PI 400 -- Catalog Printing - Roller Coaster Ride

BY CAROLINE MILLER

In August, catalog printers were crossing their fingers. The long-awaited holiday season was just around the corner. It's a time when most catalog printers see an increase of both page counts and quantity orders. And an increase is just what printers needed after a lackluster year.

At the time, early signs were beginning to indicate that catalog production would indeed increase during the coming fall. It was a hopeful and much needed sign for a market segment that, in response to a slumping economy, had remained flat throughout the summer.

But everything changed on September 11, with the attacks on the World Trade Center and the Pentagon.

For Brown Printing, the tragedy caused several of its clients to delay drop dates and/or not drop at all to affected ZIP codes. "This created a basic challenge, as unexpected withholding of catalogs from the mail stream is not part of our normal planning. In several instances, manufacturing schedules had to be adjusted quickly," reports William Traub, vice president of marketing for Brown Printing.

And Brown was not alone in its effort to deal with unfolding events.

In the days after the attack, Arandell Corp. also had to contend with the new uncertainty in the marketplace. "All previous marketing, design, production, mailing and list strategies were reconsidered, revised, canceled or a combination of all," says Arandell CEO Donald Treis.

John Paloian, Quebecor World group president, magazines/catalogs, agrees. "There was an overwhelming appreciation of the fact that most consumers were not in a 'mindset' to catalog shop as they remained focused on the September 11 news coverage." However, in the weeks following the attacks, consumers have slowly begun to return to catalog shopping, according to Paloian, who reveals that some call centers reported as little as 5 percent of their normal volume on the days immediately following the attacks.

And the fallout from September has continued, as catalogers must now contend with the fears of anthrax in the U.S. Postal Service (USPS). In response to the threats, R.R. Donnelley & Sons altered its manufacturing processes in order to eliminate the use of slip agents and powder additives from the manufacturing process, reports Steve Zuccarini, president, merchandise media.

The threats are also forcing many to consider alternative distribution methods with possible cost implications. It's an issue so important to Quebecor that the company has gotten involved in the issue of mail security at a national level.

Jon Van Horn, Quebecor's president of strategic relationships, is a member of the recently convened Postal Service Mail Prep Task Force, which is focused on dealing with mail security issues.

Yet, despite the numerous hurdles facing the catalog industry at present, Traub believes that the catalog market will recover and settle into a more realistic pattern. "One must realize that 2000 was an aberration from the usual print production and revenue cycles—most print demand spiked way past historical growth trends. It now appears that we are heading back to the demand levels of 1998 or 1999."

It's an assessment that Zuccarini shares. "If you compare 2001 to 1998 or 1999, you'd find the industry's volumes more comparable. As the economy stabilizes, we fully anticipate that the catalog industry will rebound and that we'll see growth rates similar to those of the '90s."

It's a belief that Arandell's clients hold, as well. "There is still, within a majority of our clients, a sense that business will resume to some degree and that there will be, in some cases, even more opportunity to grow their businesses within the catalog section," notes Treis.

In the short term, however, it is difficult to predict how 2002 will unfold. "Many customers are still trying to determine what makes the most sense for their own operations," says Paloian. "Few economists are predicting a strong recovery in the first half, yet the impact of proposed government 'economic boosts' remain unquantified. The anticipated third quarter postal rate increase will definitely cause some catalogs to refine their mail strategies."

Many catalogers are now considering the historical route of lighter weight papers and smaller trim sizes as ways to gain relief in postal and paper costs. "We find our clients to be more flexible with respect to product formats, as they look to take advantage of the diversity of the trim size offerings of our equipment," observes Paloian. "Many are now designing their final specifications to achieve maximum product-ivity on our manufacturing equipment, and are enjoying the economic and cycle time benefits associated with that approach."

Brown Printing also expects to see some changes from its customers. In particular, Traub predicts the decrease in some catalogers' circulation as business-to-consumer and business-to-business mailers watch economic trends. Traub also expects there will be less prospecting and mailing to marginal buyers in the coming months as catalogers focus on core clients.

Catalogers are now heavily focused on increasing revenues while reducing costs, according to Paloian. For some, this means combining what would have been multiple books into a single event, while for others it means an increase in clearance sections or the creation of entirely new "sale" books.

But not all catalogers are rethinking their strategies. "While we haven't experienced significant drops in circulation as of yet, we have seen our customers make some modifications in page counts," reveals Zuccarini. "However, this is not across the board. Some catalogers are adding or increasing programs to capture new customers."

Catalogers are not the only ones looking for ways to reduce costs. Many printers are placing an increased emphasis on cost containment and reduction. Traub says Brown has focused its cost containment efforts on its raw material usage. The printer has also made an extra effort to expand its base of business and to place more emphasis on more profitable product lines.

Despite the downturn and the terrorist attacks, Quebecor World intends to make significant capital investments and independent acquisitions in the coming year.

Included in its plans are the addition to the catalog platform of a wide-web gravure press, 48˝ and 32˝ short-cutoff presses, and additional saddlestitchers with 16 to 24 pockets per line.

Additionally, Quebecor plans to continue to invest in financial resources to enhance its network of mail consolidation centers to increase mailing efficiencies. Increased mail tracking systems, such as Planet Code, will also assist customers in their marketing and new customer acquisitions plans, Paloian notes.