Critical Issues & Trends

Catalogers continue to agonize over the need to reduce costs without reducing offerings or services. Among respondents to Catalog Age’s exclusive Benchmark Survey on Critical Issues and Trends this year, 81% cited it as their top management concern, the same percentage as last year. And once again, it was the most frequently cited issue overall. In comparison, the number-one marketing issue, making customer acquisition efforts more profitable, was considered a critical concern of 49% of respondents. And the top merchandising and operations issue, the rising costs of package delivery, was a key concern of 47% of respondents.

When it came to marketing issues, there were no significant variances between consumer catalog respondents and their business-to-business counterparts, nor between small catalogers (those with annual sales of less than $10 million) and the larger survey participants. For instance, 52% of this year’s consumer catalog respondents and 41% of the b-to-bers considered the need to acquire customers more profitably a top concern. Among last year’s survey participants, only 20% of the consumer catalogers and 17% of the business mailers deemed it a pressing issue. In fact, last year only 18% of all those surveyed considered it one of their top marketing worries.

This year’s consumer and b-to-b respondents did have different concerns regarding merchandising and operations. Both agreed that rising package delivery costs was a key issue, with 53% of the consumer respondents and 45% of the b-to-b catalogers listing it as such. But the number-two and number-three concerns of the consumer catalogers — the availability of fresh or unique merchandise (cited by 49%) and the ability to rapidly restock and rebuy merchandise (46%) — weren’t among the top three issues worrying b-to-b respondents. B-to-b catalogers were more concerned with inventory forecasting (45%) and the need to integrate the operations of multiple channels (36%).

Similarly, 36% of the consumer catalogers said that federal and state attempts to implement use taxes were a top management concern, making it second only to the need to cut costs without reducing offerings (82%). But merely 19% of the b-to-b respondents said use taxes were a key concern. They were more worried about the difficulty finding experienced catalog talent (29%), the need to merge with or acquire another company to achieve economies of scale or fund expansion (38%), and of course the need to cut costs (71%).

Not surprisingly, larger catalogers were more concerned about attracting experienced employees (39%) than were smaller respondents (26%). Also unsurprisingly, while 30% of those with sales of less than $10 million cited the difficulty in securing additional or continuing financial support as a top concern, only 22% of those with sales of at least $10 million did. But while 20% of the smallest companies mentioned the need to merge with or acquire another company as a top management issue, 36% of the larger catalogers did.

On the somewhat brighter side, not one respondent cited employee fraud or pilferage as a pressing concern. And just one respondent said that service bureaus’ ability to process rental orders correctly was a key issue.

Money Matters

When asked about their profit results for the previous year, 37% of respondents said that they’d fallen short of their goals. That’s a significant improvement from the previous year, when 49% of survey participants said they’d missed their profit goals.

Both marketing expenses and operating expenses consumed a smaller mean percentage of respondents’ revenue this year than last year. Participants in this year’s survey spent a mean 23.0% of their revenue on marketing; last year’s participants spent a mean 26.1%. Operating expenses as a percentage of revenue declined more dramatically. Among last year’s respondents, they equaled for 33.7% of revenue; this year’s respondents spent a mean 25.9% of revenue on operations. General and administrative expenses as a percentage of sales did increase slightly, though, to 22.0% from 20.7% last year.

On the revenue side of the ledger, 36% of this year’s participants said they’d missed their sales goals last year. Among those surveyed in 2003, 42% had fallen short of revenue expectations the previous year.

Nearly half of this year’s respondents (47%) said they expect their company’s revenue to grow more quickly during the next 12-24 months than it had during the past two years. B-to-b respondents were more optimistic, with 57% expecting sales growth to accelerate compared with 43% of the consumer catalogers. Forty-eight percent of the smaller catalogers expected sales to grow faster than they had during the past two years, as did 46% of the larger catalogers.

Slightly more than one-fourth (26%) of this year’s respondents said that they’d considered selling their company. That’s down from 35% of those surveyed last year. What’s more, 20% of this year’s respondents are considering buying or merging with another company next year.

Methodology

On Sept. 8, Primedia Business e-mailed an invitation to participate in an online survey to 3,660 Catalog Age subscribers selected on an nth-name basis. The invitation contained an embedded URL linking the respondent to the Website where the survey questionnaire was located. Respondents were offered a chance to be entered into a drawing for one of four $50 gift certificates to Amazon.com. A follow-up e-mail was sent on Sept. 15. Of the 3,105 deliverable surveys, 107 usable surveys were completed, for an effective response rate of 3.4%.