Wholesale gag gift

Traditionally, business-to-business catalogers have been less adventurous than their consumer counterparts in expanding into new markets. But more recently, b-to-b books are targeting a segment they may have once considered out of bounds: the consumer market.

For many b-to-b catalogers, crossing the line into the consumer market is hardly a radical concept. Aside from making appropriate merchandising and creative changes, selling to consumers is not particularly different from b-to-b says Day-Timers' vice president of marketing Allen Abbott. The time organizers cataloger found its business customers were buying stationery products for personal use, so it launched a consumer stationery catalog last year. According to Abbott, the company found "the [consumer marketing] process is the same--we're dealing with end-users whether it's at a business or a consumer address."

Some b-to-b catalogers build from strength and target consumer market because they see a golden opportunity for additional sales and increased market share. Anatomical Chart Co., for example, launched a novelty gift business from its narrow niche in medical supplies (see box).

Others turn to a consumer audience out of necessity, when changes in the market or the economy diminish the need for their original b-to-b products. Art materials and gifts cataloger Flax Art & Design, for instance, began targeting consumers after new technology reduced the demand for art supplies. According to marketing director Craig Flax, "we can thank the Macintosh (computer) for putting art supplies stores out of business." The company, founded more than 55 years ago as an art supplies store in San Francisco, launched the Flax Artists Materials catalog in 1984. But by the time Craig Flax joined his family's business in 1987, desktop publishing had drastically diminished the need for art supplies. "I looked at our [catalog] numbers and realized that the T-shirts were selling better than our paint brushes!" Flax says.

Though technology has eliminated the need for some business products, it's launched new consumer markets for others. For instance, the advent of personal computers, faxes and modems has pushed some b-to-b catalogers into the consumer home-based businesses market. According to a study conducted by the U.S. Small Business Administration, the number of home-based businesses has increased from 3.6 million in 1985 to more than 5.6 million in 1991. Also, many people that once worked in an office building now "telecommute," or work from home during office hours. With more business people working from non-business addresses, some b-to-b marketers have had to find new ways to reach them.

As far back as the mid-1980s, "we kept hearing about his emerging home office market," says Barbara Zeller, director of marketing for the Reliable office supplies catalog. So the cataloger conducted consumer focus groups to determine a profile of the home-office audience. These sessions confirmed Reliable's suspicious that home office consumers are more upscale and design-conscious than its general business audience, Zeller says. "Home office customers are integrating whatever they're buying into their home environment, so they're more color and style-conscious and less price-sensitive than business customers." To target this market, Reliable launched its HomeOffice consumer catalog in fall 1986. Although the company will not release sales figures, Zeller claims its profit margins are higher in the consumer market than in the business market.

Making the transition

The consumer market holds out great promise to b-to-b catalogers that face slower growth or dwindling profits. But finding the right merchandise mix and the appropriate prospects for the consumer market can be daunting, even to b-to-b experts. To determine which products might work, many catalogers first test so-called "consumer products" in their business-to-business books. When Flax Art & Design became interested in the consumer market, it initially added a few accessories and gift items to its merchandise mix. "We started with |well-designed' products--they didn't have to be gift items, although most of them were," Flax says. In 1989, the company changed the catalog's name from Flax Artists Materials to Flax Art & Design. The company still mails a separate art supplies b-to-b catalog to its lists of artists, designers and architects, but art-themed consumer gifts have become its core catalog product.

If customers respond to the consumer merchandise, catalogers typically next search for the rights consumer lists to rent. Flax Art & Design hired a separate list company to help it select appropriate consumer gift lists. Reliable used the information from its focus groups to select appropriate consumer names for its HomeOffice book. And Day-Timers identified 200,000 customers within its own database that had purchased stationery products. (Day-Timers has prospected for consumer names, says Abbott, "but almost exclusively with solo mailing pieces as opposed to catalogs.")

Once they decide to plunge into the consumer market, most b-to-b catalogers find it's more effective to mail a separate book to consumers or businesses than to try to target both with one catalog. At Day-Timer's, though customers were already purchasing stationery, the product category was not strong enough to support a page in a full-run catalog, Abbott says. "[Stationery] gives us a marginal return in the full run of our catalog, which is 4 to 6 million in the spring and 8 million in the fall." So mailing a specialty catalog to the 200,000 customers who buy stationery has proved to be more productive, he says.

Not every cataloger with a cross-over product line needs to mail two different books. Photographic supplies and equipment cataloger Zone VI sends the same book to advanced amateur consumer photographers as it does to professional studios. Its audience is about 80% consumer, 20% b-to-b, says president Fred Picker. But because many professionals do personal work, and a lot of amateurs do occasional professional work, the company has found that the line between its consumer and business customers is "particularly sloppy," and it can't justify producing a separate book.

The Renovator's Supply catalog faces the same situation. "A consumer's a consumer's a consumer to us--we don't care what kind of label they put on themselves," says president Claude Jeanloz. Primarily a consumer book, the cataloger has found that many consumers re-doing their homes consider themselves designers, and therefore expect a wholesale discount. "So we decided we were wholesale to everybody," Jeanloz says. The same catalog that mails to property managers of hotels, condos, offices, cruise ships and theater production companies also goes to consumers.

As easy as it is for some b-to-b catalogers to also sell to consumers, the two markets are definitely not the same. For one, even if the product line is nearly identical, consumer books are more likely to have smaller average orders than b-to-b. "The consumer market is onesies and twosies, compared to 40, 50 or 100 [units of a product] with b-to-b sales," says Katie Muldoon, president of catalog consulting firm Muldoon & Baer. If you're selling a high-ticket item, such as a $500 desk, it may be worth your while to go after consumer sales, she says. Otherwise, "you'd need to sell a disposable item that they'd keep buying."

Indeed, businesses have more spending power than consumers, admits Renovator's Supply's Jeanloz. Although more than 90% of Renovator's Supply's customers are consumers, only 70% of the company's revenues come from consumers. The cataloger could sell $1 million worth or product in one sale to a hotel job, he says, while consumer orders are generally less than $10,000. But consumer business has made the cataloger less dependent on single large orders. "If we were strictly b-to-b, it could be feast or famine between large orders," Jeanloz says. Not that the consumer market is completely stable, however. Since targeting more consumer business, Flax Art & Design has found that year-round consumer catalog sales are not as solid as in the b-to-b market. "Like most gift catalogers, we've become fairly dependent on the holiday season," Flax says.

Targeting consumers as a secondary audience can give a company the best of both worlds, provided catalogers don't lose sight of their core customers. Those business customers provide the foundation that makes it easier to launch the consumer business. "You can capitalize on some pretty decent efficiencies," says Reliable's Zeller. Although Reliable's HomeOffice catalog operates as a separate entity, Zeller says the consumer book shares the advantages of the large b-to-b catalog. For example, all Reliable's b-to-b orders in stock are shipped the same day; HomeOffice orders get the same treatment. "I don't think many small consumer catalogs can boast that kind of service," she says.