March 29, 2015

Can't Somebody Else Pay For It?

When I worked at Nordstrom - late 2005 - early 2007, we did mail catalogs ... though they were not true catalogs that funded themselves via profit.

Instead, we went to our vendors ... Coach, for instance, and told them that if they wanted to help us sell their handbags in our catalog, they could pay $29,000 a page, and get immediate access to 2,000,000 customers. In essence, that's a cost of $14.50 per thousand pages circulated. If you mail a 96 page catalog to a co-op name, the co-op is charging you an effective rate of $0.63 per thousand pages circulated, just to give you a comparison point.

In other words, if we mailed a 96 page catalog and were able to sell every page to our vendors, we could generate $2.8 million in ad revenue, which essentially paid for the entire variable catalog cost (postage, paper, printing).

Now, these catalogs performed poorly. But the financials were acceptable, at least from a profitability standpoint.

Of course, we didn't drive demand - our vendors paid $29,000 for a page, they wanted to get the creative aligned with their interests, and this combination of creative strategy and vendor-centric merchandise selection (i.e. choosing the products they liked, not the products that sold the best) cut productivity by 67%.

But the strategy was more profitable.

So maybe it is time to ask a simple question ... "Can't Somebody Else Pay For It?" If your ad-to-sales ratio is out of control and you sell branded merchandise, figure out how to get your brands to help you out.

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