Power-Packed Product Line: Focus on B-to-B Merchandising

Ron Mis sees Galeton as the Dell Computer of the work gear industry: manufacturing and marketing its own product line to a loyal fan base.

Mis, owner and president, likens Galeton’s business model to that of a true direct marketer, with cost advantages that a manufacturer enjoys when it sells its own goods direct to end-users.

By selling direct in this way, Mis explains, it “makes our business truer to the original concept of a direct marketer than many who call themselves that today. Many who say they’re direct marketers actually are distributors of other manufacturers’ products,” he explains.

Thus Massachusetts-based Galeton both makes and markets many of its own products, which include work gloves, footwear, eyewear, apparel, safety supplies and related merchandise.

Such a business model has served this business-to-business (b-to-b) cataloger well: Galeton is one of the few b-to-b catalogers to make the Catalog Success Top 200 list two consecutive years. This year it was ranked No. 152, with a 10 percent housefile-growth rate. And in 2004 Galeton was ranked No. 86 with a 27 percent customer growth rate.

Here’s the story of how this cataloger is using its merchandising mix to help grow its customer list.

In the Beginning

Galeton started as a glove-making business in 1908 by a Mr. Smith in Galeton, Pa. (His first name has been lost to history.) The company made and sold only work gloves until the 1980s.

The company, then known as Smith of Galeton, had a manufacturing facility in its original location in Galeton, until the 1990s, the same decade the company entered the catalog business.

Galeton had begun to expand into other product categories, but its new product tests were limited, and its expansion capacity was strained by both a lack of pages and funds. The company was producing a 30-page glove catalog when Mis bought it in 1997.

Mis, whose own background is in business acquisitions, gets excited when he talks about Galeton catalog’s potential: “Today, we want to look at the person who puts on our gloves and also needs other products to wear to work and say, ‘What’s next that we can supply to them?’ That’s how we started to expand into eyewear. Then we moved into selling headgear and footwear. Our mission is to be the most efficient supplier of these products.”

This fall, Galeton will mail a 160-page catalog. A bit less than half of the merchandise in that book is gloves. Currently, the company’s total SKU count is 5,000 to 6,000 — still relatively small by catalog industry standards. But Mis says that a testament to the success of the product launches is the penetration curve of new merchandise lines over time. “We track these data, and they display a classic ‘S’ curve. New product sales build gradually, then accelerate over time,” he explains. “Many of our new products still are in the initial stages of their market penetration, and have significant room for growth.”

Mis plans to continually add new products each season.

Growing the Merchandise Mix

Early in the catalog’s expansion, the company identified new product categories by looking at what competing catalogs offered. If competitors were rational in their merchandising decisions, then Mis and his team reasoned that they also could sell products in the same categories.

More recently, Galeton identified new merchandise categories based on its core capabilities in product sourcing along with the developing brand identity it’s established with customers.

Growing the catalog’s merchandise mix is a balancing act. Mis cautions that if a company — his or anyone else’s — strays too far, it can risk diluting its identity. “It’s best to accept the limitations of a company’s core strengths and brand identity, and not try to extend too far away from its base,” he explains. “Unless your markets are tanking or your product line has been made obsolete by a new technology, it’s often better to build on the core strength of a business than to branch out and become spread too thin.”

With these concepts in mind, Galeton merchandises within areas — notably, gloves and work gear — that are related to its core strengths. In this way, Mis and his staff feel they can use their economic advantage and build on the identity they’ve already established with customers.

The Catalog as a Test Vehicle

When it comes time to try new merchandise offerings, Galeton tests products right on the catalog pages. Mis calls this a cost-effective testing vehicle and says it’s much more accurate than focus groups and similar methods. But Galeton still uses some degree of caution when it comes to entering a new product category full-force. “We typically enter a new category gradually, and test it with a limited offering to reduce our risk,” Mis says. If the initial limited test gets a good response, Galeton expands its offering in the category in subsequent catalog editions.

Testing a single product doesn’t work well, Mis says, adding that the offer must be substantial to have credibility among customers. “At the same time, too broad of an initial offer can expose us to more risk, so we compromise and test between one and four pages of products in a new category when we start.”

Tight relationships with vendors are helpful in making this type of merchandise testing possible. “Our manufacturers help us by identifying products that are selling best in our markets,” says Mis, adding that customers also help by suggesting products they’d like to buy. “We don’t determine up front what category we might enter. We determine what categories to test, and then we let the test results tell us what categories to merchandise more fully.”

Direct Sourcing Advantage

Several years ago Galeton did its own manufacturing in the United States, and the company operated its own factories filled with sewing machines. But as was the case for many U.S. manufacturers, it became less costly to have the job done overseas. That trend, in and of itself, isn’t unique, says Mis, noting that many companies source overseas today using an agent. “But we don’t use an agent. We do all our own negotiating with the factories. We don’t use a middleman,” he notes.

This gives Galeton two distinct advantages: lower costs and more control in the manufacturing process. “There’s a lot of cheap, crummy stuff out there. [At Galeton] we’re not just selling somebody else’s widgets, so we have something to say about how it’s made. We can also price more aggressively because we’re not working with a middleman.”

