Kayaking, Partying & Profits

There’s a very thin line that ties together the two catalogs produced out of 132 Robin Hill Road in Santa Barbara, Calif. Founded in 1994 as Surf to Summit, a B-to-B catalog of kayakin g equipment, the company in 2001 spun off After 5, a consumer catalog of quirky — often wacky — products for wine and martini parties.

After 5 came to life after the company found that its customers were responding briskly to the cocktail party-related novelties that it first offered almost as an afterthought in Surf to Summit. But that’s where any similarities between the two catalogs end. Although the overall business reached profitability for the first time in 2005, the party catalog clearly has stolen the limelight and helped propel the company into the black.

Owner/president Eric States, who in a former life made a bundle in real estate, has invested a fair amount of that in this $5 million business to reach a money-making position. He’s weathered many storms. For instance, the first edition of After 5, which happened to be printed on Sept. 11, 2001, dropped later that fall just as letters were turning up in Washington and New York laced with anthrax.

“The book tanked. Everything went wrong. Bad timing. Bad lists. Bad book size [digest size],” States laments. “We probably only brought in about $1.50 per book. But I was just so damned determined to make this work. I felt like, if I could handle this, I could handle anything.”

Complementary Seasons

With his own real estate capital available to keep the company afloat, States stuck it out, gradually building up the After 5 business. In addition to discovering how well his Surf to Summit customers — who primarily are affiliated with small sporting goods retailers and original equipment kayak manufacturing businesses — responded to the items that would make up the After 5 book, States also pushed forward with the newer catalog because it became a holiday season-dominated business. On the other hand, Surf to Summit’s peak months occur between March and August.

Whereas the sales growth curve for Surf to Summit is fairly flat and steady, the more dynamic growth curve for After 5 has States’ closer attention. And in a recent interview at the company’s headquarters in an industrial park on the outskirts of posh Santa Barbara, he was much more interested in telling the After 5 story. Both books contribute roughly the same amount of revenue.

“I learned how to cold call in the real estate business,” he says, “and got tired of that. But I figured I could sell stuff to anybody as long as I could come up with a good product line.” After 5 carries party-related T-shirts, Hawaiian shirts, novelty drinking glasses, cocktail shakers and cocktail party games, among other things. Surf to Summit offers kayak seats and seatbacks, anchors and hardware. (The corporate name of the two catalogs remains Surf to Summit. See SurftoSummit.com and After5catalog.com.)

“It’s impressive that he’s able to run the two businesses under one roof,” observes Mark Gallo, a friend of States who’s been a close observer of After 5. Gallo is CEO of Magellan’s, a Santa Barbara, Calif.-based cataloger of travel gear. “And he continues to see success with the Surf to Summit business, even though more of his creativity and energy is spent on After 5.”

After 5 Evolves

After 5’s product line has evolved considerably since day one. “We wanted to be a mini Williams-Sonoma at first, because we had a number of kitchen items,” says States. “We even used the Williams-Sonoma list at first. But then I thought, ‘Who would you buy from: big, fat Williams-Sonoma or us?’ So we expanded to become more of a gift catalog, and listened to what customers wanted.”

Some gifts abound, but the keyword here is party novelties. Among the bizarre product lines that have done well for the company in terms of both sales and margins are rolls of yellow barrier tape typically used by police to close off crime scenes to the public; except the tape After 5 sells says “Caution: Party Zone.”

“It seemed like such a dumb idea, but it took off,” States says. “And the tape is cheap to produce.” Turning what seemed at first like a “dumb idea,” typifies States’ approach to the business.

“Eric’s beyond the classic entrepreneur,” observes John Hunt, president/CEO of Santa Barbara-based Compuvision, a local area technology consulting firm. “He’s daring and willing to take on new businesses, and basically has no fear whatsoever. He just decided one day to move into the catalog business; read up on it, taught himself, and with no mentors to help him, jumped right in. I’ve never met anybody with that ability.”

After 5 originally was designed as a men’s book. “Guys like to party and set up parties,” States says. But it’s evolved, and women ages 34 to 55 now account for 65 percent of the book’s sales. “That was kind of a shock for me, and it changed the perspective of the catalog. So we added more products, such as Cosmo Queen T-shirts, specifically for women.”

After 5 primarily attracts the deeper pockets of the middle-aged market with income ranging from $75,000 to $150,000. “We first used list brokers and the dynamics of modeling to get us lists of upscale prospects,” States says. “And although we have a lot of fun college-age drinking toys, we’ve never marketed toward the under-35 group. They’re more Web savvy and aren’t getting our catalogs, yet. So we built blogs to go to an audience that’s never seen our book.”

As a result, After 5 likely will make a greater impression on the 21 to 34 market. “It’s an area we’re experimenting with because we’ve neglected it,” States says. And considering that more than 60 percent of the catalog’s sales are placed online, he expects greater interest among younger people.

