Distributors penetrate the retail niche with services that target and retain consumers.
FORM, Jan. 2000What's the secret to long-term relationships with retail clients? Tim Curtin's secret is his ability to respond quickly to changes in the market. Proof is the 28-year relationship his Portland, Ore., distributorship, DocuSource Print Management, has maintained with G.I. Joe's, a large sporting goods retailer. The products requested by the retailer have changed, but one thing remains the same-Curtin's dedication to offering a one-stop shop.
In the beginning, DocuSource mainly sold business forms to G.I. Joe's. But Curtin says purchase orders, rain checks and other forms are a small percentage of his retail business today. "Retailers want marketing materials, commercial printing and quick turnaround," he says. "We also provide desktop delivery, warehousing and distribution to all store locations. It's a lot different than calling on the medical market. In some respects, it's more creative."
Curtin had an opportunity to exercise his creativity when DocuSource was hired to help G.I. Joe's launch an electronic gift card promotion for each of the store's 18 locations.
The distributorship provided G.I. Joe's with 110,000 4-color plastic cards with magnetic stripes that tracked the amount of money available on each gift card account. The gift cards featured a digital photograph of a sport utility vehicle with two canoes strapped to a rack on its roof and two bikes strapped to the trunk. DocuSource also provided 110,000 point-of-sale packages and 400 point-of-purchase displays.
The point-of-sale packaging consisted of a 4 5/8 x 7-inch outer envelope that was 4-color process printed on cover stock and die cut to show the gift card inside. A smaller envelope and greeting card were also included in each package. Three different designs were printed on the point-of-sale signs and packaging-a skiing Santa for the holidays, a dad and his two kids for Father's Day and a landscape scene for other times of the year.
Another of Curtin's responsibilities was finding a company to design software for the gift card program and to bring the stores online. Two companies made presentations to DocuSource, but G.I. Joe's decided to develop its own software. "The company is small enough for the left hand to know what the right hand is doing," Curtin says, "but large enough to have an information systems department that could make this thing happen." Curtin was amazed at how quickly the company implemented the new program. "There are a lot of big chains still trying to roll out electronic gift cards," Curtin says. "But my client was able to do it successfully within 60 days."
Curtin's long-term relationship with G.I. Joe's gave him an opportunity to learn more about gift card technology. "During the whole process," says Curtin, "we kind of became experts on electronic gift cards, gift card service providers and how the whole system needs to function. It has opened doors with some other clients that are interested in gift card programs as well. Paper gift certificates are going to become a thing of the past. More people are seeing the value of whole gift card systems."
The E-commerce Debate
Internet research firm Jupiter Communications projects online retail sales to reach $40 billion in 2002. As e-commerce continues to boom, some distributors fear a decrease in sales to retail clients. But Peter Coperthwaite, vice president of Applied Graphics, a distributorship in San Rafael, Calif., says retail stores are stronger than ever. "I think the people selling online and nowhere else are the ones who are going to be in trouble," he says. "I guess there are some niches that will sell only via e-commerce. But customers want to be able to touch and feel. I don't think Internet sales are going to hurt the big retailers at all."Kris Bilyeu, CFC, vice president of Tabco Business Forms, a distributorship in Terre Haute, Ind., agrees. "You'll always have your store down the street," he says. "Some will go out of business, but I don't think the good ones will." Besides, Bilyeu says, distributors can also sell to Internet retailers. "With e-commerce, you're going to lose point-of-sale documents because they'll all be electronic," he says, "but [retailers] are still going to need picking tickets, shipping documents and product identification labeling."
While Coperthwaite isn't as concerned with business-to-consumer e-commerce, he says business-to-business e-commerce is a great tool for acquiring and retaining retail clients. In addition to register rolls, tags and checks, he says distributors can offer bags, boxes and promotional items via the Internet. "You could even offer a pick-and-pack service," Coperthwaite says, "where clients can go online and have 1,000 or 2,000 items shipped to a particular address. It's unlimited, really."
Alan Brynjolfsson, president of General Printing LLC, a distributorship in Shrewsbury, N.J., sees e-commerce as both an opportunity and a threat-an opportunity for those who have the contacts and resources necessary to offer the new technology and a threat to those who refuse to change with the times. "Distributors who [offer e-commerce] are going to have a distinct comparative advantage over other distributors," Brynjolfsson says. "If you don't do it, you're eventually going to be whittled out-no doubt about it."
With 25 percent of his distributorship's sales to supermarkets and department stores, Brynjolfsson has a firm handle on the retail niche. Competition in the market is fierce, he says, but virtually none exists among distributors offering e-commerce to retailers. Brynjolfsson recently decided to take advantage of the untapped technology by focusing 50 percent of his company's time and resources on e-commerce. "It's a major shift," he says. "We basically stopped further traditional print brokering development."
