Ending The Catalog: A Checklist

I've been associated with catalog shutdowns for two decades ... either shutting the darn thing down or reducing circulation to only the most productive customers. Not a popular person around catalog agencies, paper reps or printers ... but it's a necessary job.

If you're saying to yourself right now ... "geez, idiot, you're talking a lot about Orvis in the past week", you're right. There are a lot of things I know that I can't talk about, and if one of the most conservative brands in the history of commerce does something stunning, you should pay attention.

Let's introduce a "checklist" for determining whether you can get away from paper as well. Share the list with your boutique catalog agency, if they push back, well, it tells you something, doesn't it?

Still Generating Mail/Phone Orders:  If you still generate 10% or more of your orders via mailed-in checks (yes, Gen-Z, that still happens, splash some water on your face and pick yourself up off the ground) or via phoned-in orders at your call center, you cannot get away from catalog marketing without pain.

Annual Repurchase/Rebuy Rate > 40%:  If your annual rebuy rate (12-month buyers) is north of 40%, it is much easier to get away from catalog marketing. If it is above 55%, pull the rip cord, it's over.

Mail/Holdout Test Results:  If you chose to not execute mail/holdout tests, you cannot get away from catalog marketing. You simply don't have the knowledge necessary to know what to do. If you've executed mail/holdout tests and more than 70% of sales are organic (i.e. still happen) when catalogs are not mailed, you may prepare your catalog exit plan.

New Customers:  Any brand generating 35% or more new customers through catalog marketing needs to create a two-year transition plan before beginning an exit from catalogs. Most of you have figured out how to move on from catalog customer acquisition. If you're still having fancy dinners with your co-op partners in Colorado, it's time to begin your two-year transition plan.

YouTube:  Here's a simple guideline ... you should have as many YouTube followers as you have circulation depth for your primary November catalog. If you have fewer YouTube followers than November catalog recipients, you are doing something wrong. You are a media company, not a catalog brand. You want some inspiration? Look at some of the videos created by King Arthur Baking Company (click here). Or on Instagram, where they are also popular (nearly a million followers). You can do this! You are a media company who monetizes content by selling merchandise instead of selling advertising space.

Personalization:  If you are not sending personalized merchandise assortments to each individual email marketing recipient, you are not ready to transition away from catalogs. You simply do not understand the preferences of your customers ... you are a mass marketer, and that's why you still mail a one-to-many catalog to so many customers. There 20% to 50% gains to be had personalizing the merchandise assortment to your customer base. Brands without catalogs (i.e. almost all brands) have to hustle to be successful.

Community:  If you don't have at least 1-3 "experts" who speak passionately about what you sell and are publicly recognized by your customer base ... 1-3 experts you can build a community around, you are at least two years away from being able to even think about not sending catalogs anymore. The very fact that most of you will say "well, we're two years away" after reading this and then do absolutely nothing about it makes me sad.

Digital Ad-To-Sales Ratio:  The inverse of ROAS, ad-to-sales ratios for digital marketing that are < 10% suggest "opportunity". When you take the catalog away, you'll be able to increase digital marketing efforts as the catalog won't cannibalize digital efforts via misguided matchback analytics. If your ad-to-sales ratio for digital efforts is already over 20%, well, how do you think you'll make up the sales you lose when the catalog disappears?

Email Marketing Share of Annual Sales:  Your email marketing program (which I do not lump in with digital efforts) should already make up 25% of your annual sales. If email marketing comprises at least 25% of annual sales, you may move forward and begin winding down catalog operations. If email marketing is < 10% of annual sales, you may never be able to get away from catalog marketing, because you haven't built out all of the necessary marketing skills required to speak to customers outside of print.

Demographic Overlay:  If at least a quarter of your customers are age 65-79, you will mail catalogs for years to come ... and then hit an abrupt and highly predictable cliff. If you don't have many 65-79 year old customers, you may move forward and begin winding down catalog operations. Catalog marketing is distinctly targeted at Baby Boomers.

Profitable Stores:  Any market where you have 10% pre-tax profit on sales attributed to stores is a market where you no longer need to mail catalogs. Why are you mailing catalogs AND paying for expensive brick 'n mortar? Over. End Game.

Equal Monthly Sales:  If you generate half the sales in May that you generate in November, you are less dependent on marketing and consequently you can get away with mailing fewer catalogs. Brands with reasonably equal monthly sales tend to generate more "organic" sales than do brands that are highly/seasonally dependent.

November / December Ratio:  If you generate more sales in the two weeks prior to Black Friday / Cyber Monday than you generate in the two weeks after, you cannot as easily get away from catalog marketing. Older customers have institutional memory of not receiving a package in 1994 and they order early as a consequence. Younger customer expect to order from you on December 14 and receive merchandise on December 16 ... this is the audience that doesn't need a catalog.

