Stonewall Kitchen: Ingredients for Success

Since Stonewall Kitchen dropped its first consumer catalog in 1999, the Maine-based specialty foods and kitchen accessories merchant has increased its average order value by 210 percent and its housefile by — brace yourself — 1,275 percent.

Meanwhile, clients of its wholesale channel — which provides 50 percent of the company’s overall revenue — include veritable giants of the retail world such as Crate and Barrel, Marshall Field’s and L.L. Bean.

Perhaps more impressive is that Stonewall Kitchen manages to maintain a catalog staff totaling only five and an e-commerce staff of three. “Just a matter of hard work,” is how Joan Walsh, catalog manager, describes the company’s growth — an understatement, to be sure.

Although this relatively new catalog is not yet profitable, its rapid growth and savvy business practices already are turning some heads in the business.

From Market to Mainstream

Stonewall Kitchen was started in 1991 by Jonathan King and Jim Stott, who at the time were selling homemade jams from a table at a Maine farmer’s market. One day a customer bought everything the pair had on the table and sold it to a gourmet food store in Portsmouth, NH.

King and Stott saw an opportunity to start a wholesale business, and they pursued it, going to trade shows and selling first to small and then progressively larger high-end specialty stores such as Whole Foods and Bread and Circus.

Stonewall’s wholesaling provided most of its sales until 1995, by which time the company had built a sizeable client roster. King and Stott wanted to increase profit margins on manufactured goods, and that year they opened the company’s first retail store near its headquarters in York, ME.

The venture’s success inspired King, now company president, to expand the retail division with a catalog. And in the fall of 1999, the first Stonewall Kitchen book mailed to 300,000 people gathered from lists brokered through Millard Group. Encouraged by the mailing’s initial results, Walsh, who came on board in 1999, and her staff boosted specific aspects of the business, such as the following:

• Housefile. Stonewall’s nascent housefile of only about 4,000 clearly needed some nurturing. Walsh didn’t shy away from mailing drops whose numbers dwarfed the housefile total — sometimes 300,000 per drop. In fact, often up to 90 percent of the catalog’s mailings shipped to rental names, despite the production costs and relatively high investment risk involved.

Meanwhile, Walsh continued to test lists, and she used only those that yielded an above-average response rate per book, a process she credits with helping grow the housefile to its current level of about 55,000.

In her testing, Walsh found that individuals on seemingly unrelated lists often responded better than those on lists from other food catalogs. For example, lists of clothing and decorative accessory buyers performed especially well.

• Average order value. Walsh added more hard goods to complement Stonewall’s specialty foods, figuring it would increase average order value, though she knew customers at first wouldn’t expect to see such products in the lineup. “They weren’t looking for hard goods from us; they were looking for food,” she explains.

But she decided to test kitchen items, such as appliances, servingware, dinnerware and cookware. The tactic worked. By the time the Winter 2001 edition mailed, average order value had increased to $48, from $20 in 1999.

Today, hard goods comprise 50 percent of the catalog’s offerings, and the average order value has increased to $62. Much of the merchandise for the hard-goods line is sourced exclusively from European vendors to differentiate the catalog’s brand (customer surveys found that Stonewall catalog customers prefer items with a European country flair).

• Response rates. Starting with its first edition, Walsh marked the catalog mailings with source codes that indicated to which list it had been mailed. This provided her with information on which lists responded to Stonewall’s products, as well as offered a way for her to tailor promotions.

Mainstream Meets Clickstream

The print catalog isn’t the only channel that’s come a long way since inception. Stonewall Kitchen’s Web site (www.stonewallkitchen.com) generates more than $1 million in gross revenue per year, and Walsh says the channel is a profitable one.

Though it supplies only 8 percent of the company’s overall annual revenue, Walsh estimates that the Web provides 35 percent of all catalog orders, making collaboration between the two channels vital. But, she admits, a seamless integration wasn’t always in the cards.

Stonewall’s Web site has been operating since 2000, but until 2002 it could take only customer orders and catalog requests. And none of this data was integrated with the company’s back-end systems. Item and inventory data were maintained internally and then manually replicated online, making for a time-consuming and inefficient workflow.

