Catalog Start-ups: What You Need to Know

If you want to succeed, you should strike out on new paths rather than travel the worn paths of accepted success.

—John D. Rockefeller

Building wealth by starting a catalog is the stuff of legends. The reality, as you know, is much different.

Having inadequate financing from the start is a blueprint for failure. Yet, having adequate financing and deep pockets doesn’t guarantee your success either.

Sure, cataloging is fun and exciting, and it can be rewarding. My intent is not to scare readers away from the prospect of starting a catalog from scratch. Rather, I want to make you aware of what it takes to start a catalog today and what is the best strategy for doing so. I want to give you some idea of what it will cost, and how long it will take to achieve profitability. I’ll also discuss spin-off catalogs and how they can leverage your housefile.

Questions to Answer

It’s difficult to start a catalog from scratch these days because there’s no housefile to leverage, and response rates to outside lists are lower. It takes a long time and a sizeable investment to grow a housefile to the point of breakeven. Most entrepreneurs underestimate how long it will take and how much money they’ll need to reach profitability. I ask would-be entrepreneurs the following questions:

Why Some Start-ups Fail

Assuming they have the right product, why do some start-ups fail?

Retailers Who Start Catalogs

Retailers often don’t have a housefile to leverage. Perhaps they’re capturing names and addresses at the point of sale. But these names are of little benefit since retail buyers aren’t necessarily mail-order catalog shoppers.

Typical problems associated with retailers starting catalogs are as follows:

Spin-offs

Spin-offs are catalogs started by existing catalogers. The odds for success are much greater, because the company already is in the business of catalogs with at least one title (assuming the spin-off title is related to the existing catalog). That is, the cataloger already has a housefile that can be leveraged.

Finding segments or pockets of your current housefile that can support another catalog title will add incremental revenue without increasing fixed costs. For example, a gift cataloger may notice that a product category continues to grow, even after it’s been expanded a few times.

Once you have at least 10,000 customers purchasing from a particular product category, you may be able to start another title. This assumes the company can merchandise the new book with at least 300 SKUs. Starting new titles and leveraging your housefile can be a great way to grow your business.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in marketing, circulation planning, forecasting and analysis. He can be reached at (302) 541-0608 or by e-mail at slett@lettdirect.com.