The Rebirth of Cataloging

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Birth Requires a Mother . . . So Does Rebirth

Since the first nascent moment of the first catalog, all sales—business-to-business or consumer—have been birthed from the field sales and retail sales worlds. Think about it. Our world of catalog marketing is wholly derived from sales taken away from field sales and from retail sales. We have not created new sales; only taken away or shifted sales from other channels. If there were no catalogs or direct marketing, the field sales and retail sales worlds would be, very conservatively, some 2 to 3 trillion dollars bigger. Direct marketing’s mom and dad are retail and field sales. And Mom and Dad are not pleased.

Almost every business-to-business marketer I know admits that their true competition is retail, and every consumer marketer faces this reality daily. In a commercial world where substitutes can be found, and where those substitutes can be found within 1 to 12 miles of any business location, retail will have a primary, competitive influence. If you examine the strategic, geographic positioning of both retail consumer and business-to-business merchants, you find that niches are served by placing retail stores within 12 miles of niche customer concentrations, that is, no customer should ever have to drive more than 12 miles to make a purchase. By locating two stores 25 miles apart, the 12-mile circle is established for niche customer satisfaction. By targeting 12-mile circles in densely populated universe areas, the geographic niche and market share strategy can be readily seen.

Knowing this, why are catalog marketers not challenging their biggest competitors right in the competitive arena? Why not do geo-selects and blanket a 12-mile or 25-mile overlapping circle with catalogs specifically targeted to local competitive offers? Why not take the rebirth of direct marketing to the battleground and meet the competition in hand-to-hand combat? And if the wisdom of this strategy is unclear, consider what is likely to occur in the immediate years ahead.

Retail is Overbuilt. Catalogs Are Not.

Any reader who truly believes that this country can sustain all of the retail stores that already exist and that are being built need not detain themselves here any further. You are already hopelessly Pollyanna-ish.

First, few of the retail merchants own their real estate. Insurance companies, pension plans, state government annuitants, REITS, and a host of other fragile, investor-benefit structures own the strip and destination malls of America. The actual tenant merchants (your competitors) are renters. They have little or no investment risk, only high, unsustainable operating overhead to remain in business.

Second, if there is a minimal, say 15 percent, pull-back in retail spending, these investment structures cum landlords are in deep trouble. Consider: the 2002 retail season was a disaster financially and there was actually 1 to 2 percent growth, year on year. Imagine the gnashing of teeth if there was a 15 percent decline in retail spending. And, that is possible. Allow me to draw your attention to oil prices, war, global instability and global financial stress. If there is a draw-back in retail spending—whether consumer or business-to-business—(it makes little difference), there will be a lot of shuttered and boarded retail stores. As this nation is inevitably forced back to a consumption equilibrium that is significantly below the levels of the most recent decades, what happens to all of that excess retail capacity? Will we repave the mall parking lots with grass? Face it: the post-1970s level of U.S. consumption is simply not sustainable in a common sense outlook for the future.

What will happen is fairly clear, it seems to me. We are doubtless headed into a period of increased financial stress. Cities and states are already experiencing unfunded mandates from the Federal government for Homeland Security and a plethora of other expensive, special interest regulatory and legislative imperatives. The local coffers are empty and the only solution is markedly higher taxes. Higher taxes mean less disposable income. Less disposable income means a reduction in spending. A reduction in spending means excess retail capacity. And that means store closings and downsizing and reduced manufacturing. Probably for at least 10 years or more. A “consumption winter” descends on America for the first decades of the 2000s. Genuine buyers, both business-to-business and consumer, will be driven into an escalating environment of scarcity of products, services, convenience, advice, civility, and geographic access. There is a corrective period coming in retailing—bank on it!

But, catalog companies are not over built. Catalog companies are not nearly as subject to excess capacity. Catalog companies are not at the whim of investor group or pension plan landlords. Catalog companies can “relocate” their geographic competitiveness at a moment’s notice. They can zero in on a geographic area that is no longer served, or is underserved, by retail competition by simply doing a zip-select. Catalog companies, indeed direct marketing companies, are positioned by virtue of their internal and financial structures to take significant share away from mass and small retailers in the decades ahead. Our industry clearly has the financial and operational advantage in this period of economic re-ordering if we have the ability to re-focus on segmenting lists and mailings to the changing and opportunistic local level.

