No let up for letterboxes: Print21 magazine articleOLD COPY

After years of strong and steady growth, the catalogue business was seemingly dealt a serious blow last year with revelations of dodgy business practices by the region’s largest print producer. So, with its image tarnished and under pressure from the rise of electronic media, what does the future hold for this once mighty print market? Mitchell Jordan finds out if catalogues can still deliver the goods.

Nobody knows when their next love letter or overseas postcard is going to arrive in the mail but one thing is for certain: there is bound to be a bundle of catalogues waiting for you.

At least that was the assumption widely held for many years until late last year when PMP, Australia’s largest printer and distributor, admitted to distribution errors for some of its catalogues following widespread speculation and talk that catalogues had been pulped, dumped and not delivered.

Last year, Coles supermarket hired private investigators to watch PMP’s distribution centre after claims that it had been overcharged by approximately $8 million during 2007/08. Bernie Brooks, chief executive of Myer, also admitted that the company had experienced problems with PMP either not delivering or delivering later.

In a statement, former PMP CEO, Brian Evans, who later left the company in mysterious circumstances, claimed that: “Only a small number of customers appear to be affected”, and that “PMP Distribution has already implemented steps to avoid reoccurrence of this issue”.

With new CEO, Richard Allely, applying a transformation plan, hot on the heels of taking the reins at PMP, getting the company’s catalogue business back on track became a top priority. Among the many new faces joining (and rejoining) PMP was David Chesser, former distribution general manager at rival Salmat, who scored the role as general manager of PMP Distribution.

The distribution disaster was brought to a close in June this year by the ACCC. PMP claimed that it worked with its clients to resolve any issues and also agreed to undertake “a number of measures recommended by the ACCC”. Much of the damage, however, had already been done. PMP lost the Coles contract, which was picked up by Franklin Press, AIW Printing and Michael Hannan’s Independent Print Media Group (IPMG) with the distribution being managed by Salmat. In addition, PMP also lost catalogue contracts with retailers K-Mart and Harris Scarfe.

Allely’s plans have made some progress though. In October, PMP climbed back, scoring a $25 million contract to print and distribute Franklins’ retail catalogues for the next 3.5 years. Allely sees this as a step in the right direction.

“Franklins has an impressive track record since its new ownership and it’s a business with good growth trajectory ahead of it,” he says.
As for PMP’s mistakes, Allely asserts that the company has learnt its lesson and moved on.

“Our catalogue distribution business has had some issues in the past; but those issues have all been addressed and I’m delighted today with the people running that business and the changes we have made which will enhance our performance and reliability for customers,” he says.

Still going strong
One of the many lessons to be learned from the messy affair is that even if catalogues don’t always get delivered, major retailers are not going to be backing out on the medium anytime soon. A case in point is the Ikea catalogue which, according to a report in Business Week, is the third most printed book in the world.

In its recently released findings conducted by Sweeney Research, the Australian Catalogue Association revealed that out of 600 interviews carried out across the nation, 89 per cent of households were happy to receive catalogues, while 85 per cent of Australians said that they read the catalogues delivered to their letterboxes.

According to new CEO of the Australian Catalogue Association, Ken Bishop, catalogues are still the most effective form of message delivery for retailers. He, for one, has not seen any rapid decline in the market’s growth.
“It’s quite a buoyant market and our members are still reporting healthy volumes and forward bookings,” he says. “Anecdotally, after having spoken to some retailers myself, they are still continuing to put the same amount of money into catalogues as part of their overall advertising mix or, in some instances, even increase it.”

All of which suggests that despite some criticism of over-capacity in the industry as a whole, there is plenty of work waiting for IPMG’s hush-hush new Warwick Farm site, believed to be powered by three high-speed gravure presses, when it comes on-stream (Print 21 has already received several requests from gravure printers eager for work). Michael Hannan, group managing director of IPMG, confirmed his confidence in the catalogue market during a rare media interview when he told the Australian Financial Review that the likes of Coles and liquor stores have increased volumes for their catalogues.

An effective tool
Ian Jones, general manager, sales at Salmat, which has been a leader in catalogue distribution throughout Australia since 1979, reports year-on-year growth and an increase in volumes as customers have come to understand the effectiveness of the medium.

“Overall, we have still seen an increase in volumes and that has been driven by major users who have diverted other money from more traditional forms of advertising and chosen to put that money into something that will drive sales,” he says.

