May 11, 2014

Dear Catalog CEOs: Who's On Your Side?

Dear Catalog CEOs:

The USPS will deliver on Sunday for Amazon, helping make life difficult for you. FedEx will charge you more for box size, but let Amazon negotiate a better deal (click here).

Yes, I know, you're going to dive in and "pretend to be strategic", figuring out how to deal with FedEx and UPS and USPS ... your "trusted partners".

Meanwhile, your trusted partners are using you, and profiting from you. They're using you in so many ways.

FedEx uses you to generate profit, profit they can then pass along to Amazon. You pay more so that Amazon can pay less, so that your customers can choose Amazon.

Why do you continually tolerate this? Why do you let your trusted partners stick their thumb right into your eye?


You have a small handful of major partners.
  • FedEx / UPS - you kind of need them to deliver merchandise, right?
  • USPS - Raising prices, giving preferential treatment to Amazon (Sunday delivery).
  • Paper / Printers - constraining supply - locking you into agreements that greatly limit your circulation flexibility. I had somebody recently tell me that they couldn't make circulation changes for the next six months because they were locked into paper for six months. Another individual told me that their printer, their PRINTER, told them not to go with anything smaller than a 64-68 page catalog, because that page count was "optimal". Optimal for who, the printer? Stop it!!
  • Abacus - passing your information into the Big Data ecosystem so that they can generate profit in the digital economy while dramatically aging your customer base.
Your partners are using you for their survival. They have to.

Who is looking out for your survival?

Have you thought, at all, about how silly your business model looks right now?
  1. Your trusted partners are all figuring out how to charge you more so they can survive/thrive.
  2. You are figuring out how to charge customers less (20% off or 30% off plus free shipping) so you can compete?
Do you understand how hard, mathematically, it is to survive when your trusted partners are charging you more, but you are asking your customers to pay less? 

I mean, are we even capable of doing simple math anymore?

Some of you criticize me, because I am telling you to not mail catalogs to Jasmine ("he's telling catalogers to mail less, he's an idiot") ... I mean, I easily find ways for you to generate a million dollars of incremental profit a year (does FedEx do that for you) and yet, some of you find my approach offensive ... but you happily support FedEx / UPS / USPS / Abacus / Printers / Paper Reps / legacy catalog vendors.

Look at the Epsilon (Abacus) home page, as of Saturday (two days ago):



Go ahead and take a look at Epsilon's blog (click here, I'll wait for you):

One of their thought-leadership focused articles was titled "tweet your way to relevance".

Did you read the "tweet your way to relevance" article? Oh, that was a thing of beauty, alright. Let's think about this one for a moment.
  • You give Abacus your most valuable asset, your customer data, to Abacus, FOR FREE. They don't have to pay to get access to your data.
  • Abacus, in kind, CHARGES YOU MONEY for access to data you and your partners gave to Abacus FOR FREE.
  • Do you think that the relationship described above is profitable to Abacus/Epsilon? Oh yes.
  • Abacus then spins you 60 year old customers - customers that will in the next decade put you out of business as they retire and stop spending money. Thanks, Abacus.
  • Abacus transmits your FREE customer data into Epsilon's BIG DATA ecosystem where, guess what, they sell the information to Twitter and advertisers on Twitter. The data is overlaid on top of social/mobile information, helping Twitter and advertisers on Twitter.
We give an asset to a vendor for free. The vendor sells the asset back to us, and we willingly pay for access to the asset. Then, the vendor sells our data to Twitter and advertisers on Twitter, allowing the vendor to earn profit two ways from data we willingly give to Abacus for free.

We will pay FedEx extra money to pay to have our packages shipped. FedEx, in return, negotiates better rates with Amazon, allowing Amazon to deliver packages faster and cheaper, allowing Amazon to have a better value proposition, allowing Amazon to have a better value proposition for our customers than we can offer.

Who is on your side?

What we need is a database provider that is on our side - a hybrid database provider, co-op, and negotiating advocate. Something like this:
  • We pay a one-time-a-year fee, somewhere between $25,000 and $100,000 a year (or whatever is needed to fund the database).
  • You pay $0.01 per name from the database.
  • You are paid every time your names are pulled from the database. If your names are amazing, they'll get pulled often, and you'll make list income.
  • Only catalogers could participate - you have to be a cataloger contributing names to buy names, and to get paid when your names are selected. Yes, I get it - this will be a problem because all catalogers will simply toss 60 year old names at each other - but that's already where you are at today.
  • Full transparency - you pick the names, or you let a model pick the names for you. The converse, of course, is that you are accountable. You pick the names, and if the names don't work, it is your fault, because you are picking the names. You are given a menu of attributes (actual & modeled) that you pick from.
  • Full transparency in reporting - you get to see how this living, breathing catalog ecosystem behaves. If it gets stronger, you see it. If it gets weaker, you see it, in real time.
  • You get to see how often your customers are selected/mailed. 
  • You get to select based on how often customers are selected/mailed. 
  • You get to see the merchandise preferences of the customers you select. 
  • You get to pick age cohorts and/or personas (Judy, Jennifer, Jasmine). 
  • You get to pick by marketing channel (mail/phone/catalog, online matchback, online marketing).
  • You get to overlay the information on your housefile, and you get access to a proprietary algorithm that tells you the optimal number of catalogs to mail to the customer, on an annual basis. This optimal number of catalogs changes dynamically, as your catalog peers at other companies make their mailing decisions.
  • Your data does not get passed along into the BIG DATA borg - it's a database by catalogers, for catalogers. When it fails, it fails because cataloging fails. When it succeeds, it succeeds because catalogers succeed.
  • Because this is for catalogers - catalogers would have negotiating power. Say you had 2,500 catalogers in this database, generating ten billion in annual sales - would folks not want to negotiate with you as a unified front? FedEx / USPS / UPS? Would a paper rep not give you, as a collective group, a deal? Would your printers not give you, as a collective group, a deal? Would Clario or CohereOne or Merkle not give you, as a collective group, better terms?
  • Would you not, in this situation, flip the competitive balance in your favor, to some extent?
What do you think of a this idea? Would the person creating this business model be on your side? Absolutely! Would you participate? Please tell me your thoughts (kevinh@minethatdata.com).