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Last year is finally behind us, and it is official: Holiday 2008 was the most challenging season any of us in the specialty-food-by-mail industry have ever been through. Sales went from bad to worse from September through November. Most companies experienced a rebound by the second week of December, but it was too little too late. Therefore, almost every company we know of missed their sales plan, and many posted a sales decrease compared to last year.
The good news is many well-run specialty-food companies quickly saw and accepted the fact it was going to be a very tough season. They made mid-season adjustments to marketing plans, promotions, and inventory and staff levels. These adjustments helped lower expenses to the point that bottom-line profits will not be down nearly as much as top-line sales.
In this issue of the Food-by-Mail Industry Update (FBMIU), we will summarize some of the mailing/catalog trends and ordering patterns we saw last season.
Mailing Trends
From August 1 to December 31, 2008, we received 879 specialty-food catalogs vs. 966 in the same period last year. Upon review of these, we found:
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Catalogers continued a trend of reducing page counts that started in 2005. The average page count was 27.1, down from 28 last year and 30 two years ago. The median average was 25.8 pages, down from 26.5 last year and 27.5 two years ago.
As we reported last year and it still holds true, two things are driving the trend to cut pages.
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The May 2007 postal increase and higher paper costs raised the sales level needed for a given item to breakeven on a per-inch, per-page or per-book basis. Therefore, fewer items qualify for inclusion in a more expensive catalog. With fewer items, the logical step is to cut page counts.
These days, 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) featuring your best sellers may be just as effective at driving shoppers to the website as a larger catalog.
This approach is especially relevant to food catalogers, who usually have a lead product or product category that generates the vast majority of their sales.
By cutting page counts, you lower the total in-the-mail cost of each catalog. This allows you to mail to more names, thus exposing more people to your brand and your products at no additional out-of-pocket expense.
53% of the catalogs were full-size, down from 57% last year and 60% two years ago. 22% were slim-jims, up from 20% last year and 17% two years ago. 6% were digest-size books, down from 10% last year. The remaining 19% of the food mailings we received were various shapes and sizes (including postcards, letters, and a few 3-D mailers), up from 16% last year.
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.
Catalogers continue to mail later each year. The following table shows the percent of food catalogs we received by month. As you can see, in 2002, only 14% of the food catalogs arrived in home in December. In 2008, that number had ballooned to 36%.
62% of the catalogs had some type of promotional offer vs. 58% last year, 55% in 2006 and 51% in 2005. Of the catalogs we received with an offer, 48% were promoting conditionally-free shipping. The table below shows the percent of catalogs we received with an offer by offer type.
Order Patterns and Trends
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Customers continued to order later in the season. The first four weeks of December accounted for 57% of the entire season’s sales and 60% of the orders. In 2007, 54% of the season’s sales and 56% of the orders came in during the first four weeks of December.
Comparing monthly sales and orders this year to last, September and October were basically flat, November was a disaster (down 21%), and December bounced back to be flat with 2007.
In total, the average company posted a 6% decrease in sales for the season, compared to 13% growth in 2007 and 16% growth in 2006.
The table below is a composite index of the percent change in monthly orders and sales of several companies we track. (Note, due to a change in the mix of companies in the index, the Sep, Oct and Nov numbers vary slightly from our last report.)
In spite of the lower than expected sales and higher costs, several companies managed to grow and were quite profitable last year. In the next few issues of the Food-by-Mail Industry Update, we will discuss the common elements and techniques these high-performing companies share and describe 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 and email stats and results from our third annual survey of specialty-food online consumers.
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 and implementing 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 and larger companies with small mail-order or Internet divisions is what we do best.
Visit us online at www.5thFoodGroup.com to download a copy of our free booklet, The Seven Habits of Highly Ineffective Catalogers, and for information on our fully guaranteed introductory program called JumpStart.
If you will be in San Francisco for the 2009 Fancy Food Show (January 17-20, 2009) and would like to meet, please give us a call. We’d love to see you there.
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