Offering direct mail services can help distributors penetrate accounts and boost shrinking revenues.
Like lava slowly flowing down a mountain, the proliferation of distributors offering direct mail products has spread slowly but surely over the last decade, fueled by the twin fires of cost-consciousness and demand.
As people throughout the forms and labels world desperately try to figure out what the future holds for this maturing industry, attention has turned toward finding new products and services to take the place of older, more commodities-oriented offerings.
Direct mail products, with their ability to offer users significant savings over traditional stuffed envelopes, as well as a measurable response to marketing initiatives, have slowly expanded into the vacuum left by decreasing forms sales. To wit, direct mail sales now account for 5 percent of the BFL&S Top 100 Distributors' sales.
Nevertheless, this growth hasn't taken place overnight.
"We got into direct mail 15 years ago," said Jeff Scott, vice president and general manager, Merrill Corporation, Monroe, Wash. "We decided to expand our print management services to include anything that was branded, which eventually led us to direct mail."
Though Scott said his company didn't begin offering direct mail products as a way to subvert any decline in forms sales, he did say direct mail sales have doubled over the past five years and now account for 10 percent of the company's annual revenue.
On the other hand, John Osborne, president, Midwest Single Source, Wichita, Kan., said he began providing direct mail products for his customers in response to their demands.
Two years ago, Midwest wasn't offering direct mail products at all, but Osborne said that in keeping with the company's goal of being a single-source provider, he decided to put its assets where the demand was—direct mail products. Now, direct mail products account for 10 percent of the company's yearly sales.
"Midwest basically doubled its sales from 2000 to 2001," said Osborne. "It has the capacity to double them again if we can secure the business.
"The key to success," Osborne added, "is to find a niche in which to add volume to a client's output. If the products you offer are too generic, that means the customer is smarter than you."
The Control Printing Group (CPG) in Independence, Mo., has also had success with direct mail. Glenn Martin, president, said his company decided to pursue an account that was already purchasing a fair amount of direct mail-related products.
After CPG found a supplier that would work for both his company and the client, Martin said they decided to jump in with both feet.
Last year the company's direct mail volume grew by 10 percent and Martin said he expects it will continue to grow over the next few years.
"One of our direct mail customers sought to increase his or her business and, as a result, our volume grew," explained Martin. "As a percentage of total business, our direct mail business is pretty consistent from year to year, but we expect to be more aggressive and see even greater growth in the future."
Chip Grayson, president, Systems Business Forms, Savannah, Ga., said that his company wasn't handling any direct mail business four years ago, but when he looked on the horizon, he knew the company had to diversify. That meant offering direct mail.
Four years on, Grayson said direct mail products now account for a quarter of the company's business. But he also said he was fortunate to start off with a large, national account, which helped him learn the ropes and turn enough profit to survive direct mail's steep learning curve. Otherwise, he said, Systems Business Forms might not have had the profitabilty to sustain the move into that market.
"We started with a very large account and that gave us the ability to handle other large accounts," said Grayson, "but it can take years to learn how direct mail works, and to get enough customers to make it worthwhile. It's tough for small distributors."
Grayson pointed out that the best way to achieve diversity is to penetrate accounts entirely. "If I go into a customer's office and I see that there are five different products from five different vendors, I know somebody's not doing his or her job," he said.
Different Strokes
For Mike Weinzierl, president, Professional Graphic Communications, Cranberry Township, Pa., specializing in direct mail has been a good way to replace lost forms business. In fact, it's been so good it now makes up more than 50 percent of his company's business.
Five years ago it wasn't even half that. Though some companies might be wary of investing so heavily in one product line, Weinzierl said it's just a matter of finding a niche.
"The role of the distributor is to be the expert in whatever product he or she wants to sell," he said. "Because we've spent a lot of time in this area, we're expecting our business to grow."
Another area where distributors expect to see growth is in e-marketing.
"Conventional wisdom says that since children today are so acclimated to using computers, they'll be more receptive to Internet marketing," said Weinzierl.
The fact that those services are relatively inexpensive doesn't hurt either. Therefore, many distributors are trying to position themselves to provide these kinds of services before their competition does.
"We're trying to grow into Internet marketing," said Weinzierl. "We're spending training dollars to become more Internet savvy and we're trying to develop more Web clients, which will produce more printing and mailing business as well."
But even if distributors do manage to diversify or find a niche to exploit, how long can they stay profitable as larger distributors push smaller ones away with lower prices and huge customer service departments? According to Grayson, in the direct mail market, not too long.
"Direct mail, on a profitable basis, is made for larger companies," said Grayson. "But at the same time, super-huge distributorships can only go so low on price. At some point, it comes down to something more than price."
Martin agreed. In his mind, it's simply a matter of survival of the fittest. Those who are strong enough to survive will, but owners of smaller distributorships do have a way out.
"Smaller distributorships need to merge with larger ones," said Martin. "The big distributorships usually have better buying power and sales and training, and they can offer added services like warehousing. The way to survive is to merge."
Scott also said smaller companies can survive, but it won't be easy. The strength to weather these changes, he said, can be gained through growing business and product offerings. But, as the lines of competition continue to blur, he predicts that niche suppliers of traditional products will have a harder time keeping up with some of the larger vendors.
"Distributors must think about their company's growth and be committed to expanding their products and services," said Scott. "Being smaller does have many advantages, but during tough times, revenue and earnings can really shrink."
Still, perhaps like in so many other industries, only the strongest—and biggest—will survive.
"Distribution is more important today than ever," said Osborne, "but the requirements have changed. Distributors need a warehouse these days, not a car trunk.
"They also need a product like Four51 to help customers order easily over the Internet. The demands of customers are in-creasing and distributors have to be in line with those demands in order to survive," Osborne concluded.
By Allan Martin Kemler