Vendor Office:  If your paper team or your printer leases a satellite office a quarter mile from your campus, you are not going to easily get away from catalog marketing. This is a clear sign that your "trusted partners" control your brand. It gets even harder if you let these folks have a cubicle in your office campus ... and it gets harder still if that cubicle becomes a walled office with a door. Worse, if these folks are "collaborating" with you on your circulation plan, you're doomed.

Merchandise Reporting:  If you don't have reporting that shows you what sells best via print and what sells best via digital efforts, you are two years away from even thinking about ending catalog marketing ... you simply do not have the intelligence to make a proper decision.

Merchandise Preference:  If what you sell performs just as well digitally as it does in print, you are much closer to the end than are brands where the merchandise assortment is fundamentally different between print and digital. When the best-selling item ranking list is very similar, you can trust a customer to buy from digital channels. When the ranking is different and you take away a channel, don't expect the customer to go with you.

• Hint:  It has been my experience that catalog brands are not good ... not good ... at understanding the merchandise/channel dynamic. This lack of knowledge harms catalog brands, costing them profit.

I'll stop here for now. If you don't know the answers to these questions, you'll need to start working with me right away so we can figure out what your future looks like (kevinh@minethatdata.com).

Times Are Changing

This is a fun graph.

One of my favorite images of all time was this misguided one from McKinsey about twenty years ago. Long-time readers have heard my gripes ... many times ... silly Venn Diagram.

The image was a colossal analytical failure because there is a confounding variable ... as customers purchase more and more, they are more and more likely to purchase from multiple channels. The analysis error is identical to saying "Customers Who Purchase On Multiple Days Of The Week Are More Valuable Than Customers Buying From Just One Day Of The Week". You'll buy from multiple days of the week when you buy at least twice ... by definition, you'll buy from just one day of the week when you buy just one time. Purchase Frequency is the confounding variable here.

Reality:  Your customers only want to purchase from you "x" times per year. That's it. You have a small number of customers who will buy from you a lot. The vast majority of your customer base is locked into a small number of annual purchases.

Here's where the retail chart and the Venn Diagram come into play. If your customer is locked into a small number of purchases per year (as most are), and you keep offering the customer more ways to purchase, you will divide up a small number of orders across a large number of marketing/physical channels. This means weak channels will lose, by definition they have to lose ... they only way more marketing channels (and the investment involved with each of them) can win is if merchandise productivity increases.

Worse, if your merchandise productivity decreases ... weaker channels immediately become much, much weaker. Weak stores immediately become untenable. Weak marketing channels, like catalogs, become untenable.

This is what the Paper/Printing/USPS world did not understand. They constrained supply, they increased costs to you ... at the very same time that you had all of the digital marketing channels eating away at legacy print channels ... a double-whammy that accelerated the demise of the Paper/Printing/USPS folks. These folks executed the exact wrong strategy ... when marketing channels are weakening, the cost to execute within those channels must come down. Not up. Down.

What do you want Orvis to do, folks? Sell on Amazon, a strong marketing channel that promises consistent variable profit while giving up a corner of your soul ... or keep expensive stores open and expensive paper in the mail while orders flow out of those channels into more lucrative marketing channels? Orvis may not realize it, but Orvis might be (long-term) headed down a path not unlike Truthear is with iems selling on Headphones.com and Amazon. I work with enough clients, and get to see enough "alternate channel / marketplace" transactions to see a version of the future where traditional "brands" become "vendors".

Times are changing. Your marketing team often feels overwhelmed with too many marketing channels to manage and not enough profit. Marketing channel contraction is coming for brands with weak or average merchandise productivity.

A Post-Tropical Cyclone

A tropical system doesn't stay a tropical system forever. Take Milton for instance. A Category 5 hurricane at two different periods earlier this week, the storm slammed into Florida, was shredded apart by land, then emerged in the Atlantic as a post tropical cyclone.

In other words, the storm is transformed by a traumatic event ... sure, we as humans experience a hurricane as a traumatic event, but the hurricane also experiences a traumatic event. Without boiling hot ocean water to fuel it, the storm transforms from a storm of tropical characteristics to a garden-variety low pressure system (or becomes even less than that).

So it is with catalog brands.

A catalog brand experiences a traumatic event (decreased co-op performance ... then the paper catastrophe of 2021 followed by printers firing catalogers in 2022 and the erratic USPS) ... resulting in the end of the brand as a catalog brand ... but it does not mean it is the end of the brand. The brand is transformed ... "post-tropical" if you will.

Milton is still out there in the Atlantic. It's different now, shredded apart by Florida.

Orvis is still out there in New England. It's different now, shredded apart by market forces. They get to take full advantage of their new status ... post-catalog if you will.

