The Aberdeen Group Openly Belittles Catalogers

On the Multichannel Merchant website, Aberdeen Group Analyst Jeff Zabin has this to say about catalogers in this article:

Reflecting on Al Gore’s recent acceptance of the Nobel Peace Prize for his tireless work in raising international awareness of global climate change, and opening my mailbox to discover yet another deluge of post-holiday merchandise catalogs, I can’t help but think about the environmental impact of the direct mail industry.

Each year, more than 100 million trees are destroyed, three million cars’ worth of energy is consumed and reprehensible-by-any-measure amounts of greenhouse gas is emitted into the atmosphere—all in the name of producing, distributing and disposing of direct mail solicitations.

The Aberdeen Group is owned by Harte-Hanks, a company that provides products and services that enable catalogers to distribute direct mail solicitations. The brand that published this article is Multichannel Merchant, co-sponsor of the ACCM conference, formerly known as "The Catalog Conference", the "largest conference for catalog, internet and multichannel merchants".

These are odd times ... organizations that have made millions of dollars of sales/profit on the backs of healthy catalogers now publicly belittle the very brands they profit from.

Giving Away Information For Free

After writing about how catalogs drive sales for retail events, I was asked by a loyal reader, "Why don't you charge people for this, don't you think people would pay for this information?".

Honestly, our industry is struggling right now. We need to improve the performance of the brands we manage. We're not getting the kind of honest, actionable information from industry leaders, vendors, research organizations, and trusted advisers that we truly need. There are certain multichannel facts that should be understood by all in our industry, not hidden in a secluded monetization chamber. And then there are other facts that are proprietary.

In my opinion, here's a pretty good example of sharing important information, without going too far --- from Terry Jukes, published on the Catalog Success website.

Maybe the question should be asked of you, the loyal MineThatData reader.

1. Where should a vendor, research organization, industry leader, trusted adviser, consultant, or blogger draw the line between giving away information for free, vs. charging for information?
2. Who in our industry does a good job of sharing useful information without hurting monetization efforts?

Spring NEMOA Conference: March 12-14

Those of you in the catalog industry have an opportunity to attend the Spring NEMOA Conference, March 12-14 at the Royal Sonesta Hotel in Cambridge, MA.

NEMOA conferences are different than your average conference. The focus of the conference is on you, the catalog employee. You won't be forced to visit an exhibit hall packed full of vendors promoting the latest multichannel solutions. You'll hear from actual practitioners and respected industry veterans. You won't be pitched by vendors.

This year, you'll hear from Ken Burke, Alan Rimm-Kaufman and Brian Rainey of Abacus/Epsilon, among others. And you'll enjoy Thursday dinner at Fenway Park.

Downturns in the economy provide opportunities to learn. Put the Spring NEMOA conference on your agenda --- and save $50 if you register before February 18.

Mistake In The Multichannel Forensics Book: Figure 8.1

One of our loyal readers pointed out the Figure 8.1 in the Multichannel Forensics book is incorrect.

The image here (please click to enlarge) is what the actual image should look like.

Thanks for your attention to detail, folks, and my apologies for the incorrect figure in the book.

When Is The Best Time To Send A Catalog To Support A Retail Event And Drive Multichannel Sales?

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I'm often asked what the best timing is for sending a catalog that supports a retail event. Here are a few guidelines for you to consider.

Let's assume you want to mail a catalog to support a retail event.

First, identify (via test and holdout groups, not via matchback analytics) the channel that benefits most from the mailing of a catalog. If the channel is the telephone channel, you'll probably have to mail the catalog at least three weeks ahead of the event, with a Monday/Wednesday in-home date. If the channel that benefits the most is the retail channel, you'll probably have to mail the catalog 1-2 weeks ahead of the event, with a Wednesday/Friday in-home date.

Similarly, you ask yourself who the majority of customers receiving this mailing are. Catalog/Online customers prefer Monday/Wednesday in-home dates, while Retail customers prefer Wednesday/Friday in-home dates.

