With world conditions and the economy in upheaval, business has been tough for most catalogers lately. This month I’ll focus on several ideas to improve your bottom line.
Although it’s always important to stay focused on long-term growth and strategic development of your business, some of you obviously will have to take action now to ensure short-term profitability. The following suggestions may produce only a temporary increase in your profitability, however, so be cautious about any potential impact down the road.
1. Improve your margins. The No. 1 expense line on your profit-and-loss statement (P&L) most likely is cost of goods. Small improvements here can yield substantial overall results.
Improvements in your product margins can come in many ways:
- reducing vendor costs per unit;
- getting vendors to pay for some advertising allowances or co-op advertising;
- negotiating rebates from suppliers when certain purchase thresholds are met; and
- increasing your product prices.
In this economy you may think it would be difficult to boost prices, but your customers may not even notice a slight price increase if it’s handled properly. Since the No. 1 reason people shop by catalog is for convenience, many times small changes in price won’t decrease response.
For example, if you have price endings of $.50 or $.75, try increasing the endings to $.95 (as long as this fits with your brand). Or if you’re not at a threshold price point on an item, you may be able to increase the price a bit (e.g., from $17.95 to $19.95), usually with no or only a slight decrease in response.
2. Cut or limit investment spending on circulation. Since catalog mailing costs probably comprise your second-largest expense, another way to trim costs is to mail fewer catalogs. Of course, this also will lower your revenue, but it may be unprofitable revenue anyway. To find out, perform a P&L on each of your outside lists and your housefile.