Although he's exploring unfamiliar territory, Brynjolfsson envisions a bright future for innovative distributors. "Instead of having your independent print broker working out of a home office, handwriting invoices," he predicts, "you're going to have print brokering firms that offer automated print purchasing systems online, manage inventory and act as full-service companies. They'll be able to sign up more clients and get more business."
Helping Retailers Target Customers
If it isn't clear that the days of customer loyalty have passed, just open your mailbox, turn on the tube or flip through a magazine. Supermarkets and department stores spend millions on advertising based on the fact that your business isn't guaranteed. For many distributors, fierce competition among retailers means more opportunities to provide products and services designed to retain customers.Brynjolfsson identifies consumer targeting as the biggest trend in the retail market today. "Instead of just printing a circular and giving it to every resident in the town," he says, "stores send out mailings specifically targeted to their customers. Every retail store, regardless of the industry, is setting up customer databases. They want to know who their best customers are and which customers they've lost."
In order to obtain information about their patrons, many of Brynjolfsson's clients have issued charge cards, loyalty cards and check cashing cards with bar codes or magnetic stripes. Before supermarket customers check out, they swipe their cards to receive discounts. The purchased products are recorded in a database along with corresponding customer numbers. Brynjolfsson usually sells to marketing companies that represent particular stores. An average card order for the distributor is worth $200,000, but he has sold several orders ranging between $1 million and $3 million dollars.
Another tool Brynjolfsson uses to help improve his customers' response rates is personalized direct mail. One of his favorite applications was a supermarket newsletter that included four bar coded coupons related to each customer's buying history. "The marketing companies run reports that identify purchasing trends," Brynjolfsson says. "They can determine which customers spend the most money and send them $50 coupons, or look for names of people who have never bought seafood and send them coupons for the seafood department."
The newsletter was printed in two colors, folded into four panels and personalized with the recipient's name and address. It included a letter from the company's president, a list of popular herbs and how to use them, recipes and school lunch ideas. The newsletter also featured a customer survey that perfed out. The survey served as a business reply piece with a postage-paid insignia and the store's return address on the back. The recipient's name was printed in the upper left corner of the reply card to save time and to prevent transcribing errors. Brynjolfsson provided the newsletter to the supermarket three times in quantities ranging from 50,000 to 150,000.
More recently, Brynjolfsson provided another supermarket chain with 3 million 8 1/2 x 5 1/2-inch direct mail pieces for a Thanksgiving turkey promotion. The pieces included the client's 3-color logo and instructions for the promotion. They also featured wallet-sized perfed paper cards made from 65# opaque cover stock. The cards included Mod 10 bar codes that were scanned to keep a running total of customers' purchases. Customers who spent a certain amount before Thanksgiving won a free turkey.
Bilyeu enjoys selling direct mail because it opens doors to more business with his retail clients. "The retail market isn't that interested in business forms," he says. "We're trying to expand into other areas and provide more than just printing." Each year, Tabco Business Forms provides printing, personalization, folding, sorting and mailing for a furniture store's direct mail promotion. The mailing includes an 8 1/2 x 11-inch letter and a numbered form that customers bring into the store during its big sale. Customers who match the numbers on their forms with a number on the store's giveaway chart win prizes. "It's nothing extremely fancy," Bilyeu says, "but it's another service we're providing that isn't the norm. That's the way to go [in the retail market]."
Maximizing Retail Sales
Over the past five years, Chuck Trosvig of Logical Business Forms has noticed a slight decrease in his sales to the retail market. "I've had a number of my smaller retailers go out of business because of the various large stores that have come in," says the president of the Lynnwood, Wash., distributorship. "Office Depot, Costco, Wal-Mart, you name it. There are a number of customers that will stay in business, but it's harder for them to make it because their margins are smaller." Distributors have to choose clients carefully, he says, because too many small accounts could spell disaster.One way Trosvig compensates for revenue loss is targeting larger stores with multiple locations. "Those are the companies that use up a lot of paper," he says. "I have a large pharmacy that's part of a medical clinic, and they go through 10,000 sales orders every six to eight months. They have five or six pharmacists doing prescriptions all the time, and that's just at one location."
After calling on supermarket and department store chains for the past five years, Brynjolfsson has become adept at penetrating large retail accounts. "In the retail market, it's more who you know," he explains. "It's difficult to get in touch with the correct people because you're dealing with much larger organizations. When you sell to a small or medium-sized business, you're dealing with an owner or someone who's directly involved in making the final decision. At large retail stores, it's not as simple as, 'This person buys the printing.' It's more like a long chain of command. But when you do reach the right people, there's a lot of potential business."
