Following her recent indictment on charges related to alleged insider trading, Martha Stewart may no longer be the first place consumers turn to for advice on what is a “good thing.”
Direct talked to several industry professionals to get their take on how Stewart’s woes will affect her direct division, which generated $36.8 million of Martha Stewart Living Omnimedia’s $295 million in revenue last year.
At least in the short term, Stewart’s woes will hurt the company’s direct sales business, said catalog consultant Katie Muldoon, noting she had just received the latest edition of Martha By Mail, featuring a patriotic theme for the Fourth of July.
Stepping down as CEO was the right thing for Stewart to do, but she should have made the move months ago, added Muldoon.
“She really had no choice,” said Philip H. Bonello, president and CEO of Gray Supply Co., home of the Top Bulb lighting catalog. “She’s in deep trouble. I think she’s going to end up decorating a prison cell.”
Bonello feels the scandal will impact the catalog’s response rates negatively. “People will flip through the book and think ‘no, I don’t think so’,” he said.
Consumer catalog consultant Kris Snyder agreed, noting that consumers who followed her philosophies and tried to do things “the Martha way” won’t be as inclined to go down that path in the future.
“The consumers who love her will still love her,” countered Alan Rimm-Kaufmann, vice president of marketing for electronics cataloger Crutchfield. “The impact will be larger on the business than the brand.”
But Snyder said she felt it will be difficult for the brand to recover. “She was as much the brand as Lillian Vernon is ‘Lillian Vernon’.”
The scandal is sad for the industry as a whole, added Snyder, because the brand drew in so many people who weren’t typical direct response buyers. “In a way, we all lose.”
“My sense is that it breaks down into two camps,” said John McManus, president of travel catalog Magellan’s, “her housefile and prospects. If someone has been a buyer and has gotten good merchandise and service, they’re not going to be put off by tarnishing at the top.”
Harry Chevan, principal with New York-based direct marketing investment banking firm Gruppo, Levey & Co., said it might be a little premature to think about the future of Stewart’s DM ventures.
The fate of Stewart’s direct business is closely tied in with the fate of her media company, Chevan noted, because that’s how she generates her DM prospects. “The media business is the lead horse,” he said.
In the personality horse race, however, now may be the perfect time for an up-and-coming domestic doyenne to step in and fill the void that will be left if Stewart falls completely out of the public’s good graces, noted Muldoon. “There’s definitely an opportunity.”
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