From a cost standpoint, Galeton’s business benefits from the direct-sourcing relationships. By selling direct, Galeton isn’t incurring additional costs of working with distributors, says Mis. Distributors and resellers incur costs along the way, such as for reshipping, packing and handling. In such cases, handling costs would have to be added to final product prices. Galeton, meanwhile, can keep its product prices lower because it’s selling direct.

Of course, Mis admits, it’s sometimes a good idea to act as a merchandise reseller. In several instances, Galeton resells other vendors’ goods, but only where it makes economic sense. For example, “We may carry a product when it’s something customers are willing to pay a premium for in terms of added value, or if it’s a specific brand they want,” Mis says.

Before deciding on that route, Mis asks: Is the distributor adding value to the product? If the answer is “yes,” then reselling makes sense. If not, he won’t do it.

A Low-cost Model

Mis insists the main reason the company grows faster than most others is basic math: “We can increase our circulation faster than others.” To explain, he uses the analogy of Southwest Airlines vs. United. As a low-cost carrier, Southwest can grow faster and respond quicker to the market. “We’re the low-cost model,” he recounts. And the sourcing half of the equation helps the company operate more efficiently. “By having a lower cost, we have more room to play,” he notes.

Handling all of its own manufacturing without using middlemen is something not all catalog merchants can do. “Our products don’t change as rapidly as some, for example, fashion merchandisers,” Mis says. “We don’t need to redesign our goods every season.”

Galeton sources products from eight countries, with China being its largest provider. Mis himself travels to meet with factory executives in China, Malaysia, Sri Lanka and Thailand.

“It can be difficult trying to operate a manufacturing operation so far away,” Mis admits. “But we stay on top of things and communicate. We take the information on each production run and let it travel down the learning curve to get better results each time through.”

Quality control always is an issue — whether you’re manufacturing locally or abroad. “Add 10,000 miles of distance, and it becomes that much more challenging,” Mis says. “We absolutely have to have good communication.”

E-mail is an important tool, and the company often overnights product samples. The two biggest lessons he tries to remember: 1) treat manufacturers as partners in the business, and 2) when starting to work with new manufacturers, listen to their needs. It’s important to realize they’re also running a business, Mis says, and they have challenges, needs and demands of their own.

Strategies for Growth

Considering Galeton is a nearly 100-year-old company, it might be odd to call it a young business. But, says Mis, “We’re young in our evolution” as a catalog operation. He says he’ll continue to grow both catalog circulation and merchandising.

“Our circulation is growing rapidly, but still has a long way to go,” Mis admits. In this regard, one technology the company looks to tap is database modeling, a tool Galeton has just begun to utilize and is looking to delve into as a way to grow its housefile.

Mis adds that Galeton’s page count still is relatively modest compared to other b-to-b catalogs, so there’s room for growth there as well.

Acquisition is another possible avenue for expanding the business. Being from a background in mergers and acquisitions, Mis is on the lookout for a good opportunity to buy another company — if it’s a good fit for Galeton. “I’d love to invest in or acquire another business, one with $5 million to $50 million in sales, and apply the same principles to it — to help the company with its sourcing so it can take full advantage of the market’s opportunities.”

One thing is for sure: Whatever direction Mis takes Galeton, continuing to grow both the catalog’s merchandising and its overall business certainly will be priorities.

Galeton’s List
12-month housefile: 43,381
Rental cost: $105/M
Contact: Mike Soltis, MeritDirect, (914) 368-1025

About Galeton
Headquarters: Mansfield, Mass.
Year founded: 1908
Merchandise: work gloves, apparel, eyewear, footwear and safety supplies
Primary demographic: customers in industrial and manufacturing settings
Ranking on the Catalog Success Top 200 list: 152
12-month housefile: 43,246
Full-time employees: 30
SKUs: 5,000 to 6,000
Web sales: 15 to 20 percent of overall sales
Printer: Dingley Press

Adventurous Creative

Galeton has a unique style for a business-to-business (b-to-b) catalog. Its creative personnel employ bold graphics and colors, and devices such as bursts, bullets and callouts. It even has put illustrated cartoon characters on its cover.

Ron Mis, owner and president, says the company uses a consumer-style creative approach to market its business products. “It’s just my own enjoyment of making something more fun to look at,” Mis says.

He notes that most b-to-b catalogs tend to have a boxy appearance. “Pages are designed as grids, and products are arrayed in different-sized squares, usually in relation to their sales volume. This is practical, and even efficient, but it’s about as visually appealing as looking at a wall of bricks,” he says.

Where does Galeton get its creative inspiration? “We constantly look at other catalogs, and get ideas from what they’re doing,” he notes. Galeton’s catalogs are designed by a team comprised of employees and outside specialists. Says Mis, “I give them considerable freedom to innovate.”

Ultimately Mis believes designing a catalog is like designing a house: There are basic rules to be followed, but after that it’s a matter of personal taste. “My taste is a little more fun, a little more adventurous than the typical b-to-b book,” he notes.

As each catalog is mailed and customers respond to the catalog’s look, Galeton’s design team takes feedback into consideration when shaping the design for its next book.

Alicia Orr Suman is a business writer based in Maple Glen, Pa., and is the founding editor of Catalog Success. You may contact her at aorrsuman@aol.com.