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Holiday 2007 was one of the most challenging seasons we have been through in the 10+ years we have been helping specialty-food catalog and Internet companies. The season started very slow. Then it came on stronger than expected in the last 10-14 days of Christmas shipping, but it was too little too late at that point for most specialty-food companies to achieve their planned sales. Couple those problems with higher postage and delivery expenses, lower consumer confidence and a weak dollar making imports more expensive, and it all conspired to erode profits.
In this issue of the Food-by-Mail Industry Update (FBMIU) we will summarize some of the key numbers we have aggregated from specialty-food mailers in the holiday 2007 season.
Mailing Trends
From August 1 to December 31, 2007, we received 966 specialty-food catalogs. Upon review of these, we found:
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Catalogers continued a trend of reducing page counts that started in 2005. The median page count was 28, down from 30 last year. The mean average was 26.5 pages, down from 27.5 last year.
Two things are driving the trend to cut pages. First, the crippling postage increase that hit hard in May 2007 and higher paper costs raised the breakeven point for all mailers. Therefore, fewer items qualify for inclusion in a more expensive catalog. With fewer items, the logical step is to cut page counts.
The second and perhaps more significant reason mailers are cutting pages is that the purpose of their catalogs are changing. Catalogs are now used as much or more to drive web traffic as they are for selling directly “off the page.” A smaller catalog (i.e., fewer products and pages) may be just as effective at driving shoppers to the website as a larger catalog. The jury is still out on this, but there are compelling reasons to travel this path. You can cut pages and mail more names, thus exposing more people to your brand and your products at no additional out-of-pocket expense.
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57% of the catalogs were full-size, down from 60% last year and 62% in 2005. 17% were slim-jims, up from 11% last year. 10% were digest-size books compared to 9% last year. The remaining 16% of the food mailings we received were various shapes and sizes (including postcards, letters, and a few 3-D mailers).
As with the lower page counts, we believe the decrease in full-size catalogs signals a move toward smaller and lower-cost mailings whose main goal is to drive customers and prospects to the web.
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Customers continued to order later in the season, with over 64% of the season’s orders and sales occurring in December, up from 62% last year. Over 77% of orders and sales were generated from November 12 to December 31, up from 75% in 2006.
54% of all holiday orders and 32% of annual orders came in during a 21-day period (from December 3-23). This is up from 51% and 31% last year.
As a result of customers ordering later in the season, catalogers continue to mail later each year. 33% of the catalogs we received arrived in December vs. 28% in 2006 and 25% in 2005.
58% of the catalogs had some type of promotional offer vs. 55% last year and 51% in 2005. Of the catalogs we received with an offer, 46% were promoting conditional free shipping. The table below shows the percent of catalogs we received with an offer by offer type.
For the third year in a row, December was the fastest growing month of the season. This is further evidence of customers ordering later in the season and closer to need. The table below shows the percent change in orders and sales by month in 2007 compared to holiday 2006 for the food mailers that report results to us.
The overall growth rate for food catalogers we tracked was 13%, down from 16% in 2006.
Final profit numbers are not in yet, but almost all of the reporting companies feel their bottom line will be lower this year than last. This is due to several factors
Almost across the board, sales were higher than last year, but most companies’ sales were under plan.
Since most spending levels are based on planned sales, marketing expenses as a percent of sales were higher than expected.
By the end of October, when sales were running only 4% over the prior year, many companies began to promote and discount heavily via emails, web specials, and postcard mailings. These tactics generated sales but at a lower margin than selling at full price.
With the season coming on so strong so late, many companies had to bring on additional staff and pay unexpected overtime in weeks 3 and 4 of December.
In spite of the lower than expected sales and higher costs, several companies did quite well this past season and were very profitable—pulling a rabbit out of the hat the second half of December.
In the next few issues of the Food-by-Mail Industry Update we will look at some of the common elements and techniques these high-performing companies have in common and discuss how you can apply these techniques to your mail-order and Internet food business.
In addition, we will report our findings on specialty-food web stats, email stats, and results from our second annual survey of specialty-food online consumers. Our hope is that this information will give you a frame of reference as you begin analyzing your own results from holiday 2007 and help you in your planning for holiday 2008.
Warmest regards,
Tony Cox
President
The 5th Food Group and Catalog Solutions, LLC
ABOUT 5TH FOOD GROUP & CATALOG SOLUTIONS
5th Food Group helps specialty food companies grow and make more money by developing, managing, implementing and analyzing their mail-order and online marketing programs.
We are the only catalog/Internet marketing firm that works exclusively in the specialty-food industry. Helping smaller companies or large companies with small mail-order or Internet divisions is what we do best.
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