Now, couple that formidable strategic advantage with the functional advantages of the Internet, and we begin to see the scope of the rebirth of direct marketing and the shape of cataloging to come. The catalog remains integral; the Web becomes the tertiary destination; the speed and relevance of offers become critical; the geographic targeting becomes incessantly local. We no longer focus only on prospecting lists at the macro universe level, but prospecting lists at the local “universe of one” level. The rebirth of direct marketing will follow and fill the voids left by retail store closings. We fill the vacuum. Customers are shape-changed and order is restored. A large portion of retail purchasing is shifted to self-directed, remote purchasing, and the established, experienced, invested catalog and Internet channel masters win . . . if you want to and if you do something now to assure your dominance in the inevitable commercial milieu of the future.

What Would You Want In The Rebirth of Direct Marketing?

If I were authoring the strategic plan for the decade ahead for office supplies, I would be looking for innovative list work that would provide me with the combined universes of all businesses in the U.S. located within a 12-mile radius miles of all recently closed big box office supply stores and segmented into the 12 regions of this report on a hierarchical basis of economic viability.

If I were in the MRO business, I would want the geographic lists of all businesses within a 12 mile radius of every closed big box MRO retail supply store. If I sold to contractors, I would want lists of every construction-related business within 12 miles of every closed Home Depot. And then I would create offers and incentives for each of those local niches on a local basis, in a local voice.

And as the retail downsizing panoply develops, we have the innovative ability and capacity to track and develop localized list segments for every major SIC group that has a local retail presence. We can develop shared databases of retail-challenged or retail-vulnerable customers. We can do it for the shared benefit of catalog businesses. And, we can do it for food service equipment, dental supplies, office furniture, safety equipment, agricultural supplies, landscaping equipment, and on and on for nearly every niche target group you can name. And we can make offers and position ourselves as local suppliers interested in the customer’s local needs.

The rebirth of direct marketing will occur at the local level and it will fill the competitive void left by a shrinking and diluted retail presence.

The rebirth of direct marketing will consist of more of what we are good at, but focused not on national universes, but on local segments of underserved local universes.

The rebirth of direct marketing will occur on the local retail battleground.

The rebirth of direct marketing will unite direct, catalog and e-com marketers and it will finally be recognized that list rentals among direct competitors are absolutely and unabashedly essential in an all-out war for market share derived from the bones of the retail channel dinosaurs. You cannot afford to keep your list from your increasingly cooperative and mutually sustaining direct marketing and cataloging colleagues, especially if they are competitors. Not renting your list to competitors is classic 1970s thinking.

The rebirth of direct marketing will occur only in an environment where a disillusioned, disenfranchised, discommoded and disappointed retail customer is made to feel welcome, important and appreciated by a channel that is genuinely thoughtful of and thankful for that customer’s business.

The rebirth of direct marketing requires that we do more of what we have always done so well, but that we now bring it to the individual customer at the local level. It is back to basics locally. And the battle is for channel conversion of market share, one customer at a time. Even Wal-Mart is massively vulnerable.

The Next Prospecting Frontier

Local prospecting. Mastering local prospecting to zero in on reduced retail activity in your niche will pay off for several reasons:

1. You learn about “local” direct marketing, an extension of the national direct marketing we have all experienced for so many years. Local is different than national and it requires far more sophisticated segmentations and economic profiling of both business-to-business and consumer prospects. And, the list and circulation expertise, uniqueness and experience will be priceless for the future.

2. You develop “local” offers and local relevance for local customers. We have never gone out with prospecting offers that are geared to a small geographic target. By necessity, printers will have to develop local segmentation binding and multiple offer press capabilities that reflect and cost-effectively drive this local marketing focus. Imagine: a marketing campaign replete with lists, offers, printing and mailing targeted to business buyers in specific cities and areas where major big box office supply stores are closing. Now, imagine the same campaigns in every city and area where they are closing . . . and read the teaser copy on the catalog cover: “Your OfficeBox at 5th and Oak may be closing, but we’re still here . . . and we’ve got what you want, at better prices, and we can deliver to your door . . . FAST."

3. You have all of the internal IT systems , call centers, fulfillment operations necessary to make this work at the local level, and it’s already paid for. You also have highly skilled and experienced marketers who can find those customers if they will only begin to look locally.

4. It is a “No Risk” strategic concept. Right or wrong, true or false, prophesy or shamanism, you benefit from learning how to better service customers on a local basis as well as a macro-national prospecting basis. And, if you really believe you want to have local distribution and local warehouses and local retail stores (as many of you are actually thinking), then you have to master local prospecting anyway. But, my belief is that you can master local prospecting and marketing from a centralized position. Your chief strategic advantage is economic. Don’t obviate that advantage by getting into the retail business!

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