Catalogues in Canada

Myth, magic or madness?The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database...

Myth, magic or madness?

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.

Strategy also invites other news items or column submissions for this section. Enquiries should be directed to Mark Smyka, editor, at (416) 408-2300.

According to various sources, there are about 600 Canadian catalogues.

But have you had even a dozen catalogues drop through your mail slot in the past year? Even counting u.s. catalogues? Probably not.

So, where are they all? Simply put, they are invisible to the public eye. Unless your name crops up on a mailing list, then, presto, there they are.

Why do we not get more catalogues in our mail?

The price of entry, for one thing. Starting up, and building up circulation, is an expensive proposition.

$1 million capital

Some would say that unless you can raise $1 million to work with, do not bother trying to start a catalogue.

That said, I would guess 80% of the 600 in Canada were conceived through the mating of a brainwave and a shoestring, were born on a kitchen table, and are being raised in a basement or garage.

According to a survey conducted each year among Canadian cataloguers by Catalog Age magazine, more than 60% of Canada’s catalogue companies report annual sales of less than $1 million.

A survey, commissioned by the Canadian Direct Marketing Association in 1990, put the total size of the Canadian catalogue industry at $2.2 billion in sales.

Compare that to the u.s. estimate of $74 billion in consumer and business-to-business sales in 1991. Applying the 10% rule provides ample potential for the Canadian catalogue business to more than triple.

So what is getting in the way? Economies of scale, for one thing. Look at it this way.

Suppose it costs $1 million to produce a catalogue to be mailed to all adults aged 35-54. That is about seven million people, according to Statistics Canada.

Costing

Suppose half of the cost is fixed (design, copy, type, photography, film, print set-up, etc.) and half is variable (mailing lists, paper, printing, postage).

That makes the per unit cost of this hypothetical catalogue 14 cents (seven cents in fixed cost, and seven cents in variable cost.)

In the u.s., there are about 59 million people in the target group. The per unit cost to mail them all would be eight cents (one cent in fixed cost, and seven cents in variable cost.)

In other words, mailing a Canadian universe that is 88% smaller costs 43% more per unit. Now think about profitability.

Let’s set parameters that catalogue cost is 18% of gross sales, margin (sales minus product cost) is 40%, operating cost is 12%, and the before-tax profit target is 10%.

In the Canadian scenario, it takes 44% more in sales to cover the catalogue cost of 14 cents each and achieve the 10% bottom line. Is it any wonder there are so few ‘visible’ Canadian cataloguers?

Likewise, is it any wonder u.s. cataloguers see opportunity in mailing to Canada?

Their additional fixed costs are minimal, and the remainder of the cost is variable. Besides, they tell me they get higher response rates and larger orders here than they do at home.

There is something else at work in Canada. That is a lack of mail/phone order catalogues from retailers.

Catalogues designed to produce sales in their own right, as well as drive additional traffic to stores. Why not? There might be an attitude problem.

The president of the Retail Council of Canada was quoted recently as saying, ‘[Direct mail] suffers from not being able to live up to the instant gratification aspect.

‘It has to, obviously, be a planned purchase, not an impulse purchase.

Instant gratification? Wasn’t that an ’80s thing? Aren’t people now looking for genuine value, convenience, better, more personalized service, ways to reduce stress in their lives?

Faith Popcorn and her futurist cohorts predicted the ‘stay-at-home’ ’90s. Whether you call it ‘burrowing,’ ‘barricading,’ or boredom, supposedly, the resulting shopping trend is out of the mall and into the mail box.

u.s. retail mall traffic is now less than half what it was in 1986. In 1992, 52% of adult Americans had placed an order by mail or phone in the previous 12 months.

Study

According to a study done for the National Task Force on Cross-Border Shopping in March 1992, the comparable Canadian number is 26%, of which 3% ordered from the u.s.

This means more than five million of our sample target market of adults 35-54 are still waiting to either receive a mail order catalogue and/or one that excites and incites them to order.

That is a sizable market – for somebody.

A second column on this topic will appear in the May 3 issue.

Barbara Canning Brown, a 20-year veteran of the direct marketing industry, is a direct marketing consultant specializing in catalogues. She was named Direct Marketer of the Year in 1990.