How A Small, Book-selling Cataloger Survived The Big Box Retail Assault

By Paul Miller

The past decade hasn’t been good to small booksellers — catalog or retail. Soundly beaten in price, selection and convenience by volume-driven big box retailers like Barnes & Noble and Borders, as well as online retailers such as Amazon.com, many of today’s smaller booksellers are barely hanging on.

But at least one small cataloger has found a way to reinvent itself and thrive. Chinaberry, a two-title cataloger of children’s books, educational toys, and spiritual and inspirational gifts, has found its own path to modest growth over the past couple of years. The company mails a namesake catalog that offers children’s books and toys, and the Isabella catalog, which offers inspirational gifts, books and music.

“This is a classic case of a small, entrepreneurial business that has stayed true to its niche while continuing to invest in the new things needed to succeed — but at a rate that allowed it to weather a couple of rough seasons,” observes Mark Swedlund, senior vice president of Haggin Marketing, a Mill Valley, Calif.-based catalog marketing firm. Swedlund once worked for Chinaberry catalog rival HearthSong and has followed Chinaberry closely ever since.

In 2001, the company realized it could no longer sell its products the same way it had been selling them before, says Ann Ruethling, Chinaberry’s co-founder/co-owner and vice president of creative and merchandising. Consumers were using the Chinaberry catalog mainly as a resource, then buying the same items in large retail stores or on Amazon.com at lower prices. Some stores even were posting signs saying, “We carry books from the Chinaberry catalog.”

Turnaround Tactics

With sales sputtering and the future clouded by the onslaught of off-price competitors, the Spring Valley, Calif.-based Chinaberry, the corporate entity that operates both catalogs, made some changes to improve sales and profitability. Among them:

Reduced book offerings: In 2002 and 2003, the company reduced Chinaberry’s once dominant book offerings from 66 percent to 50 percent. Isabella’s book offerings, which weren’t as prevalent as Chinaberry’s, were nevertheless scaled back from 23 percent to 10 percent.

“This was hard to do, because our identity was traditionally as a bookseller,” says Assistant Merchandising Director Janet Kelly.

In fact, as Ruethling points out, the company’s catalogs always have been known as the places to turn for advice on book purchases. “We’ve always been known as a resource,” she says. “So we’ve tried to find ways to make money while still being a resource.”

Greater emphasis on Isabella: Chinaberry shifted marketing resources from its flagship book Chinaberry to Isabella. “We moved more mailings to Isabella, because response to Isabella was greater, and it’s a more profitable business,” says Director of E-commerce Stephen Fuller-Rowell.

As a result, over the past three years, the portion of sales has flip-flopped from 60/40 Chinaberry to 60/40 Isabella. This year, Chinaberry’s circulation was at 1.5 million, compared to Isabella’s 1.8 million.

That’s not to say the company threw in the towel on Chinaberry. “It’s still profitable,” Fuller-Rowell says. “We balanced the merchandise mix by doing detailed square-inch analysis, and cleaned up its pricing by offering fewer high-priced items. And as a result, our average order size is growing.”

In fact, Ed Ruethling, the company’s president and co-founder, says that closing down Chinaberry to focus exclusively on Isabella isn’t being considered. “As long as it contributes to our profit, I don’t see any change in that area,” he notes. “I had cut back on Chinaberry’s mailing to allow it to contribute more profit (not sales), which was used to grow Isabella and keep us debt-free in the process.”

Management shift: Perhaps the most notable change of all took place three years ago. Pressured by its bank to make executive changes in 2003, the company laid off President Gary DeMaine, who earlier that year had laid off Director of Marketing Mel Concors. At that time, Ed Ruethling, who had served as vice president of marketing during DeMaine’s and Concors’ reigns at the company, assumed the presidency, operating out of his home office in New Harmony, Utah. He had relinquished the presidency to DeMaine in the late 1990s.

Prior to the shake-up, in May 2002 Chinaberry had brought in Fuller-Rowell to step up the company’s online efforts, and run merchandise analysis and assorted marketing details. “They returned to the roots of Chinaberry,” says Fuller-Rowell, who also telecommutes from his Northern California-based office.

The end result has been a successful shift to management by committee. Fuller-Rowell and the Ruethlings each run the company’s three key departments: Ed oversees marketing, Ann, merchandising and Fuller-Rowell, e-commerce.

“The management structure is more, if not completely, horizontal,” says Ed Ruethling, “with each manager, including Ann and myself, being more like co-workers. Decisions [on most matters, including mailing plans] are generally made with consensus from the management group and are not top-down.”

The management team’s consensus process “works well,” Fuller-Rowell explains. “Ed steps in with occasional course corrections. He does all the mail plans and handles all printer contact.”

