Catalog Retailers’ Resolutions for a Profitable New Year

The recession has been tough for many catalog retailers. Recently announced cuts and operational changes within the U.S. Postal Service will burden catalog retailers even further in 2012, with increased costs and logistics challenges such as higher postage rates, mail processing center closures and the potential end of Saturday mail delivery. Private shippers are also expected to increase prices by about 5 percent this year.

However, catalog retailers can take actions now to improve profitability and competitiveness. Like losing weight or quitting smoking, these five New Year’s resolutions will lead to greater financial and operational health for catalogers in 2012.

1. Increase your web orders. While your catalog may still be what catches consumers’ eyes, accelerate their shift from phone ordering to the internet and even the mobile web. Even efficient call centers generate significantly higher costs than internet orders. Make efficient use of your e-commerce platform investment, where order placement costs are measured in pennies vs. the $3 to $4 it costs per phone order. Driving more orders online also allows for major savings through call-center consolidation and staff reductions.

Incentivize consumers to move from print to the web through special discounts or free shipping for online orders. The experience should be just as easy — if not easier — than ordering on the phone, even for the least sophisticated internet users. Once a customer orders online, the likelihood of future online purchases increases. You may also want to start thinking about mobilizing your catalog via Google Catalogs.

2. Outsource operations. There are more functions than just the call center that can be outsourced effectively. All aspects of fulfillment from call centers to warehousing and distribution can often be outsourced for significant savings. This can be especially critical for smaller catalog retailers that don’t have the budget scale of their larger competitors.

3. Continue to prospect … but in new ways. New customer acquisition is extremely expensive for catalog retailers who limit themselves to the traditional prospecting method of list purchasing. Catalogers must think outside of the box to attract new customers through search engine optimization techniques and the use of social media discounts to encourage their best customers to spread the word. Even the smallest of catalog retailers can partner with Google or Amazon to reach a new and broader customer base.

4. Develop your IT infrastructure. Your company’s bread and butter is its catalog. However, a state-of-the-art IT infrastructure to support sales and fulfillment is essential to maximize your catalog’s marketing power. Is your e-commerce platform competitive? Are your merchandising, fulfillment and inventory management systems integrated for optimum efficiency? IT costs have gone down while functionality has improved. An investment in IT can have the most significant impact on a catalog retailer's performance.

5. Negotiate with your vendors. Just as consumers are looking for discounts, catalog retailers should be negotiating more aggressively than ever with their vendors for greater discounts. One of the biggest opportunities is with printers, who have excess capacity and are looking to survive. (The Printing Industry of America estimates that nearly 9,500 U.S. printers will go out of business in the next decade.) In addition to negotiating lower pricing and bulk discounts, consider asking your vendors for improved credit terms, including bigger discounts if bills are paid in less than the typical 60 days.

While the new year may not bring better economic news, catalog retailers that resolve to take proactive steps now to restructure operations and improve profitability can look forward to a more competitive and profitable 2012.

Pat Fodale is a managing director at Loughlin Management Partners + Company, a New York-based management consulting firm. Pat can be reached at PFodale@lmco-ny.com.