The combination of these questions yields a matrix that tells you when to send the catalog, and tells you the expected performance of the catalog on a grading scale of "A" (excellent) to "F" (poor).

In many cases, the management of the dominant channel in your brand will require you to execute your mailing to give their channel the best chance of success. The grid helps explain the impact of compromise --- one of the things that multichannel pundits don't talk about much --- the fact that compromises to accommodate channels reduce the overall ROI of a catalog campaign.

February Good News

We read an awful lot about the economy heading into a deep slumber. So let's start February with good news! Urban Outfitters increased direct-to-consumer sales by 39% during the holiday season.

Regardless of economic conditions, compelling merchandise always drives sales increases.

E-Commerce And Catalog Management Case Study: Managing Details

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Yesterday, we demonstrated how the little details make a big difference in the profitability of an e-commerce or catalog brand.

Unfortunately, few of us get to be a CEO, few of us get to learn this valuable lesson.

In our example, there are four metrics that require significant attention. Let's review each metric.


Merchandise Fulfillment Rate

This rate represents the percentage of merchandise a customer asked for that the merchant was able to deliver to a customer. Take a customer who orders over the telephone. She asks for three items, but only two are available, one item is sold out. The merchandise fulfillment rate is 2/3 = 67%.

The CEO uses this metric to understand how effective the inventory management team is at satisfying customer demand. If an item sells out, and the inventory manager is somehow able to procure additional merchandise, then everybody benefits.

There are problems with this metric. When business is bad, merchandise is always available. When business is great, merchandise is never available! So to some extent, the metric has an inverse relationship with brand success.

Online brands often fail to understand the importance of this metric. Customer advocates preach that online brands should "pull down" items that are sold out, so that the customer is not disappointed. It's great that a customer should not be disappointed, but it is terrible for next year's customer, because the inventory manager doesn't learn how much s/he "could have" sold.


Return Rate

Return rate measures how much merchandise is returned to the brand by the customer. This metric plays a disproportionate level of influence in the profitability of an e-commerce or catalog brand. A new CEO will look into different ways that return rates can be lowered. Are there indirect reasons why the rate increased, like merchandise preference skewing from low-returns items to high-returns items? Or are there direct reasons why the rate increased, like quality being lowered in order to improve gross margin?

Each brand has a return rate that is typical for the business model the brand manages. Within this range, brands can succeed or fail. The new CEO will try to eliminate the failures in returns, since every item that is not returned drives increased profit.


Gross Margin

Gross margin represents the difference between what a customer paid for an item, and the cost the brand paid for the item. Take a $100 item that the brand paid $40 to acquire. The gross margin is (100 - 40) / (100) = 60.0%. Now, take a $100 item that is on sale for $60. The gross margin is (60 - 40) / 60 = 33.0%.

Gross margin has a disproportionate influence on the profit and loss statement. When a business is failing, the CEO is required to liquidate or discount merchandise, in order to get rid of it. Consequently, gross margin will be low. When a business is succeeding, it can charge a premium for merchandise, driving up the gross margin.

Gross margin is also a reflection of the ability of the inventory management team to accurately forecast sales trends. When the inventory management team buys too much merchandise, regardless of business trends, merchandise must be liquidated, lowering the gross margin rate.


Pick / Pack / Ship Expense

This metric does not receive enough attention, yet is also important to the profitability of a brand.

This metric is defined as the cost to pick, pack and ship merchandise to a customer as a percentage of net sales. For instance, if a brand spends $10,000,000 delivering merchandise to your home, and generates $80,000,000 net sales, the rate is (10,000,000 / 80,000,000) = 12.5%.

Outstanding catalog and e-commerce brands drive this rate down relentlessly, via automation and efficiency. Other brands look for low-cost solutions, or look for shipping and handling revenue to offset delivery costs. Ultimately, automation and efficiency result in lower rates, and increased profit.


The new CEO will focus on these four metrics, seeking to drive all of these metrics toward historical best performance. The best leaders realize that as much as half the reason a catalog or e-commerce brand fails is due to mismanagement of these four simple metrics.