key catalog industry paper issues todayb2c, b2b, b2g • everything you can buy at retail … &...
TRANSCRIPT
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“Forget the Paper—I’m going to the Web!” Key Catalog Industry Paper Issues Today
Drivers of increased paper sales into the catalog sector Hamilton Davison
President & Executive Director [email protected]
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Agenda
• State of the US Catalog industry today - Overview - Demographic drivers and social trends
• Critical issues and opportunities for suppliers - Why mail hard copy anyway? - Inputs to cataloger paper demand - Other issues that can affect demand
• What catalog buyers are thinking today • Challenge question: telling our story • Q&A
© 2010 American Catalog Mailers Association
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State of the Catalog Industry Today an overview • Size: $270 billion in 2006 (pre-recession, pre-postal rate hike)
! Online and offline ! Catalogs + upstream suppliers ! B2C, B2B, B2G
• Everything you can buy at retail … & more
• Low margin, high scale, variable cost business model
• Highly analytic decision making (test, test, test!)
• Improves people’s lives: the social benefits of cataloging (see whitepaper)
• Content value in the mail: - Americans like catalogs - Drives consumer interest keeping mail powerful for all types of messaging
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State of the Catalog Industry Today an overview (continued) Historically growing … but • 2006:
- 15,000++ separate catalog publishers - 20 billion catalogs mailed
• 2010: - 20-30% fewer publishers (estimates vary) - 13 billion catalogs mailed (estimated)
• Unprecedented contraction: - The recession - Contraction of capital availability - Change to business model economics due to 20-40% increase in
postage cost Source: ACMA estimates from various sources
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State of the Catalog Industry Today an overview (continued)
• Huge demographic “tailwind” – this should be the golden years…
Age ranges
Mill
ions
of c
onsu
mer
s
Baby boomers are vigorous catalog buyers Catalog buying does up with age: As baby boomers reach their ‘golden’ years, their catalog buying should increase
Source: MediaMark, 2006, includes catalog, phone and online sales
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Catalog marketing is a highly variable cost business model - Total cost drives total volume
Source: 2009 actual cost data from a successful upscale cataloger
Only 17%* Cataloger 1’s costs are ‘fixed’
Cataloger Example 1:!
* Some catalogers have much lower fixed costs, in the 7-10% range
Components of fixed and variable costs
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Catalog marketing is a highly variable cost business model - Total cost drives total volume
Postage is the largest cost component of mailing an incremental catalog
1990
Printing & Paper
Postage
2008
Printing & Paper
Postage
Cataloger Example 2:!
Source: company records from established catalog brand
Shift in the mix of cost for a successful catalog
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Postage trends have far exceeded inflation & other catalog cost components
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
Dol
lars
per
M
Year
Printing Paper Postage
Between 1997 and 2008: - Inflation increased 34% - Postage increased 58% - Paper increased 16% - Print decreased 18%
Analysis of historical cost trends by major industry supplier
Due to costs, catalogers have increasingly been using to other options!Source: Quad/Graphics analysis of hundreds of catalog clients purchasing history
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2009 Revenue Sources and Respective Costs per Source for large B2C
Catalogers have a Choice on How to Reach Customers
Rev
enue
s in
Mill
ions
and
Mill
ions
Costs as a P
ercentage of Revenues
Cataloger Example 3:!
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Why mail a catalog? The role of mail in the catalog marketing plan:
• Universal, unparalleled reach and frequency • Invasive, yet welcome • High visual profile demands attention … and tells a story • Speed shopping: catalog versus electronic • Unmatched color accuracy: apparel, home furnishings, gifts, floral
and garden, food, etc. • Plethora of marketing options, but multichannel is ideal • Role of Internet reinforces, but does not cannibalize • Incremental circulation volume decision making • Mutually reinforcing: mail begets mail
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Why catalogs? • Long-term growth opportunity due to favorable demographics • Hard copy has a defendable, sustainable, competitive advantage • Supply chain issues can be solved if collaboratively approached • Technology will enhance, not replace paper, if properly managed.
Catalogs are a segment worth focusing on!
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What catalogers look for in paper: • Cost, cost, COST! (& why it matters), plus premium print quality • Reproduction: white, bright, accurate, low ink absorption • “Show-thru” and opacity • High-speed handling during production • Consistent with brand statement (high perceived value) • Stiff but smooth (and at low basis weights)
What catalogers look for in a paper supplier: • Short order lead-times – pressure on date of last change (LCD) • Consistency from run to run (and mill to mill) • To be committed to, and knowing about, my business • Value-added supplier (provide ideas for cost savings, improved
effectiveness, etc.)
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Environmental issues
• Certified is best, with FSC slightly preferred by catalogers • High PCW preferred, especially by catalogs with an
environmental promise in their brand identity ! but not all agree with high PCW due to cost or aesthetic issues
• Paper Industry has a great environmental record… but not telling anyone about it
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Environmental issues (continued)
• Great environmental record but not telling anyone about it
The Plastics Industry has been aggressive at consumer-level advertising and education
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Even the generic and store brands have followed this lead.
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Food suppliers have picked up on the theme
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Even products that are not organic are on message.
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The catalog environmental story
• The importance of telling our story • 13 billion consumer impressions every year
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The catalog environmental story
The Paper Industry needs to lead this effort by being aggressive at consumer-level education as today, paper is not considered environmentally friendly. This popular sentiment is spreading everywhere in America and threatens to undermine every paper-based segment and product.
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What can you do to grow your catalog business? What happens at the USPS affects your Catalog Sector demand! Some issues to consider:
• USPS Cost Improvement - Headcount reduction - Station, Branch & Plant – count, closure, issues - Delivery Frequency
• Automation and FSS (Flats Sequencing System) - Why droop matters - Deflection standards - Make it stiff!
• Role of Congress Paper interests with a significant economic stake in the health of the catalog industry may find it in their self interest to support ACMA’s work.
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What can you do to grow your catalog business? (continued)
• Get involved:
• Financially support Mail Moves America
• Unify the impact: Join the broad-based coalition to speak with one voice:
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What can you do to grow your catalog business? (continued)
• Alliance of Nonprofit Mailers Magazine Publishers of America • American Business Media Mailing & Fulfillment Svc Assn • American Catalog Mailers Association National Newspaper Assn • American Express National Postal Policy Council • AT&T NewPage Corp. • Bowe Bell+Howell NPES • Datamatx NPTA Alliance • Direct Marketing Association Printing Industries of America • Domtar Pitney Bowes Inc. • Eastman Kodak Company Quad Graphics • Envelope Manufacturers Association RR Donnelley • Greeting Card Association Time Warner Inc. • INg Verizon • International Paper
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For more information please follow up to see how you can help affect the outcome!
American Catalog Mailers Association, Inc. a Washington-based 501(c)6 not-for-profit trade group
www.catalogmailers.org
Contacts: Paul Miller Hamilton Davison Vice President & Deputy Director President & Executive Director [email protected] [email protected] 914-669-8391 800-509-9514