Are We Trying to Make a Broken Business Model Work?
At our recent Executive Forum we talked about how rising postage costs, increasing paper costs and the fall off in prospecting response rates have radically changed the traditional catalog business model. While there are large, efficient catalogs that spend in the high 20-percents on the total cost to create and mail catalogs, many businesses are paying 30% to 35% of net sales. Postage will continue to go up.
List prospecting has declined for 10 years and has been dismal for many companies. Some attendees felt that the co-op databases, while they developed responsive lists and expanded circulation for the membership, may in the long run have eroded response rates as customers are receiving too many pieces of mail.
When you look at major expense categories, other than merchandise purchases, the total marketing cost is the major expense well ahead of fulfillment and G&A overhead combined. To turn around company profitability, the industry has got to get more prospects and sales at a lower cost than we are used to with the traditional catalog model.
But the real question is this: are we, in the catalog industry, relying on a broken business model? And is the old traditional catalog business model one that can be fixed? We have had occasion to work with a couple dozen Internet pure plays in the past year. None of them use catalogs. Granted, they are all smaller companies. But they generate traffic to their sites with search engine optimization (SEO), mostly organic rather than paid search.
How much money are you spending on SEO? If the traditional business is broken, is that expenditure enough to push your company to more financial viability? In talking with clients, I’ve found very few who are experienced and comfortable with this new electronic media and can decrease their dependence on print catalogs.
How is your experience—good or bad—with SEO? Post your experiences, and let’s learn from each other.
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm for catalog, e-commerce, and retail businesses. We offer clients expertise in business process and order management systems, inventory management systems, warehouse management systems; warehousing and distribution; contact center services; inventory management and forecasting solutions; and strategic, financial, and operational planning for all business channels.
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