This proved especially difficult to handle during the fourth quarter, when 50 percent of annual Web orders come in. Customers would place orders for products that, unbeknownst to them, had run out in the warehouse but still were listed on the Web site.

The lack of catalog and Web customer data integration made marketing operations difficult to unify and buying habits even harder to analyze. “We had customers out there on the Web and catalog customers in our internal system. We knew there was a big [customer] crossover, but we had no way to make sense of it,” recalls Mark Marquis, e-commerce manager.

To help solve this dilemma, Marquis and his staff implemented Microsoft’s Commerce Server 2002, which, coincidentally, partially enabled Stonewall to outsource its call-center operations.

The system, installed last year, enables Web customers to view inventory, track orders and manage their accounts using the same platform that call center reps do, making it cost-effective to outsource the latter department.

“The only difference between the Web customer and the catalog customer is the middle man who is the call center rep,” reasons Marquis.

The system also allows for several crossover benefits within the company. For example, Marquis can test images on the Web and send Walsh the ones that online customers respond to most, so she can substitute them in the print book.

The system’s e-mail list-segmentation module adds another dimension to the process, allowing Marquis and Walsh to coordinate e-mail and catalog marketing offers, as well as track the data that follow them.

Marquis intends for the Web site to further bolster the catalog’s revenues in the future by using information from a company-wide data warehouse that integrates Stonewall’s sales and marketing data with its operations.

For example, about 40 percent of the company’s Web orders have no “refer” or source code, so there’s no way to tell whether a customer came from a search engine, a partner’s Web site or the print catalog.

Using information from the data warehouse, the e-commerce staff will have the opportunity to look at a “no-refer” customer’s order, check if the name is on a recent catalog drop list and analyze the data from there.

The Push Toward Profitability

Walsh’s strategies for 2003 focus on increasing the average order value to $80 by the end of the year, mainly through increasing the catalog’s average price point, currently $58. Adding more higher-priced items is the first step in her plan, and one Walsh is confident in making, because, as she says, the Stonewall Kitchen customer profile warrants it (see box below, “At a Glance: Stonewall Kitchen Catalog Buyers”).

She also plans to include more branded food collections and discounted offers on those collections — for example, offering price breaks if customers buy a collection of jams instead of an individual jar. These steps should increase the average retail value of Stonewall’s food category, Walsh predicts.

Plans notwithstanding, Walsh is eyeing several possible challenges that, once overcome, may help the cataloger achieve some efficiencies.

For example, as SKUs and page counts grow, so does the need for more physical space. Stonewall’s on-site warehouse is operating almost at full capacity, says Walsh, and things are sure to get tighter this year if the company carries out its plans to add more product categories.

To combat this, she and the company’s COO are composing a five-year plan that will estimate how many order-entry representatives will be needed for each season, how much warehouse space should be allocated for them, and how many total jobs are necessary to drive the catalog division.

Overall, Walsh intends to keep a close eye on not just one, but all aspects of the business that affect profitability — merchandise, circulation, design, promotion strategies and more.

Indeed, if Stonewall Kitchen can maintain its current levels of concentration and channel integration, this catalog will continue to soar.

About Stonewall Kitchen
Headquarters: York, ME
Product offerings: Specialty foods, kitchen and cooking accessories
Owners/founders: Jonathan King and Jim Stott
Founded: 1991
Catalog first mailed in: 1999
Circulation: 2.5 million in 2002
Housefile growth: 1,275 percent in four years
Annual revenue: Catalog sales represent 16 percent of the company’s total annual revenue; wholesale division is 50 percent; retail is 26 percent; and Internet is 8 percent.
Number of SKUs: 420
Price point range: $4.95 to more than $1,000
Printer: Dingley Press, Lisbon, ME
Primary call center: Call Tech, Columbus, OH

At a Glance: Stonewall Kitchen Catalog Buyers
Average order value: $65
Demographics: 85 percent women; average household income, $100,000; age range, 35 to 54
List broker: Millard Group
Contact: Liane Rassier, senior client representative, (603) 924-9262 x2258