Print Solutions Magazine, November 2003 -- Retail Market -- Giving Retail Firms a Spark

In the retailing world, where conveying the right image is paramount, distributors are used to providing printing that shows their clients in a good light. For distributor Dan Schroeder, CFC, this mission has taken on new meaning.

That's because Schroeder, president and partner in distributorship Promotek Inc., Danville, Ill., sells light bulbs to a retailing chain. And it's nothing to make light of. Bulbs for parking lot lights run $80 to $90 each, he says, and those used in jewelry display cases sell for $30 to $40. A single store uses an average of 1,500 bulbs in its ceiling.

Selling light bulbs--a small but profitable product line--wasn't Schroeder's bright idea. It all started about five years ago, when the family-owned retailer cut its purchasing staff in half, he says. At the time, his contact offered to buy other products from him to reduce the time spent with multiple salespeople. Schroeder started by finding a source for specialty bulbs for the retailer's gem scopes and branched out from there.

Of course, most distributors don't sell light bulbs--and many may never want to. Schroeder, though, realizes the bulbs are more than a stock item for his client. Many of them illuminate the retailer's wide array of jewelry for which it is famous. For that reason, the bulbs--just like the signs, custom printed jewelry boxes and certificates of authentication that Promotek provides--enhance the shopper's in-store experience. And helping clients do that is one key to success in the retail industry.

Beyond that, it's hard to generalize about a market that encompasses everything from mom-and-pop gift stores to the high-end retailers lining Rodeo Drive in Beverly Hills. Certainly, business for most retailers is cyclical, with a significant percentage of sales coming in the last quarter of the year. The retail industry tends to reflect overall business cycles, meaning sales are slow when the economy is down. In the end, though, what a retailer needs from a distributor has more to do with what the retailer sells and who its customers are than the mere fact that it's in the retail business.

Take product distribution, for example. Schroeder's retailing client insists on having everything shipped to one location, even though Schroeder works with some manufacturers that are closer to the firm's stores than its distribution center. "They have [shipping] down to a science," he says. Perhaps that's because the retailer's broad product line includes large items, such as furniture and TVs, necessitating operation of a fleet of trucks.

At Prograde Inc., a distributorship in Cincinnati, President and CEO Dan Schroer says pick-and-pack service, coupled with a web-based ordering system, has helped the firm solidify its relationship with a telecommunications firm operating more than 100 stores nationwide. When the company hired an ad agency about two years ago, Prograde officials were nervous about losing some business. Thanks to Prograde's warehousing and distribution system, as well as its ePrint Network, that hasn't happened. "It seems like ad agencies don't want to get involved in that level of detail," Schroer says.

The Growing Gift Card Market

Ten years ago, FORM magazine (now Print Solutions) published an article about security documents that revealed a distributor was about to sell gift certificates in the form of plastic cards. At the time, the project was so secretive that neither the name of the retailer (Nordstrom) nor the distributor (Mark Trumper, then president of a large distributorship in the Seattle area) was disclosed.

Today, those plastic cards--known commonly as gift cards--can be found just about everywhere. In addition to gift cards, retailers now use stored value plastic cards for rebate programs and merchandise refunds. If your retailing client is not using gift cards yet, chances are it will soon. "It's a great market, and it's not going away," says Trumper, DMIA's 2001-02 president, who now is CEO of MaverickLabel.Com, Edmonds, Wash.

Statistics from Bain & Company, a Boston-based consulting firm, bear this out. The firm estimates that the U.S. gift card market will reach $42 billion to $45 billion this year, which is an increase of 15 percent to 25 percent from 2002. In 1998, when Bain & Company first began tracking the market, gift card sales were in the $12 billion to $14 billion range.

Why the popularity? With gift certificates, stores can give cash refunds after purchases. Often, that cash is spent elsewhere. This can't happen with gift cards because shoppers must keep using them until the stored value is depleted. The gift card industry also says gift cards are more secure than gift certificates (they can be displayed prominently unlike gift certificates) and can be processed more efficiently.

Some stores, including Walgreens, now sell gift cards for other retailers. And some shopping malls offer gift cards that can be used at all their stores. Distributors say it's tough to sell prepaid cards to very large retailers, but opportunities exist in small to medium-sized accounts.

The following statistics about gift cards, taken from a survey by ValueLink, the stored-value card services division of Greenwood Village, Colo.-based First Data Corp., can help you market them to your retail clients:

* Middle-income families and high-income professionals account for 60 percent of gift card purchases.

* The average dollar value of purchased gift cards among all consumers is $50.

* Males are more likely to load higher dollar amounts on their purchased cards ($58 versus $45 for females).