Jones admits that as a result of the global financial crisis, the spend has been “slightly offset” in the case of small-to-medium-sized customers that have had no choice but to reduce advertising and marketing funds, but at a time when consumers have never before had such cause to be so cautious with their money, catalogues would appear to be a new best friend, since their purpose, after all, is to alert householders about bargains.

“Catalogues are about generating sales and retailers are always wanting to generate or capitalise on sales,” Jones says.

The optimism surrounding catalogues might, on the surface, appear to be nothing more than hype, especially considering the common perception that using and supporting paper is bad for the environment. These days, the catalogue has to compete against letterboxes armed with aggressive ‘No junk mail’ stickers that have taken on the role of guard dog.

Jones does admit that it can be difficult to measure the effectiveness of catalogues and that it is something which customers are highly guarded about.
“But if we take the activity of our major customers, catalogue activity is increasing and there are enough systems and processes in place for customers to realise that catalogues are an effective tool for them,” he says. “Generally, the costs to produce a catalogue and the return you get is very attractive if it is targeted to the right audience.”

The Australian Catalogue Association’s research also revealed that, this year, more consumers have made a purchase as a result of reading department store unaddressed advertising mail along with a general increase in the proportion of consumers reading mail, especially for the retail, department store and jewellery sectors.

Bishop believes that the strongest demographic of catalogue readers are females in the household, aged between 25 to 55 years old. “They are the number one target and reader,” he says.

Jones agrees with this claim: “In most households it is the female who opens the letterbox and controls household expenditure; they make the decision on what gets spent,” he says. “Over 80 per cent of the time, all mums read catalogues regularly to make purchasing decisions – whether it is buying clothes or a PC.”

Swinging catalogues online
In 2007, Salmat extended its presence out of the mailbox and onto the internet when it launched <www.lasoo.com.au>, a pre-shop search engine that contains a searchable collection of the latest catalogues from retailers. Paul Marshall, executive director of Salmat Digitalforce, said that the creation and launch of Lasoo was in response to the rising reach and power of the internet.

“We saw the influence that this channel would have over what people buy and where they buy,” he explains. “There was an opportunity for something that nobody had cracked.”

In March this year, PMP followed suit with the launch of <www.catalogues4u.com.au> which CEO, Richard Allely, said was developed “in response to feedback from retailers, with their specific requirements in mind”.
“It’s relatively new but catalogues4u is achieving the traffic volumes we were hoping for and the audience is growing in line with our expectations,” Allely says.

But before Lasoo or Catalogues4u, there was Catalogue Central <www.cataloguecentral.com.au>, an online retail site featuring catalogues from the likes of Big W, IGA and Best and Less. Robert Wong, CEO, believes that the site, which launched in August 2006, was Australia’s first online retail brand allowing consumers access to catalogues and retail offers.

“Catalogue Central was launched so that consumers could select just the catalogues they want, in one easy location online,” he says.

Since then, the site has achieved between 3.6 to 4.1 million page reads per month, with 1,090,00-plus website page impressions each month. With a member database of 295,000 users, the average time spent on the site is 8.2 minutes and expected to grow.

According to Marshall, Lasoo averages close to one million visitors a month. He is particularly proud of the fact that 750,000 are unique visitors who spend an average of eight minutes looking at the catalogues. He also makes the point that research conducted by Neilson last year showed that 25 per cent of people will buy a product that they saw online at Lasoo and that a further 68 per cent will take some sort of action, whether it is going to the retailer directly, calling them or visiting their website.

“We are sending more than two thirds of Lasoo users into a retail environment,” he says. “From a retail point of view, it is an extremely powerful proposition to be in front of a consumer when they are searching for what to buy.”

Admittedly, it took some work to convince retailers of the benefits in having both an online and paper presence for their catalogues, though Marshall found that after talking with them about the power of online retail they were soon able to see that being part of Lasoo would be advantageous.

“The difficulty was in online education,” he says. “Up until late last year, the retail market in Australia was on an unprecedented growth curve and many traditional marketing methods were still working. There wasn’t a strong, in-depth understanding of the online channel and how it has changed consumers’ behaviour.”

