A Chat With April's Profile, Terry Powers, founder/president, ComputerGear

Catalog Success: Where's your company headquartered?
Terry Powers: ComputerGear is out of Redmond, Washington.

CS: When was the company established? Were catalogs mailed right away?
TP: It was founded in 1993. At that time, computers were starting to come into the workforce, and they were not very friendly. They were ugly, too. It was basically started on a dare. Someone said, “Why don't you make computers more friendly?” This whole process of having a computer on your desktop be more friendly. I saw that there wasn't really any products out there to decorate your desk or make it more fun, so I pretty much took someone up on a dare and did it.

We first started designing, manufacturing and selling a preprint line of T-shirts and gift items to other catalogers. We were on the wholesale side of it as a vendor and a supplier. We actually thought of the idea of putting like … registering your softwear (sic), with the little insert card inside the box of softwear (sic). We thought of people registering their softwear (sic), W-E-A-R. The little postcard was the hangtag that you see on clothing, whether it was in stores or catalogs, because we did sell and continue to sell to quite a few science and tech museums, and such. You had this little hangtag that people would send back to register their softwear (sic).

Eventually, people started writing us notes on them and sending letters asking us to put out more and more and more products. So in 1995 we mailed our first 16-page, digest-size catalog, featuring not only the T-shirt, but more of the gift items as well. So we started as a wholesaler and migrated to a business-to-consumer catalog company.

CS: What are the customer demographics at ComputerGear?
TP: It's more than just the catalog shopper. We do continue to sell to computer stores, museum stores, book stores on the wholesale side. Our base customers are technical professionals — mostly guys and those who buy gifts for them. I would say aged 40-plus.

CS: What's the primary merchandise offered at ComputerGear?
TP: It still revolves around that core customer, but our customers have also told us that they are very interested in science and technology. So we've grown to a 72-page digest catalog: T-shirts, gadgets, food items, jewelry, we don't carry as many books anymore as we used to, videos. The product categories are quite large.

CS: How many SKUs, on average, do you offer in the catalog?
TP: The catalog usually runs about 1,500 SKUs.

CS: How many times a year is the catalog mailed?
TP: We mail monthly.

CS: What's the catalog's circulation?
TP: It's like three million.

CS: Does ComputerGear operate any retail stores?
TP: We did at one time have four retail stores. They were seasonal stores, but we no longer have them. It was a managerial business decision back in 1999.

CS: How does ComputerGear's sales breakdown between its two channels?
TP: It's about 55 percent Web [45 percent catalog] that we receive our orders at, but of the 55 percent that we receive online, 85 percent of them are catalog-driven.

CS: How did you get started in the catalog/multichannel business?
TP: My background is retail and sales management. I have a background with Federated Department Stores and also with commercial real estate, with retail. I'm heavy on the retail side.

CS: Were you the sole founder of the company in 1993?
TP: I was. And it wasn't the first mail order company that I started. Out here in Seattle, I started this Seattle alumni association for the University of Florida. The Gators are about as far from home as we could get, so we needed stuff to wear to our football games and when we would watch on TV.

So I started a mail order catalog to sell University of Florida sweatshirts and T-shirts and gift items to other alums that were out of state. I was putting together a compiled list to go forward with that, and then when doing research and getting into it I discovered it wasn't going to work because 75 percent of alums still live in Florida and can get their Gator goods pretty quickly and locally.

CS: Did you ever mail that catalog?
TP: Yeah, we did.

CS: What was the name of the catalog?
TP: Club Gator.

CS: So that was your introduction to the catalog industry?
TP: Yes and no. In department stores you're still always involved with credit card and direct mail pieces and bill inserts and things like that. Fresh out of college, I used to buy children's clothing as an assistant buyer. I thought it would be a great idea for back to school, since we had an opportunity to do a mail insert in the bills for September, to do Scouts [Girls and Boys Scouts of America]. We did an awesome little bill insert flier with all of the leaders’ uniforms — Brownies, Boy Scouts, Girl Scouts, the whole gamut. As a matter of fact, we received a commendation from the Boy Scouts of America because it had never seen sales like that anywhere, at any prior time. It was awesome; it was really cool.

CS: What do you enjoy most about the catalog/multichannel business?
TP: It's always changing. It's never the same thing, even from year-to-year, season-to-season. And the fact that it is truly multichannel. When I was in college, you never even thought about having Internet-only stores. It changes so fast.

CS: What do you enjoy least about the catalog/multichannel business?
TP: The [cost of] postage and paper going up, and little glitches in the economic system like we had last year. It's difficult to plan to do any really long-term things when you don't know what postage and paper are going to be year-to-year. That's the challenge of it. You work with it.

For instance, we've been a digest-size all along. It promotes the brand, it promotes the product categories and it's a part of our identity. Now to have to look at moving to a slim jim, because we've even tested a catalog digest-size, full-size to digest, and it was a wash. Our customers didn't have a preference. Having to move a size, we kind of lose a little bit of control over branding that way. They'll still take a slim jim and we'll still get the same response rates from it, but we've lost a little bit of our identity being in the pack with the rest of everyone else with the slim-jim size that they're going to go forward with.