Chinaberry’s managers “are true to their mission and true to the naturalistic, counter cultural, green customer they serve,” Swedlund observes. “Some have labeled that customer the ‘cultural creative’ — people who shop at Whole Foods, buy hybrid cars, take eco-vacations and value spiritual aspects of life over the materialistic. I’d venture a guess that most Chinaberry customers (and employees) never set foot in a Wal-Mart.”

What’s more, as times got tough, Chinaberry’s managers “didn’t succumb to the price wars that so many others did,” Swedlund points out. “They took their hits, got their costs in line and husbanded their limited financial resources well during the dot-com bubble. They didn’t overspend.”

Underwhelming Sales

The company’s sales gains have hardly been overwhelming, having increased from $9.5 million in 2003 to about $11.7 million in 2006. But other key factors have proven more important. For one, the company is debt-free, according to Ed Ruethling. And although Chinaberry catalog’s housefile growth has been flat, Isabella’s has grown steadily. For each of the past three years, Isabella’s housefile growth has landed it in Catalog Success’ 200 list, a ranking of the fastest-growing catalogs (see www.catalogsuccess.com/docs/pdfs/cs0306_top200.pdf). For instance, it ranked 133rd in last year’s Catalog Success 200, based on housefile growth of nearly 20 percent, from 39,225 12-month buyers to 47,045.

“For me, growth isn’t an objective at all,” Ed Ruethling says; “it’s how growth is effected. I think of us as gardeners assisting a natural process, rather than commercial farmers.”

Although Ruethling says he’d still like the company to grow over time, significant long-term growth could be a challenge. “With some caution,” Swedlund observes, “both businesses can grow. The kids’ [Chinaberry] business is limited by the seasonality [of gift-giving]; the Isabella business is limited by the competitiveness of the categories, gifts, jewelry, books, etc. At Chinaberry’s size, it’s really a question of how well the company merchandises, how well it can attract new buyers and take share-of-wallet from others.”

Another key factor is the company’s — and its employees’ — personal bond with their customers, their own jobs and each other. “Often we know when an item could sell well for us,” Kelly says. “But unless it really enriches our own (children’s) lives, we don’t carry it” in the Chinaberry catalog. In choosing products for Chinaberry, she and three other staffers try them out on their own kids before considering including them in the catalog.

Mission-Driven Business

The mood at Chinaberry’s suburban San Diego headquarters is tight-knit, consisting of many long-standing employees with families similar to those that Chinaberry and Isabella serve. “They benefit from being in a mission-driven business,” Swedlund notes, “so they can attract and retain more smart and savvy people than you’d typically find in a business of their size.”

Having always taken an approach of one group of parents to another, Chinaberry developed a close bond with its customers. That spilled over to customers of Isabella when that title was launched in 1995. For some of its products that can be found less expensively elsewhere, customer loyalty has helped at times, though not always.

Keeping Up With Big Boxes

For instance, as much as small booksellers like Chinaberry have labored to keep up with big box retailers, marketers who sell compact discs also have struggled. “It’s tough to sell the music we offer in Isabella,” Fuller-Rowell points out, referring to the soothing and therapeutic CDs sold in the catalog by the likes of harpist Hilary Stagg and spiritual group B-Tribe. And there’s no getting around the fact that Isabella has to charge more. “So we put a message in the catalog explaining why we have to do this.” He notes that the messages have resulted in a lot of positive feedback from customers.

Emotions come into play often at Chinaberry, whether they be in the frankness of the two catalogs’ copy, the personal interest its managers take in their customers, or in their desire to stay the course in books. “We’re emotionally attached to Chinaberry catalog,” Ann Ruethling points out. “Most people think we do an excellent job picking our products. But it’s always harder to price competitively because we’re a pretty small cataloger that doesn’t carry a lot of clout with vendors.”

But with the company’s struggle to keep up with larger marketers, Chinaberry’s managers continue to find ways to keep up. Despite cutting back on both catalogs’ book offerings, they’re evolving product offerings to move with the times. “Publishers have cut back in the past few years on children’s picture books,” Ann Ruethling says. “There’s been more of an emphasis on young adult books. So we’re going right along with what’s going on in that world.”

About Chinaberry
Headquarters: Spring Valley, Calif.
Year founded: Chinaberry catalog 1982; Isabella catalog 1995
Merchandise: Chinaberry — children’s books and educational toys; Isabella — inspirational gifts and books
Price point range: $2.95 to $199
Average order size: Chinaberry $65; Isabella $72
Annual circulation: Chinaberry 1.5 million; Isabella 1.8 million
Mailings per year: three (in three drops) each
# of SKUs: Chinaberry 1,000; Isabella 600
# of employees: 42
Customer demographics: women, ages 35-60
Sales per channel: 60 percent phone/mail; 40 percent Web
Annual sales: $11.7 million (2006 estimate)
Printer: American Color
List manager: D-J Associates (Chinaberry), Pacific Lists (Isabella)
12-month housefile: Chinaberry 48,000; Isabella 55,000