The good news for printers fearing a paperless world (or letterbox) is that sites such as Lasoo have not yet affected catalogue print runs.
“Print runs have remained the same because overall they [catalogues and Lasoo] are complementary, not competing services,” Marshall says, adding that the highest spike for searches on Lasoo falls during the day between Monday to Friday at a time when catalogues are not sitting on workers’ desks.

“We obviously think that the key reason Lasoo complements catalogues is that it remains available for the entire length of the campaign, whereas a catalogue will remain in the house for a certain period of time which inevitably won’t be for the entire length of the campaign,” Marshall says.

Cut down to size
With a team of 48 staff in both Australia and the Philippines working around the clock to keep Lasoo regularly updated with the latest 100-plus catalogues that are published each week, the pre-shop engine is only going to grow. Would it be fair, then, to suggest that in the future printed catalogues might shrivel away? Not quite.

Both Marshall and Jones agree that if anything is going to change, it will be size of catalogues that may shrink.
“In the short-to-medium term, the size of catalogues will reduce as the population becomes more comfortable searching online,” Jones says. “The item in the letterbox will be a reminder to look for something online.”

When it comes to marketing tools, paper is an intrusive medium, while online is much softer. For this reason, Marshall believes there will always be a need for catalogues to exist in both forms.

“Retailers don’t want to reduce their frequency or their reach, but they may choose to put more online and say ‘Go to our website to see more specials’,” he says.

Ken Bishop did not want to offer his opinion on Lasoo, though he does not see online catalogues detracting from their print counterparts in any way.
“Research and evidence tells us that the two complement one another,” he says. “The paper catalogue is still the main source of reference for raising awareness of a product or special that’s out there and long after it’s gone into the recycling bin people can go online and do some revision of the product.”

Wong, however, differs in his view. As an online advocate, he sees a decline in print-based catalogues as fast approaching.

“As consumers continue to demand corporate social responsibility from their preferred brands, online shopping increases and retailers seek a faster way to reach their target consumers, the need for printed catalogues will continue to reduce,” he says.

Mayor, don’t take my catalogues away
Councillor Denise Wilton encountered much hostility when, as Mayor of Mosman in Sydney, she approved a ‘No Junk Mail’ sticker distributed to all residents in the harbour-side suburb in 2007.

“There was a huge outcry from people saying ‘You are trying to destroy local business; my children and pensioners get money from distributing leaflets!’,” she recalls, almost two years on.

It was certainly a radical move and one that other councils did not take up as strongly as Wilton did, though she asserts that her motivations for promoting the sticker were based upon a concern for the environment.
“The litter from catalogues and leaflets blowing into our stormwater drains is a huge environmental problem and a great cost in terms of paper and ink and production,” she says.

But for the moment, a catalogue carries just as much, if not more, essential retail information to the average consumer than a newspaper. And no matter what size or shape they come in, people will always have some need to consult them for their day-to-day needs. Marshall, for one, reckons that they play too important of a role to disappear or be ignored.

“People love lists and that is what a catalogue is - a list of things people should be looking at,” he says. “People have to deal with catalogues and do something with them, even if it’s putting them in the bin. There really is no other media like that.”

Gen Y has reasons why, too

As a 25-year-old member of Generation Y, this writer cannot remember the last time that he picked up – or read – a catalogue and, during the course of researching and writing this story, I became concerned as to whether the medium had a long-term future. One interesting case that bucks the trend is that of 27-year-old engineer, Daniel Kade (pictured), who recalls that he has been reading catalogues since he was “very young” due to their easy access and visibility. “They were always sitting on the table in the living room in the line of sight,” he says. “You could never miss them.”

Unlike some childhood habits, reading catalogues did not dissipate as Kade aged. He remains an avid reader, consuming catalogues regularly on a weekly basis. “There are two reasons why I read catalogues,” he says. “I read supermarket catalogues to see what specials are available so that I can plan for my next grocery trip. It is so much easier than walking around the whole store looking at what is on sale and what isn’t.”

The second reason is nothing more than good old-fashioned curiosity.
“I like knowing what the stores are offering – particularly the electronic stores,” Kade continues. “It is nice to see high-tech televisions and all that jazz. Maybe I will buy one, one day.”

The thought of ditching the letterbox in favour of reading online is highly unlikely, even for a techno-savvy Gen Y like Kade, who sees engaging with catalogues as more of a past-time.

“It is rare that I would read a catalogue online,” he admits. “I have done this a few times before but in those cases I was looking for something in particular, as opposed to just browsing.”