CS: So when is ComputerGear shifting to a slim-jim format for its catalogs?
TP: Probably fall and holiday ’09.

CS: What's the toughest challenge you've faced at ComputerGear, and what was done to overcome that challenge?
TP: We used to be able to prospect a lot more heavily. With the cost of postage and paper going up, we have to do less prospecting by the mail. But on the flip side, to overcome that and fine-tune that a little bit, we work more economically by buying our own paper and co-mailing a letter automated, digest-size [catalog]. I'd like to be prospecting a little bit more, but I think everybody's pulled back on their prospecting and their circulation, period.

CS: Have the rising costs of prospecting with catalogs forced ComputerGear to invest more heavily into some online tools such as search and e-mail?
TP: We were online in 1995 before anybody knew what to do with it. In fact, our first Web site wasn't even an e-commerce Web site. It was a catalog request channel with the times of the mailing as a service. So we could probably tell you some real dinosaur stories, back in the days kind of thing. We've kept up with it and our customers have required us to keep up with it. You still go back to marketing 101 and listen to what your customers say: What they want and how they want it.

CS: And the catalog is still the major driver of purchases at ComputerGear, right?
TP: Right. I've seen articles, and we've actually written articles, where it's just down to page views. You go and look at a catalog, and if you've got six items per page and someone flips through five pages, they've seen more of your items than if they go to your Web site and they click on the average four items per visit. It's just common sense. I chuckle when people say, ‘Oh, we're trying to get rid of our catalog.’ That's what's driving your business. And we do matchbacks very religiously and very stringently, and we see it over and over and over again: The catalog's driving people to your Web site.

CS: How frequently do you perform matchbacks?
TP: After each mailing. Then we use our Web analytics. And from day one, the first year we mailed a catalog, we saw this way increase in sales on the Web. And that was about the same time that Eddie Bauer decided, ‘Oh, wow. Look at this Web business. We can get rid of our catalog.’ It didn't mail its spring catalog out and didn't have any sales. We matched them all back and figured out the same thing — the Web business, the increase, is still catalog-driven.

CS: What factors have led ComputerGear to be a successful catalog/multichannel business?
TP: A lot of it's luck and timing. Most of how we stand out is that our products are unique. Seventy percent of our products are developed here [at the company's headquarters]. That's really our strength and how we stand out from the pack.

CS: If you hadn't gotten involved in the catalog/multichannel business, what do you think you would've done for a career?
TP: It would still be marketing and sales-related. I think about Christmas year-round. I start Jan. 5 with the first trade show out of the box. I'm looking for Christmas things or gift items, thinking about marketing all the time. So it would always be marketing-related. If I can't put up Christmas decorations … I'm one of those ones before Thanksgiving. My training's in retail for a long time, so I would miss the Christmas season.

CS: Is ComputerGear's business seasonally-driven?
TP: It still is a fourth quarter gift business like any gift catalog. We do have other occasions. Like by the time this comes out, Pi Day will be over because it's 3/14 — 3.14 and then the rest of the decimals. The mathematical symbol Pi. We get incredible business off of that. It's just fun. We do have things going all the time, but like any other gift anything, it is fourth quarter.

CS: Is there a lot of competition in the computer gift market?
TP: No. From the very beginning, if it was in an Office Depot, OfficeMax, Tandy's, if it was in any of those stores, we didn't touch it. And again, it still goes back to our proprietary products. You probably notice that we don't carry a computer cable unless it's energy-efficient and it has some sort of benefit outside of just being a computer cable. You don't really find any software or anything like that on our site. We've never, ever carried it.

CS: And there's no plans to change this model in the future?
TP: No. You can go to a big-box or to our competitors for that kind of stuff. We just want the fun stuff, the stuff that you can't find. It's not readily available or we develop it.

CS: What's the best thing about working at ComputerGear?
TP: The variety. One moment we're looking at how our Pi Day things are going and then the next moment I'm speaking with you. It's a lot of variety. It's nice to have the analytical side of it in addition to the creative: Are these products continuing on our mission statement and fit in with what we want to do? You get it all.

CS: Looking ahead, where do you see yourself and ComputerGear in three years to five years?
TP: It's kind of hard with that postage thing going on. We will still be here. We've got fabulous plans for this year. Our customers keep asking us for more science and tech and math things. So we've already started working on new products. We do see it continuing; we're not going anywhere.

CS: Has ComputerGear had to downgrade its projections this year because of the recession?
TP: We did fine last year — we were just off plan by a single digit. And again, it has to do with the fact that these are people's passions. These are things that really strike a chord when people see them. And for this year, we're mailing smarter. We pretty much mail when our operations are streamlined and efficient. We're mailing smarter and we're really looking at those prospects. We have always prospected at a profit. And we will continue to do so.