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CATALOGS -- Riding the e-Wave

December 2000
BY CAROLINE MILLER


It's been a very good year.

The prophecies that the Internet would eventually kill off print appears not to be coming to fruition, just yet. In fact, if 2000 is any indication, the Internet appears to have emerged as a most positive development for the catalog industry.





















Top 10 Catalog Printers
 CompanySegment
Sales
(millions)
Total Sales
(millions)
1R.R. Donnelley & Sons
Chicago
$1,350$5,000
2Quebecor World
Montreal
$1,111$6,540
3 Quad/Graphics
Pewaukee, WI
$705$1,500
4 Banta Corp.
Menasha, WI
$215$1,270
5 Arandell Corp.
Menomonee Falls, WI
$181$197
6 Perry Judd's Inc.
Waterloo, WI
$96$320
7 Spencer Press
Wells, ME
$88$98
8 Avanti/Case-Hoyt
Miami
$77$155
9 Consolidated Graphics
Houston
$62$625
10 Brown Printing
Waseca, MN
$60$376


According to PIA's Vision 21 study, "As recently as the late 1990s, conventional wisdom maintained that the Internet would sound the death knell for many paper-based . . . products. Yet this new communication medium has actually promoted the use of printed products in certain instances. In its current form, the Internet is improving the paper catalog business in a few key ways:

  • Catalog companies are expanding their customer base through the Internet;

  • Order processing and fulfillment costs are dropping, providing promotional funds; and

  • Internet retail sites are offering paper catalogs."


The emergence of the Internet has been good for business, says Steven Zuccarini, president of the Merchandise Media Group for R.R. Donnelley & Sons. The Chicago-based company again found itself the number one ranked catalog printer in the country with $1.35 billion in catalog revenues.

"This was a strong year for catalogers in that we continued to see healthy consumer spending across their multiple channels of distribution. In an effort to capture additional sales, our catalog customers increased page counts and circulation," reports Zuccarini.

A recent GAMIS study entitled "The Future of Catalogs" found that, while catalogers maintained that over half of the purchases on their Websites came from existing customers from their paper catalogs, many have begun experimental mailings to new customers who purchased for the first time from their Website. Couple this with the movement of some e-retailers toward a paper catalog, as well as an online presence, and you have the makings of a very profitable relationship between the Internet and paper catalogs.

"Catalogers have come to realize that, to be successful, they need to have a multi-channel presence, consisting of print, online, and brick and mortar," remarks Zuccarini.

Several major catalogs have heeded the call of print, online, and brick and mortar, says Zuccarini. Two top catalogers, Coldwater Creek and J. Jill, have opened retail stores and launched aggressive plans for expansion. Coldwater Creek also distributed 34 percent more catalogs in 2000 and generated more than $18 million in online sales, resulting in an overall 30 percent increase in sales in all channels.

Another industry leader, Spiegel, is also testing a "netalog"—a catalog with a specific category focus that features additional product information not found in its regular catalog. It encourages customers to shop online, creating multi-channel buyers who tend to purchase more than single-channel buyers, adds Zuccarini.

"Contrary to popular belief, the surge in Internet purchasing, which has increased nearly 85 percent to about $61 billion in 2000 over 1999, has not caused a reduction of print. Instead, it has created new avenues for print, and we have seen increased pages promoting Websites and other channels. We believe, along with our customers, that overall, the Internet drives print. Virtual dotcoms are using newspaper inserts, direct marketing and catalogs in an attempt to lead consumers to their Websites," he says.

And as catalogers continue to harness the power of the Internet, catalog printers can expect to see a trend toward the further development of multi-channel marketing initiatives, reports John Paloian, president, Magazine/Catalog Group, Quebecor World. Quebecor weighed in as the number two ranked catalog printer with $1.11 billion in sales.

"As catalogers continue to find new ways to extract value from the Internet, the focus on multi-channel marketing initiatives will continue to demand a lot of their time and attention," he adds. "Customer solutions that enable clients to optimize their combined catalog, retail and Internet marketing initiatives will drive this market in 2001."

One of the ways that R.R. Donnelley is assisting its customers in optimizing their combined catalog, retail and Internet marketing initiative is through its Premedia Technologies Group. Premedia assists its customers in repurposing their content for the Internet and other media channels.

"A trend that we have seen is our customers focusing on their core capabilities (merchandising) and exploring outsourcing opportunities in areas that require significant capital investments," reveals Zuccarini.

While the Internet will continue to greatly impact the catalog industry, the increase in the demand for targeting, versioning and segmentation also appears to be gaining even more speed as printers head into 2001, reveals Steve Sanfelippo, vice president of commercial catalog sales at Perry Judd's. Ranked sixth, Perry Judd's saw its catalog revenues rise from $87 million in 1999 to $96 million in 2000.

"As we approach 2001, Perry Judd's is continuing to see increased segmentation and targeting of the individual consumer within the press and binding/mailing process. Smaller press runs, characterized by multiple changes in offerings of product in the text, along with unique cover presentations, are becoming commonplace," he says.

"We predict an increased use of ink-jet personalization on multiple surfaces, on and in the catalog, as catalogers continue the one-to-one communication to their customer. Information regarding buying preferences gleaned from online transactions are fueling this trend."

While the outlook for the catalog segment is bright for 2001, Sanfelippo does offer some caution for catalog printers. "Consideration has to be given to the impact of the postal rate case currently under review. Combined with the prospect of a potential second rate increase in the not too-distant future, it becomes apparent that customer acquisition strategies and distribution of the catalogs themselves will come under heightened, careful review by our clients."

While the postal increase is something that printers should continue to keep on their radar screen, Paloian believes that it will not have a huge impact on growth.

"Of course, anything that negatively impacts the cost or revenue economics of our customers is cause for concern. However, we are not currently experiencing wide-spread panic among our clients, nor do we anticipate seeing dramatic shifts in terms of paper grades or trim sizes," he remarks.

Both Sanfelippo and Zuccarini are predicting continued growth in 2001, despite looming postal increases and changes in the economy.

"For 2001, we expect to continue to see our catalogers and retailers expand their media mix. How much expansion catalogers pursue will be determined by the overall level of consumer confidence, the GDP based on the new administration and the impact of the postal increase. At R.R. Donnelley, we're still forecasting strong demand across our customer base," states Zuccarini.

Sanfelippo agrees. "We anticipate exciting, new growth in the catalog segment at Perry Judd's in 2001. With continued consumer optimism and a slowing, but still robust economy, our customers are projecting increases in volume as we approach production for the new year. A moderation in paper prices in many grades, along with a reasonably manageable increase in postage in 2001, should provide for a predictable cost environment."
 

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