Similarly, you get to take full advantage of your new status when the time comes. And it is most certainly coming. Celebrate it. Look back and be proud of what you've accomplished ... then get busy in your "post" world.

End of the Line for the Orvis Catalog

When a traditional catalog brand makes changes, I get a head's up via blog / email subscriber metrics.

1. Blog unsubscribes happen from the company as much as a month before a decision is made, because some employees no longer have a need for the content I produce.
2. LinkedIn requests for connections happen close to the implementation date of the decision.
3. Email addresses bounce as the decision is made.

So, yeah, I knew something was up at Orvis (click here for the news, sent to us by a long-time reader). And yes, close to 20% of my catalog-centric email subscribers have disappeared in the past eighteen months (offset by new e-commerce brand subscribers, of course).

As a CEO tells me, "there is no catalog industry".

Brands go though a fascinating transition when the catalog disappears:

Reactivation:  Customers with recency between 13 and 60 months are impacted, especially Baby Boomer customers. When you take print away from these customers, sales decrease and reactivation rates decrease. In many ways, you are discontinuing the brand to customers age 65-79, it's not dissimilar to going out of business to this audience. Here, the impact will be significant. This crowd can be loud and angry about the topic, in ways not dissimilar to supporting a candidate for political office.

Community:  If your marketing team is smart, they laid the foundation for this transition. The marketing team shifts the marketing message from "one-to-many" (print) to "many-to-many" (community). Your marketing team will have a strong video presence (YouTube), they will have a strong community platform that allows customers to interact with each other and with employees, they will have a personalized email marketing program (especially from a merchandising standpoint), they will have a customer development program to migrate customers from Struggling/Average productivity to Loyal/Elite productivity. They will have experts that customers trust, those experts become the voice of the brand. It's a complete overhaul of the focus of the marketing team from broadcasting to interacting. If this overhaul doesn't happen two years before the catalog is discontinued ... woo-boy, you've got a fun two years coming at you.

Merchandise:  The transition here catches my clients off-guard. When the catalog disappears, the 60-79 year old customer disappears, which means the products that a 60-79 year old customer purchase start to fail. Meanwhile, customers age 30-59 are largely not impacted by the change ... they keep buying what they've always purchased. If a merchandising team does not have proper reporting to thoroughly measure this transition, there are all sorts of problems ... inventory management gets screwed up in these situations, resulting in discounts/promotions and a pollution of the remaining customer file (they're tainted by being trained to expect lower prices).

All of these issues await Orvis.

Interestingly ... a quick Google search showed how the world is changing. Look at the brand selling Orvis merchandise in the image below. Time change.

CanJam

A few weeks back I attended my first-ever CanJam ... a headphone conference.

Yeah. I'm a nerd.

Not surprisingly, the folks at Headphones.com were everywhere. They sponsored the event, they had a booth where you could try exotic headphones or the headphones they sold. You could interact with their staff (blue shirts above) ... the very people who lead their popular Noise Floor podcast / weekly video program on YouTube. Their hosts (you'd likely call 'em "influencers") led well-attended sessions about the science of the ear and impact on what you hear with your headphones.

I heard a headphone / amp combination (Meze Empyrian II ... available for just under $3,000 on Headphones.com ... paired with a $2,000 Ferrum Oor Desktop Headphone Amp) that, as I told my wife, was "like having God reach down and touch you in the brain".

The best voice I heard in a headphone? The ancient Sennheiser HD600 for just $349. Bonnie Raitt sounded like she was in my living room.

Conference organizers were expecting a comparable or larger crowd than the 2,500 who attended the two-day event in Irvine last year.

If you are in the Dallas area the first weekend in November, head over to the event.

I am not being paid to say this.

I am encouraging you, the humble business professional, to do "something". So many of you are telling me it is too hard to find new customers in 2024. Of course it is. This is where hard work comes in.

What stops you, especially if you are a $5,000,000 to $95,000,000 business, from creating your version of CanJam? Seriously, what stops you? If you sell widgets, spend a year building out a media division, become "the" community for widgets online, then bring together the widget community with your own events ... in person, online, I could care less ... do something! If you sell collectibles or gifts, be THE place on the internet people come to learn about collectables or gifts.

As I write this, I'm watching "You've Got Mail" ... a nearly 30 year old movie about the death of a local bookstore, run out of business by the big/bad Fox Books and their low-priced store across the street. I'll bet "The Shop Around The Corner" had a very difficult time acquiring customers before succumbing to Fox Books (who would have eventually succumbed to Amazon, and so goes capitalism). The Shop Around The Corner failed ... but all across America independent book stores somehow got through the transition. They built a community, and what they sold catered to their community. Don't compete against Amazon. Create your own market.

