The fall of trade barriers, a maturing domestic market and the explosion of the World Wide Web have combined to make entry into the global marketplace attractive for U.S. catalogers. Going global is a two-part equation. The first part is the decision to market internationally. The second part of the equation is where to market.
First and foremost, you must get an idea of the scale of the market, including its size and potential as well as the maturity of the channel of distribution. After narrowing it down to a few potential markets, you need to do some in-country research. You need to consider, as a whole, the market potential and logistics.
Here’s a look at a few global markets where catalogers might consider doing business.
Latin America is a region heating up for U.S. and multinational direct marketing companies. There seems to be an increased level of interest in Latin American databases, and the entire region is getting a lot of positive press as a strong Internet growth arena over the next decade.
Historically, catalog development and sales have been hindered in Latin America by wild inflationary spirals, poor delivery mechanisms, low credit card and telephone penetration and an underdeveloped list business.
Times have changed. Latin America has won its fight against uncontrolled inflation, and good quality databases are becoming available. In addition, privatization of local and regional telecoms has improved telephone service and access, and local postal administrations have improved mail delivery.
The good news for U.S. catalogers is that the market is still open and underdeveloped. And key local players are amenable to joint ventures with U.S. companies.
We’ll focus on the catalog industry in two countries, Brazil and Mexico. This does not mean the rest of Latin America doesn’t have a catalog presence. Argentina’s star performer, Sprayette, has been in business for 22 years. Chile and Venezuela also have strong representative companies, as do many other nations.
Brazil
Unlike in the United States, where many catalogs were an offshoot of an existing retail presence, catalogs originated in Brazil as stand-alone companies. Inflation hindered growth because prices were outdated before the ink was dry on the catalog. So in Brazil, the phase from retail to catalog was superceded by DRTV, space ads and inserts in daily newspapers, which proved more successful since prices could be changed daily.
Sandra Camelier, marketing director, South America, for Infocore Inc., an international list management and consulting company, reports that in Brazil, “The majority of all magazine and newspaper subscriptions are sold via direct mail. And telemarketing and DRTV sales are growing. Recently, the retail stores and supermarkets have opened Web sites. Buying habits developed through the Internet may benefit catalog sales as more people get used to buying through direct marketing.
“So the evolution of catalog sales, while taking a different path dictated by local economic conditions, now stands to grow. The main problem direct marketing companies face is fulfillment, as there are few suppliers able to handle high volumes,” says Camelier.
Two U.S. companies currently marketing in Brazil are Black Box, a business-to-business cataloger that offers connectivity devices, and Seton, a business-to-business cataloger that sells industrial identification and safety products.
Mexico
The catalog business is not a dominant marketing sector at present, but the future is very bright. NAFTA and higher oil prices have lifted the Mexican economy greatly, although the trickle-down effect to the lower classes is being offset by higher prices for goods and services. As this improves, the opportunity for direct marketing in Mexico will soar.
According to Francisco Name of Promoclave, a local cataloger, “Mexicans are just now beginning to ‘think direct’. We now have good telephone services and reliable courier services that were not available 10 years ago.”
More good news is that the quality of Mexican databases has improved greatly and many demographic segments can now be identified in large numbers.
Delivery and payment options have been an obstacle. Of Mexico’s 100 million population, approximately 5 million have credit cards. Payment methods depend upon the target demographic. Upscale catalogs rely almost exclusively on credit cards except for business-to-business orders, which are paid by check. Many experiment with cash on delivery (COD).
While postal delivery by SEPOMEX, the Mexican post office, has been improving, it still has a way to go to prove it can support a strong direct marketing industry. Delivery times during busy periods can take weeks, even for local delivery.
Direct marketers currently doing business in Mexico include:
Promoclave, a general merchandise catalog offering a wide range of products including U.S. goods.
Reader’s Digest, which has the largest mail-order customer database in Mexico.
Yves Rocher, an international cosmetics company which sells its products in more than 80 countries.
Douglas Sacks is senior vice president of Infocore Inc., an international list management company and direct marketing consultancy. He can be reached at (860) 563-6360; fax: (860) 563-6265 or by e-mail: dsacks@infocoreinc.com
A decade after reunification the German population has accepted the high standard of quality mail order. A turnover volume of nearly 21 billion euros in 1999 shows a slight increase over 1998’s volume. In 1999, German consumers ordered products from catalogs totaling 246 euros—more than any other European Union country.
More than 10,000 catalogs are available to German consumers; individuals receive four to 10 catalogs per household on average per year. In addition, there are approximately 1 million catalogs on CD-ROM targeted to younger customer segments.
Nearly all mid-sized companies are using the Internet. Germany is still behind the United States in terms of usage, but is catching up quickly as the Internet becomes an important sales and marketing channel.
A wide range of lists are available in Germany. There are more than 1,200 list brokering groups and additionally many business-to-business response and compiled lists. Household files and lifestyle surveys have also become important sources. Data mining and scoring possibilities have been developed to provide the best selections within the data regulations.
To achieve success in this market, bear in mind:
Payment: The most common method of payment in Germany is by invoice. Internet shopping favors credit card payment and direct debit. Credit card payment is increasing but is still not as accepted as in the United States.
