What’s In Your Catalog’s Future?

For the past two decades, I have written and spoken worldwide on the future of the catalog industry. My position has always been to challenge conventional thinking, and I have been right on some things and wrong on others, but hopefully always provocative.

My early thoughts on the future of the Internet (1994) and its influence on catalog and direct marketing have been, for the most part, accurate. I predicted the growing importance of e-mail marketing, permission-based databases, proprietary databases and the surety of dynamic pricing as an outgrowth of self-directed, online commerce.

In 1997, I was correct in my assessment of the coming washout in the e-commerce and dot-com worlds due to the inevitable investor demands for earnings. And, along the way since 1982, I have been reasonably accurate about variable signatures, selective binding, cooperative mailing pools, digital photography and a number of other innovative catalog production technologies. So, as I look ahead to the first decade of the 21st century, the future that I believe lies ahead is both interesting and increasingly complex compared to the two rather straightforward catalog decades.

To deal with the big question first, I believe that catalogs are here to stay. Not only do I see a growth in the overall number of catalogs produced and distributed, but I also predict a far more precise management of the frequency of catalog mailings based on better understood individual customer preferences.

I also believe that a developing backlash to Internet preoccupation will enhance catalogs’ inherent tactility. Buyers will want the simplicity of browsing a catalog, especially as the online technology fosters an increasingly jaded buying experience. The next generation of buyers will have the skill to use e-tailing, but also the tendency to use simple, uncomplicated channels, such as thumbing through a catalog and ordering by cell phone.

Say Goodbye to the Post Office

Second, distribution of printed catalogs will, I believe, be accomplished by alternative services to the U.S. Postal Service (USPS). The monolithic weight of the nonproductive union and entrenched bureaucracy of the USPS will doubtlessly cause its extensive mutation or privatization. In its place, at least as far as catalog delivery goes, will be a fresh, private, efficient and innovative service. It will meet the needs of catalogers and the capabilities of their carefully-constructed consumer databases, so catalogers can create customers’ self-determined printed catalog selections. Those catalog companies that carefully evaluate the next non-postal incarnation of catalog distribution will be the early adaptors that will lead the evolution of the non-USPS catalog future. I see the day when catalog owners will no longer have a silent partner they cannot control.

Customized Databases

Third, I believe that the list industry will become almost entirely the creators and managers of custom, proprietary databases and the liaison between catalog merchants and catalog customers.

Compiled lists are nearing extinction as a service of list professionals; they are available online and downloadable from ZapData and similar companies that recognize that compiled names are now a function of automated processes and are not an innovation. The advocates for the millions of consumers who and businesses that truly desire to participate in direct marketing, e-mail marketing, e-commerce and catalog marketing are the list brokers and managers of the future. They are not likely to emerge as traditional brokers or managers but as two-way facilitators of permissions, privacy, consumer interests and seller niches. It is possible that these new specialists will manage market and product relationships and control access to those relationships for both the consumer and the merchant in specific commerce areas, such as clothing, food, children’s educational products, office supplies or safety products. A consumer with an interest in gourmet food may go to a specific facilitator to “sign up” and to have his or her interests represented and managed.

Leveling the Retail Field

Fourth, I see significant taxation. The economic differences between retail stores and catalogs will disappear. The e-commerce taxation will spread to catalogs, and the result will be a level playing field for all commerce. Regardless of what politicians say at the federal, state or local level, they are going to continue taking more of your money, because they have to get it somewhere. And the catalog industry, as well as the e-com industry, is a big, juicy, cash-laden target.

Product Reigns

Fifth, product will remain supreme over technology. Access innovation, driven by Internet technology, will be secondary to the fundamental and growing consumer demand for new products and better product choice, selection and depth.

Product design, as an aesthetic, will be the next product differentiation. The sleek Euro designs and design principles will begin to work their way west and bring about a neo-design revolution in product aesthetics. The first indications are seen in the new universal automobile design concepts having European origins.

Product introduction and retirement rates will increase in velocity; new products will be cycled at much faster rates than I presently experience. The product masters of the future will be fast, bold and change-driven, and product will emerge as “king.”

Margins Matter

Sixth, high-margin niche catalogs will command extraordinary values. As margins continue to erode as a consequence of dynamic pricing and online price comparison, catalogs with high-margin products and dominant market penetration will achieve valuations significantly higher than the four to six times EBITDA (earnings before interest, taxes, depreciation and amortization) routinely seen in 2000. The unusually high valuations of pre-washout dot-coms will reappear when high-margin, dominant catalog businesses are recognized for their future earnings potential and their inherent experiential value. However, this is not the time to be a “me too” or a commodity catalog. Margin is still the fundamental pillar of catalog success.