I mean, 70% of people who own headphones own an Apple pair or Bose Noise Cancelling headphones or Beats (also Apple). In the face of such steep competition, how in the heck is CanJam generating record attendance? How in the heck does Headphones.com stay in business when you can buy from Amazon tonight and have your new iems tomorrow ... the same ones you'd get on Headphones.com?

I spent much of tonight listening to my new Meze Alba iems. The only reason I bought them is because the Headphones.com reviewers liked them, the guys hosting the Headphones.com  podcast liked them, and the community on Reddit liked them. So I gave Headphones.com $159 of my money. They created the purchase (my first purchase from Headphones.com) with hard work and a lot of indirect selling, earning a newly acquired customer in the process. They didn't pay Facebook, they didn't pay Google, and they didn't give Amazon a hefty cut of the profit. 

They created the purchase out of thin air.

You, too, are going to have to do the hard work of creating purchases out of thin air.

You've got this. Get busy!

P.S.:  How do I stay in business? I pay nobody. Nobody. I create purchases out of thin air from you, the community reading this content.

What Should An Analyst Actually Do?

Allow me to show you.

First, watch this video - it's pure interbreed dog craziness. 

https://x.com/i/status/1841956538048520557

We can break down the action into a series of images. Like this one. I've time-stamped each image for reference purposes.

We have a German Shepherd who leaves the pen, then jumps back in. Each time the German Shepherd jumps back in, one of the cream colored doxies (we'll call this pup "Sparky") tries to jump up and take a nibble out of the neck of the German Shepherd. Look at the elevation ... the extension of the back legs. Also notice that another cream colored doxie owns the observation deck.

Moving along.

Sparky is feeling a lot of joy ... Sparky already pivoted in anticipation of another chase.

In fact, three doxies are already anticipating more mayhem (above). Three seconds later (below), the German Shepherd has left the pen!

Sparky goes vertical, a little early if you ask me.

Again, Sparky excels at pivoting in mid-air. There's a lot of raw athleticism on display. Also, there will be a day eight years from now where a vet will say "Sparky has three bulging discs, do you know why?" and the owner will say, "no, I have no idea why".

Within the matter of one second, and for reasons unknown to anybody, one of the doxies decides that deck doxie needs to get lit up.

So yeah, deck doxie is about to get lit up. As you can see from the time stamps this all happens within the period of one (1) second. Deck doxie is not only ready, but gets in a series of nips that the black doxie doesn't appreciate.

In pickleball, we call those "counterattacks".

Notice that it only took Sparky one full second to refocus on the German Shepherd.

It's back to live action.

Once again, notice the outstanding bodily extension Sparky exhibits on each leap.

Sparky also behaves in chaotic and unpredictable manners. Seconds later, Sparky is headed back to the deck - and is quite happy about it.

The German Shepherd senses a chance to engage with Sparky, and heads to the deck. Sparky senses an opportunity, goes for the neck, and blows out two additional discs in the exchange.

The scene ends with a winded German Shepherd guzzling water from a bacteria-laden tray of tepid water.

What have we learned?

• The German Shepherd is an instigator. Via seemingly innocent acts, the German Shepherd causes complete chaos.
• Sparky ... well ... wow. Full of vim and vigor, Sparky is entertaining in an athletically manic sort of way.
• Deck Doxie ... willing to counterattack if required. If you don't want hip nips, stay away from Deck Doxie.
• Black Colored Doxie ... unsure of role, clearly smart and unwilling to damage joints by recklessly jumping after the German Shepherd, occasionally attempts to assert control over other doxies, then acts surprised when suffering a series of hip nips.

There are other characters in this plot, but they only play a support role ... like the waiter at a restaurant in a movie.

This, dear Analysts, is your job. It's your job to dissect a chaotic situation with seemingly unlimited moving parts, assign value to the individual players, and then communicate clearly enough that anybody following the plot can ... follow the plot. I mean, if you don't watch the video clearly enough, you'd never know that deck doxie is a hip nipper ... you'd come to the conclusion that deck doxie is just a distant observer.

Get busy breaking down chaotic scenes with many moving parts ... it's fun!

P.S.:  This also applies to Executive Leadership. It's your job to break down a chaotic and complicated business into individual parts that can be acted upon for the benefit of the p&l. Right?

Project Opportunity

Ok, you've read all about reactivation ... and scoring your customer base to know which customers you should be targeting. You've clicked on the images, you've paid attention, you've sent email messages.

Now, loyal readers get a new project opportunity.

My "Playbook" methodology is now available!! As with all new projects, I give loyal readers first chance to use the methodology at a discounted rate (so that I can test my programming code).

Normal Cost:  $24,900.

Your Price (Through The End of the Week):  $12,900.

Click on the image below for a sampling of details. Contact me (kevinh@minethatdata.com) to get your project booked ... I have openings for November, saved for you, knowing this was coming.