January 22, 2013

Dear Catalog CEOs: USPS Shutdown, Would You Be Out Of Business?

Dear Catalog CEOs:

By now, you've had the opportunity to enjoy this little ditty about the possibility of the USPS shutting down in 2013 (click here for the article).

I'll bet 22,000 of you relish the thought of 535 Republicans and Democrats playing games while you await the death of your business because of their action or inaction.


And I know, the online folks will chide you for not moving your businesses online - for being dependent on paper, for killing trees - they'll tell you that you deserve this.  Remind them that their day of reckoning is coming ... it's called mobile.

But I digress.

You need to know what happens if your business is destroyed by our Government.  In other words, what the heck happens if you cannot mail catalogs anymore?

Do you know the answer to this question?  What happens if you cannot mail catalogs anymore?

For just $9,950, I'll answer it for you - click here to send me an email - and we'll get started solving the problem.

Here's a catalog brand.  Take a look at the customer file.
Click on the image for more details.  Clearly, this business is stuck, but at least it isn't in terrible decline like so many businesses.

Here's the profit and loss statement for this business.
Now, the business may not be growing, but it is printing money.  The owner is forecast to continue making at least $2.8 million per year, pre-tax.  Who wouldn't love that?  Yes, fixed costs are swamping the business, so the owner better figure something out, long-term.

But that's not what the owner is worried about, in the short term.  The owner is worried about the USPS shutting down.  So she asks me to show her what her business looks like in the next five years, if she's not allowed to mail catalogs anymore.

In order to perform this analysis, I have to figure out the organic percentage for this business, and I have to figure out how many new customers are generated because of catalog marketing.  Both metrics can be easily calculated (that's what I do for a living).

Then, we simulate the five year trajectory of the business, without catalogs.  Here's what the customer file looks like:
Oh oh.

A $32 million dollar business, without a corresponding increase in online marketing activity, becomes an $11 million dollar business.  Nearly half of the loss in volume happens in year one.  Look at new customers labeled as "Judy" 1x (one order) - without a catalog, we go from 13,128 newbies to 2,626.  Now look at newbies classified as "Jasmine" 1x (one order) - without a catalog, we go from 29,687 to 23,750.  The loss of the catalog isn't cataclysmic to Jasmine.

Over five years, the lack of a catalog essentially eliminates the presence of Judy and Jennifer in the business.  This business becomes a Jasmine-focused business, one that is a third as big as today.

That's what not having a catalog does to the composition of the customer file.

What happens to the profit and loss statement?
This is depressing, but surprising.  This company is not out of business.  In fact, for a short period of time, the business is highly efficient, generating 15.7% pre-tax profit ... of course, that's only $2.3 million of profit vs. $3.3 million under current circumstances.  But it isn't the death of the business, in the short-term.

In other words, our owner "has a chance".  If the USPS disappeared, her business would die a long, slow, painful death, but not an immediate one.  There would be time to craft a new business model.

This is the kind of information you must know ... this analysis must be sitting on your desk, for your entire Management team to observe, understand, and act upon.

This is the kind of information you must forward to the American Catalog Mailers Association.  How can you ask this organization to defend your business model without providing them with the appropriate information?

This is a simple simulation.  Find your data analyst, and demand that s/he perform this work for you.

Or hire me ... it's just $9,950, I'll knock the project out in ten days ... click here to contact me right now, this is what I do for a living.

I'm sure you agree ... you have to know this information.  Right?