Catalog Creative Returns

Seventh, a renaissance in catalog creative concepts will occur. As the e-tail and e-com neophytes enter the catalog arena, they will bring their specialized knowledge to bear on the catalog world and cause it to change. At the same time, they will learn the proven, timeless techniques of catalog creative, copywriting, layout, pagination, photography, style and design.

From this frenzy of rediscovery will come a renaissance of the old blended with the new. The foundation arts of copy, design, layout and pagination will experience a rebirth and rejuvenation. Creative will mean more to the symbiosis of print and e-catalog than it ever meant to the print catalog alone. In short: Go with quality; it won’t let you down.

Resurgence of Catalogs

Eighth, any economic downturn will drive consumption out of traditional retail stores and into the efficiency of e-tail. An economic downturn is near, and I believe it will be devastating to the massively overbuilt retail infrastructure. The survivors in the inevitable bear market will be the experienced catalogers in partnership with the experienced e-tailers. Pure-play brick-and-mortar retailers have never been more vulnerable; pure-play e-com has never been more vulnerable; only the symbiotic catalog/e-com blended operation has an advantage in a future cyclical economic downturn.

I believe there has never been a better time to be a blended catalog/e-com company. Such organizations are half rooted in a proven channel and half aimed at dominance of an emerging channel. Unfortunately, all the Internet and technological improvements in the world cannot control the price of oil. It matters.

Operating Systems

Ninth, catalog operating systems will achieve a near-total algorithmic integration. Stated another way, catalog enterprise software operating systems will reach a level of sophistication that finally brings all of the disparate analytic and operating tools under one integrated master program. Compared to the massively complex operating systems used today, they will be streamlined and enhanced to include all of the adjunct analytics and metrics that are now accomplished by numerous, separate initiatives. The “SuperSystem” that offers near-total “catalog management in a box” will be available off the shelf. These new mega systems will integrate all e-tail and catalog operating systems including Web sites and retail store operations. The advanced catalog and e-com operating system, Ecometry, from Smith-Gardner is the first and most powerful of such systems available worldwide.

Work Force

Tenth, the major need in cataloging will be people. During 2000, and back to 1998, during the high-intensity focus on Internet and e-commerce development, the primary concern of catalog CEOs was, and still is, finding qualified people to staff the catalog companies. Only a severe economic downturn will relieve the shortage of experienced people. As the direct marketing, catalog and e-com industries expand, the demand for human capital will continue to grow apace. With an inherent shortage of people in the industry, the problem can get only worse. Productivity is improving as a result of better operating systems, but value-added thinkers and creators will remain at critically low supply levels. Consequently, the cost of human capital will continue to escalate as long as the economy continues to expand.

These 10 future influences do not describe a sensational future laced with high-intensity change and technological drama. Instead, it is a logical, rational catalog future that is driven equally by technology, economics and industry innovations.

Perhaps most significantly, I see abundant opportunity. The integrated industry of cataloging and e-tailing is at the forefront of the commercial future. Within that evolving construct, U.S. business will once again accomplish what only U.S. business alone is able to repeatedly accomplish era after era: recycling.

When U.S. businesses rapidly grow and become large, they tend to drop small “acorns” around the base of the parent businesses. In time, these “saplings” mature and become large. At that point, U.S. companies recycle themselves. They chop themselves down and use the raw wood of the old business as fertilizer for the fast-growing trees they have nurtured. The United States is the only country in the world that can do this. Businesses in the United Kingdom are 600 years old; so are businesses in France, Belgium and elsewhere. America is the recycler of businesses on the global stage and is the only country able to rapidly tear down and rebuild business concepts, structures, even ownership models in order to continue to grow and to dominate the forest.

This, then, is what I see occurring in the next 10 years in the catalog world. In 2010, catalogs will be, once again, something new, resembling only faintly the catalogs of 2000 or 1990. It’s the reason for my success. It should be the reason for your optimism.

Donald R. Libey is co-founder of Libey-Concordia, the Philadelphia investment banking firm to the catalog industry. He is a worldwide advisor to catalog and e-commerce CEOs and boards of directors, and he has owned and managed numerous business-to-business and consumer catalogs in his more than 30 years in the direct marketing world. He is the author of seven books on cataloging and is recognized as an industry-leading strategic futurist. He can be reached through the Web site: www.libey.com.