Personalization On Premises

After 5 and Surf to Summit fulfill orders right out of the company’s Santa Barbara headquarters. Taking a page out of Lillian Vernon’s book, After 5 makes frequent use of product-personalization to help make its merchandise stand out.

“We make a product, we build it here [at the company’s Santa Barbara headquarters], then somebody knocks it off and gets it made in China for much cheaper,” he says. “But China can never compete with our personalization. That keeps us from being undercut by cheaper versions.”

The company operates seven sublimation presses that execute personalization, all of which it built, literally, from scratch at an $80,000 investment. Being a jack of all trades, States also built a T-shirt printing machine for $20,000.

Online Opportunity

The company “has a lot of opportunity with its personalization,” Gallo of Magellan’s says. “But it’s more of an online opportunity than in print. The economics of online vs. print and the ability to offer more of a dynamic online store — especially for the personalized kinds of products After 5 has been pursuing — is much more demonstrable online than in print. And with the technology available today to make an engaging and compelling Web site that can tell the story on personalization, it allows customers to see what those possibilities are.”

What’s more, After 5’s robust prospecting activity in 2005 set the company up for greater growth with the print book. Although After 5 annually had been mailing fewer than 500,000 books to customers and prospects through ’04, it mailed more than 2 million catalogs in ’05, primarily to prospects, to build up its housefile by 85 percent. That propelled it to 16th in the last year’s Catalog Success 200, which ranks the fastest growing catalogers by housefile growth for the previous year.

Last year, however, States reeled the prospecting in, returning to a circulation level of nearly 400,000. “We took a different tactic, trying to get the money back we invested in prospecting in 2005, while also focusing on strategic Web marketing and viral marketing,” he says.

Whereas an After 5 catalog mailed each month in ’05, the company last year only mailed for Mother’s Day, Father’s Day and spring-summer editions, in addition to three books from Nov. 1 through mid-December.

“It takes any new cataloger three to five years to become profitable,” says Mike Hayden, president of co-op database ALEXA Marketing and former senior vice president of brokerage for the Millard Group, After 5’s list manager. “You have to build up your housefile to supplement mailings. He may have over-mailed a bit in spring and could’ve mailed more during holiday.”

Despite reeling in its circ, After 5’s ’06 sales came in level with ’05, States says. “We’ve developed an asset, our housefile,” he says. “We have a brand, we’ve gone through the school of hard knocks. Now it’s time to leverage and refine that.”

In addition to mailing catalogs more profitably, After 5 will focus more heavily on the Internet going forward. “We’re also putting greater emphasis on search engine optimization and search engine marketing,” States says, “because we’ve recognized them as much cheaper ways to acquire customers. We can bring in 20,000 to 30,000 more new customers a year with a very small outlay. On the other hand, on 1 million books, you’re lucky to get 12,000 to 15,000 new buyers.”

Comparable 2007 Circ

This year’s print mailing plan calls for comparable catalog circulation and sticking to Mother’s Day, Father’s Day and holiday mailings. “That’s something I didn’t know in the beginning,” States says. “I thought a book in the mail every month would work. But you can bury yourself financially that way.”

In leveraging the company’s housefile, After 5 is communicating more with its customers, by making its Web site a place to learn about making martinis and throwing parties. “You don’t sell anything with that,” States says, “but you get that viral marketing. You get people talking about you.”

For instance, the company recently started a gift reminder service, sending out e-mail reminders to customers who sign up online. “You fill in birthdays, anniversaries and other special occasions, and tell us how far in advance you’d like to be reminded,” States says. “Then we e-mail a reminder.”

And States hasn’t forgotten about the Surf to Summit business, which only mails about 3,000 catalogs annually. Next up for
the kayaking side will be a venture into retail, and Hunt of Compuvision doubts that moves like that will hurt. “Eric has no qualms about going out on a bit of a financial limb,” he says. “But he always seems to come out of it doing well. Each successive business has taken him to the next level.”

Headquarters: Santa Barbara, Calif.
Year founded: Surf to Summit - 1994; After 5 - 2001
Merchandise: Surf to Summit - kayaking equipment; After 5 - party-themed gifts and novelties
Price point ranges: Surf to Summit - $5 to $90; After 5 - $15 to $875
Average order size: Surf to Summit - $600 to $1,500; After 5 - $68 to $85
Annual circulation: Surf to Summit - 3,000; After 5 - 500,000
Mailings per year: six
# of SKUs: 650-700 total
# of employees: 45
Customer demographics: Surf to Summit - sporting goods retailers, original equipment manufacturers; After 5 - men and women over 35, average income $75,000 to $150,000
Sales per channel: 70 percent Web; 30 percent call center
Annual sales: $5 million
Printer: Times Printing
List manager: Millard Group
12-month housefile: Surf to Summit - 3,000; After 5 - 22,412