipment in the U.K., Overtoom in the Netherlands and Belgium, and Ziegler in Germany.
Kaiser & Kraft, another giant industrial equipment concern, is headquartered in Germany. Unlike Manutan, K&K uses a common brand throughout Europe. I understand that the catalogs for every country are created in Germany.-MM