Making It with Mail-Order
Despite the growing popularity of Internet shopping, old-fashioned mail-order catalogs are still a thriving, $100 billion-a-year industry, according to catalog consultant Jim Tilberry. And placing a product with a popular mail-order catalog can provide a powerful jump-start for an entrepreneur's sales efforts. Tilberry spoke recently to Smart Answers columnist Karen E. Klein about how he helps inventors and small companies sell their consumer products through catalogs. Edited excerpts of their conversation follow.
Online sales are becoming increasingly popular, but despite some of the predictions of demise we heard a decade or so ago, paper catalogs are still around. Why?
The days of a Sears catalog that sells everything to everyone are over. But paper catalogs haven't gone out of business, and they aren't threatened. They've just moved into narrower, highly defined market niches. In fact, about two-thirds of consumers report in surveys that they buy something by mail order every year.
I think the mail-order catalog industry made the transition to Internet sales and marketing very easily, because they were already set up to take orders remotely and ship product all over the country. Also, you need something to drive traffic to a Web site, and the paper catalogs do that really well. Estimates are that the catalogs are now deriving between 1% to 30% of their revenues from online sales. Also, a Web site helps a catalog liquidate product that doesn't sell through [the retailer's] paper offerings.
What kind of capacity does a small company have to have before it goes looking to place a product with a catalog?
That's a great question. It's very easy for a startup or one-product company to get overwhelmed with orders if something is in a catalog and it hits big, so it's often counterproductive to sell a large account early on.
A startup or smaller company should start out selling to a small catalog, or a couple small ones, first. They should have their production capability in order and be able to produce, at minimum, 2,000 to 3,000 pieces a month. Of course, sales come in slowly, so that capacity may not be needed for six months or a year. But that's the minimum they should be able to do in order to get started.
When it comes to inventory, most catalogs will start out very conservatively, in order to test the popularity of a product, before they place a large order. So their opening orders are usually 25% to 30% of what they expect to sell. I'd say a small-business owner should start with 500 to 1,000 pieces in inventory, so they can fill an opening catalog order. Of course, if their product is going to sell for $5, they should look at having larger quantities in inventory. If it's a $100 item, they don't need to warehouse that much.
How many catalogs are out there, and where can an entrepreneur find contact information for them?
Estimates range from about 8,000 to 10,000 catalogs, and the vast majority of them are very small, niche catalogs that won't necessarily be around forever. They come and go. There are maybe 500 longtime, well-established catalogs that most people would recognize.
There are several catalog directories that can be found by searching online. A good one is Google Catalogs, www.catalogs.google.com, which lists them by category, shows you a picture of the cover, and lets you go into each one and review the merchandise.
How would a small-business person pick which catalogs they should try to sell?
You want to find the catalogs that cater most specifically to the niche market that's likely to buy your product, and pitch those. Catalogs find their niches based on quality, category of product, and price point, so you have very low-end catalogs, moderate catalogs, and very upscale catalogs.
Once you decide which catalogs you want to pitch, you call them up, find out who the buyer would be for your product category, and submit information to that person about your product, including pricing, product description, and good pictures, which are very important.
What are some of the risks involved for entrepreneurs who venture into catalog sales?
Often, catalogs will ask for things like volume discounts, exclusives, and other concessions. They will try to negotiate your price down -- they may demand that you pay freight costs, or pay fees for things like advertising and photography. I've found that the negotiations usually involve some bluffing. While most catalogs have fixed margins, they will engage in back-and-forth, and if they really like your product, they'll take it pretty much on your terms.
Are small businesses at a disadvantage compared with larger companies when it comes to selling to catalogs?
They really aren't. For instance, most catalog products are judged and sold on their merits, not on the reputation of the manufacturer. Also, catalogs evaluate one product at a time, so a one-product company is not at a disadvantage, like it would be when trying to get shelf space in a chain store that's looking for a whole line of products. You also don't need expensive, fancy packaging to sell through a catalog.
Which products are the most likely to be picked up by catalogs?
New and unique products are attractive to catalog buyers. They are looking for simple products that make sense immediately in terms of their usefulness but haven't already gotten a lot of exposure. They also like products that look good and photograph well, and that have a year-round market, rather than being limited to a short, seasonal market.
Products that are safe, and present no risk of injury to the consumer, are certainly more attractive, as are durable products that can ship easily through standard UPS channels without a lot of breakage. Pricing between $5 and $100 is the most common.
What about intellectual-property protection?
Although it's not absolutely necessary to have a patent for your product, a patent will help you defend against knockoffs. The catalog buyers are also more comfortable if they see your patent and know you are the rightful owner of the idea.