Catalogues and all that stuff, part 1, Strategy Magazine May 17, 1993

According to various sources, there are about six hundred Canadian catalogues. Six hundred!? Have you had even a dozen different catalogues drop through your mail slot in the past year? Even counting American catalogues? Probably not. So, where are they all? Simply put, they’re invisible to the public eye. Unless, of course, your name crops up on a mailing list, then, presto, changeo, there they are! But, it’s still not a deluge. Why don’t we get more catalogues in our mail? The price of entry for one thing. Starting up, and more importantly, building up, circulation, is an expensive proposition. Some experts would say that, unless you can raise a million dollars to work with, don’t bother trying to start a catalogue. That said, I’d guess 80% of the six hundred in Canada were conceived through the mating of a brainwave and a shoestring, born on a kitchen table and are being raised in a basement or garage.

According to a survey conducted each year among Canadian cataloguers by Catalog Age magazine, over 60% of Canada’s catalogue companies report annual sales of less than $1 million. A survey, commissioned by the Canadian Direct Marketing Association in 1990, put the total size of the Canadian catalogue industry at $2.2 billion dollars in sales. Compare that to the U.S. estimate of $74 billion in consumer and business-to-business sales in 1991 Applying the 10% rule, provides ample potential for the Canadian catalogue business to more than triple.

So what’s getting in the way? Economies of scale for one thing. Look at it this way. Suppose it costs $1 million to produce a catalogue to be mailed to all adults aged 35 to 54. That’s about 7 million people, according to Stats Canada. Suppose half of the cost is fixed (design, copy, type, photography, film, print set-up, etc.) and half is variable (mailing lists, paper, printing, postage). That makes the per unit cost of this hypothetical catalogue 14 cents (seven cents in fixed cost and seven cents in variable cost). In the US, there are about 59 million people in the target group. The per unit cost to mail them all would be 8 cents (one cent in fixed cost and seven cents in variable cost). In other words, mailing a Canadian universe that’s 88% smaller, costs 43% more per unit. Now think about profitability. Let’s set parameters that catalogue cost is 18% of gross sales, margin (sales minus product cost) is 40%, operating cost is 12% and the before-tax profit target is 10%. In the Canadian scenario, it takes 44% more in sales to cover the catalogue cost of 14 cents each and achieve the 10% bottom line. Is it any wonder there are so few “visible” Canadian cataloguers? Likewise, is it any wonder American cataloguers see opportunity in mailing to Canada? Their additional fixed costs are minimal and the remainder of the cost is variable. Besides, they tell me they get higher response rates and larger orders here than they do at home.

There’s something else at work in Canada. That’s a lack of mail/phone order catalogues from retailers. Catalogues designed to produce sales in their own righ as well as drive additional traffic to stores. Why not? There might be an attitude problem. The president of the Retail Council of Canada was quoted recently as saying, “(Direct mail) suffers from not being able to live up to the instant gratification aspect. It has to obviously be a planned purchase, not an impulse purchase and you don’t really know when the product is going to arrive. For many people, that’s too long to postpone the satisfaction.” Instant gratification? Wasn’t that an 80’s thing? Aren’t people now looking for genuine value, convenience, better, more personalized service, ways to reduce stress in their lives? Or, is that a mythical tale spun by the seers of the future? Faith Popcorn and her futurist cohorts predicted the “stay-at-home” nineties. Whether you call it burrowing, barricading or boredom, supposedly, the resulting shopping trend is out of the mall and into the mail box. US retail mall traffic is now less than half what it was in 1986. In 1992, 52% of adult Americans had placed an order by mail or phone in the previous 12 months. According to a study done for the National Task Force on Cross-Border Shopping in March 1992, the comparable Canadian number is 26% of which 3% ordered from the US. This means over 5 million of our sample target market of adults 35-54 are still waiting to either receive a mail order catalogue and/or one that excites and incites them to order. That’s

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