Delivery: The German Post has a domestic letter monopoly until 2002. There are strict postal regulations and four segments for the sizes and weights of mailings. For example, if your mailing exceeds 20 grams you fall into a more costly category.
Legal: Free offers like “buy one get one free” are forbidden and free gifts are only allowed within certain limits.
Data protection is an important issue preventing the enhancement and merging of address information. German consumers also are active with consumer councils. If a product is not of the quality expected or service is unsatisfactory, a consumer will contact the consumer councils who will then investigate the company.
Follow these guidelines and you will have an excellent chance to do business within Germany.
Heidi Bremner heads the International department of AZ Bertelsmann. She can be reached at +49 5241 805046; fax: +49 5241 809336 or by e-mail at heidi.bremner@bertelsmann.de.
Japan is the second largest market in the world, yet many catalogers still hesitate to launch there. Although many cite lack of knowledge about the market as their main reason, mailing to Japan is really no more difficult than any other international campaign. Success in the Japanese market does not come from merely translating your catalog. Successful catalogers have established their operations to meet the demands of their Japanese customers. These include accurate order taking, timely delivery of their products, accessible customer service and professional follow-up.
If you’re willing to commit to the Japanese market—and many U.S. catalogers have, including Patagonia and Hanna Andersson—Japan can be very rewarding. The problems a cataloger may face will be different, but good planning and execution will solve most of them.
The most common obstacle for mailers to Japan is obtaining good lists. Quality lists are few and far between, and most catalogers find they have exhausted the best lists within the first year of mailing. Developing other marketing channels early on is a good way to avoid a lack of quality lists to mail later. One channel proving successful in Japan is the Internet, and many U.S. catalogers are initially testing the waters via the Web. The e-commerce market in Japan is poised to take off, so now is the time to launch a Japanese Web site.
However, a common mistake among catalogers new to marketing to Japan through the Internet is that their back-end operations haven’t been adapted to the Japanese market. Japanese customers still expect timely delivery, good customer service and a high degree of professionalism.
The good news about marketing to Japan is that many catalogers already have their marketing pieces in place. U.S. catalogs work well in Japan—with only a few minor changes. First, the English copy should be replaced with Japanese copy and the order form needs to accommodate Japanese addresses (there are no states and zip codes in Japan—just prefectures and postal codes!). Most catalogers with Japanese versions design the catalog so that only a black-plate change on press is needed to switch to the Japanese copy.
Web sites can also be easily adapted into Japanese. The key to a successful Japanese catalog or Web site is to make sure the copy is translated and adapted properly. A straight translation rarely sounds good, but a good copywriter can polish the text accordingly.
Japanese consumers are receptive to American goods and can be among a cataloger’s most loyal customers. They are also more deliberate shoppers than their American counterparts and tend to want detailed information about a product before making a purchase. To meet these demands, a successful cataloger should provide as much information in Japanese as it can.
James Dempster is general manager of Hemisphere Marketing, a San Francisco- and Tokyo-based direct marketing consultancy. He can be reached at jim@hemispheresf.com
After many years where mail order was considered to be the grubbier end of marketing, the industry has gone through a quiet revolution. Retailers are clamoring to win catalog and Web site customers. Business-to-business companies are getting over the fear of upsetting their dealers, and launching catalogs and Web sites to sell directly to the end user.
There are approximately 6,000 catalog companies in the United Kingdom. This number has grown 25 percent in the past year. The catalog market, excluding e-commerce sales, has grown from £8.6 billion (US$13.8 billion) to £12.4 billion (US$19.8 billion) in the last two years. Oddly enough, the percentage of the adult population buying by mail remains at 40 percent.
However, this market is being replaced by cash-rich, time-poor adults buying from niche catalogs. Drawn to the convenience catalogs offer, this sector is generating growth and has a higher incidence of active e-commerce buyers. Relative to the U.S. catalog market there are few market sectors in the United Kingdom with significant competition. The market is ripe for entry as a market in itself or as a stepping stone into the rest of Europe.
A few words of caution: We may speak the same language, but we are different in terms of attitude, spending patterns and behavior. The direct marketing infrastructure is well developed but not as sophisticated as the U.S. market. For example, the list market lags behind the United States, but this is changing rapidly as more mail-order lists come onto the market and as U.S. companies buy U.K. list companies. The fulfillment industry has been the slowest to keep up with the growth, but there are now some excellent, professional operations that have developed workable e-commerce interfaces.
The key to successfully launching a catalog in the United Kingdom is to adapt your existing methods of customer recruitment and catalog strategy to match this market. Selective mailing to prospect lists on a massive scale is unlikely to be successful. Lists and postage are more expensive than in the United States, although response rates are significantly higher.
Launching in the United Kingdom requires a flexible approach to prospecting, which incorporates more alternative media, such as space advertising and inserts, in your media mix, with prospect lists making up a smaller part of the mix.
As long as the product range and offer appeals to a U.K. audience, there will never be a better time to launch a successful U.S. catalog into the United Kingdom.
Phil Randles is managing director of catalogue development at Centre Marketing and co-founder and director of the mail order trade publication Catalogue & e-business. He can be reached at (44) 1372 396687; fax: (44) 1372 370127 or by e-mail at cdcm@lineone.net.