In order to acquire that business, Brynjolfsson says distributors should add pizzazz to their sales presentations. "You have to offer something different to catch the [retailer's] ear," he says, "Some reason why they should meet with you, some unique attribute that differentiates you. It's always an added value if you are well-versed in different types of products and can give solutions, such as suggesting integrated labels instead of a form and a label." Coperthwaite says his four major retail accounts are quite profitable because they're with large national chains. He agrees that superior product knowledge often impresses retail clients, and he suggests finding a niche within the market. "Whether it be bar codes, thermal transfer labels, packaging, hang tags, or commercial printing," he says, "you have to sell yourself as an expert. Otherwise, it just becomes a bidding war."
Coperthwaite has also found specialty items to be a retail market gold mine. "You can't compete for the bag and box business at a store like the Gap," he says. "They do millions and millions of dollars worth of product, and the big manufacturers just buy that business. You have to offer something that the big manufacturers can't. It could be a very small bag that won't fit on [standard size] equipment and has to be sourced out to Asia or South America."
Coperthwaite recently provided Gap Shoes with imported specialty bags for shoe horn and shoe polish purchases. The 5 x 8-inch plastic drawstring bags were blue with a white Gap logo. "That size didn't fit the bag manufacturer's niche," he says. "But I found a place in Mexico that could do it."
Stacey Hawkins is an assistant editor at FORM Magazine.
Thanks to Neenah Printing, Neenah, Wis., for assistance.Distributorship Fills in the Gap with E-commerce Solutions
The future may be bright for distributors offering e-commerce. But in the present, Peter Coperthwaite, vice president of Applied Graphics, San Rafael, Calif., says it's sometimes difficult to convince retailers to adopt new systems. His distributorship partnered with an e-commerce software company and sold the technology for a year and a half before bringing its first retail client on board."It's hard to get [clients] to change from the old way of using faxes and proofing back and forth, to going to the Internet and proofing in real-time, looking at it on a screen, pushing a submit button and sending it directly to our production facility's floor," Coperthwaite says. "A lot of people get it, but they're scared of it. That's why you have to target large companies that already have email and access to the Internet."
Coperthwaite knows quite a bit about working with large retailers. One of Applied Graphics' most lucrative accounts is with the Gap, a nationwide retailer with six divisions, including Old Navy, Banana Republic, Baby Gap and Gap Kids. Gap is technologically savvy, Coperthwaite says, but the company was reluctant to adopt an online system for proofing and ordering stationery.
"When I tried to introduce them to e-commerce," recalls Coperthwaite, "I was shunned. But I sent them email attachments with demo pages to look at anyway. Then one day I got a call, and they said, 'Come in. We need to talk to you.'" Gap had decided to close its in-house print shop, and after a second meeting with Coperthwaite and his software partners, the company said yes to e-commerce.
Gap employees worldwide can now order business cards, envelopes, letterhead and stationery online by accessing the company's custom-designed Web site. The site's home page shows Gap's logo and divisions, as well as Applied Graphics' logo.
Gap personnel click on a division to view available products. After entering variable information, such as name, title, store address and contact numbers, Gap employees can proof and submit business card and stationery orders for printing. Once an order is submitted, it is locked into an EPS file and sent directly to one of Applied Graphics' manufacturing partners. "This eliminates having to do film or proofs because customers are proofing [the order] right on screen," Coperthwaite says. "And it eliminates having to do any typesetting because the job goes direct-to-plate. Then it's usually produced in 48 to 72 hours and shipped out."
The system saves Gap time and money and nets Applied Graphics $30,000 a month in stationery revenue. Coperthwaite has sold his company's online proofing and ordering system to two other large retailers, but he is especially proud of his partnership with Gap. "Getting a company the size of the Gap to agree to do something like this with a broker is an accomplishment in itself," Coperthwaite says. "It helps very much when we go in to sell e-commerce to someone and demo the Gap site with all its different [divisions]. It's a very good selling tool for us."
Retail Sales by Region Millions of Dollars Year U.S. NE Midwest South West 1993 $2,073,838 $407,142 $503,095 $716,627 $446,974 1994 $2,229,877 $426,441 $538,688 $782,754 $481,994 1995 $2,329,310 $438,323 $567,329 $821,581 $502,077 *1996 $2,461,196 $463,268 $598,411 $870,092 $529,425 *1997 $2,566,209 $485,898 $623,815 $901,380 $555,116 *1998 $2,695,855 $506,738 $652,798 $953,584 $582,735 Historically, the South has led the country in retail sales. The chart above shows the amount of retail dollars spent in all four regions of the United States between 1993 and 1998. Sources: U.S. Department of Commerce; *Bank of Tokyo-Mitsubishi Ltd. (New York)