* Seventy percent of gift card buyers fall between the ages of 25 and 54.

* Nineteen percent of Hispanics used a gift card in 2002 versus 39 percent of non-Hispanics. At the same time, Hispanics are more likely to make their decision to purchase a gift card while they are in a store (42 percent) than the 17 percent of non-Hispanics.

Hot Opportunities

Grocery stores were pioneers in customer relationship management with their frequent-shopper cards designed to track shoppers' purchases. Increasingly, retailers of all sizes are relying on distributors to help them implement CRM. If stores can track shoppers' purchases, they can send post cards, emails and coupons to notify shoppers of new products, special sales or discounts likely to interest them. Using bar coded coupons and stored-value plastic cards, retailers continuously update--and mine--data about their shoppers.

For Jim Klempka, this has translated into large orders for credit card carriers and integrated products. Klempka, a sales associate with American Solutions for Business in Sioux Falls, S.D., sells to an operations center of a national retailer. He provides his client with four-over-four carriers that contain the client's logo and often 4-color photos that change seasonally. The retailer advertises special services, such as credit card insurance, on the bottom third of the form, part of which perfs out so consumers can mail back a post card.

The carriers "are very marketing-driven in terms of design," Klempka says. The client's marketing department works with an ad agency to develop the right image. Klempka then provides valuable information about the printing process, such as details about lock-up and advice on which glossy papers will perform best in the client's high-speed laser printers. He also supplies labels that are affixed to the credit cards. The labels explain how to activate them.

The integrated product Klempka sells is for the client's reward program. Shoppers who spend a certain amount of money at the store receive the piece, which measures approximately 7 x 10 inches. The product contains the store's logo, a letter to the customer and a bar coded integrated card that lets the shopper receive a certain amount off his or her next purchase at the store. Klempka also has sold letters notifying consumers of credit line increases as well as marketing pieces sent with statements. "Behind every national retailer is an operations location," he says. "Obviously, if you can interface with those places, there's a lot of opportunities there."

Changing technology has made gift cards affordable for small and medium-sized retailers, thus boosting retailers' CRM efforts. Currently, Promotek's Schroeder is investigating gift card systems for his client. For now, the retailer uses a system administered by MasterCard, which collects transaction fees. His client hopes to install its own system in each store after the holiday season. This follows a national trend of retailers installing their own systems so they can eliminate transaction fees and own their own data, according to an article in the April 2003 issue of Integrated Solutions for Ret@ilers magazine (www.ismretail.com). (For more information on gift cards, see "The Growing Gift Card Market" on page 40.)

For Prograde's retailing client, targeted marketing means more emphasis on direct mail and less on newspaper inserts. Schroer says the distributorship has helped its client with short run post cards sent to potential shoppers with children and those with a certain household income. Phil Cleaver, a senior account executive with Prograde, would like to help the client market with a targeted message, using variable printing. Targeted marketing is critical, he says, because of the national Do-Not-Call registry and declining newspaper readership.

When it comes to target marketing, experts say retailers and other businesses should be actively wooing the nation's Hispanic population. The 2002 U.S. Census showed that Hispanics are the largest minority group in the country. Catering to this segment of the population could mean everything from printing ads in Spanish, as a Midwestern grocery store does in key markets, to introducing clothing lines specially designed for Hispanics, as J.C. Penney did earlier this year.

The Market's Ups and Downs

Selling to retailers, especially large ones, isn't for everyone. "With retail, the speed element has been more demanding than [with] other customers," says Prograde's Schroer. When the telecommunications company's rates change, Prograde must update printed materials quickly, which also means sending notices in each box of forms alerting store employees to the change. Prograde once had to make changes to a few dozen items and have them proofed, printed and distributed in a week. Likewise, when Klempka's client changed its name a few years ago, he scrambled to have its forms updated.

In addition, distributors must be prepared to deal with a faster pace of business during the end of the year. Schroer notes that transaction volumes for Prograde's retailing client increase approximately 30 percent during the last few calendar months. Certainly, retailers are more particular than most about their image, and salespeople who provide commercial printing to this market are all too familiar with middle-of-the-night press checks.

Finally, salespeople serving this market have learned one more thing: What might be a retailer's nightmare can be a boon to a distributor's business. For example, unseasonably warm or cold weather at the wrong time of year can result in last-minute marketing pieces. Frequent returns and abuses of a store's return policy mean demand for custom printed roll receipts that explain the policy. Additionally, retail's notoriously high employee turnover results in plenty of opportunities to sell W-2s, payroll checks and ID cards. Those high volumes, distributors say, can offset the hassles of selling to retailers.

Katherine House, a freelance writer based in Iowa City, Iowa, is a frequent contributor to Print Solutions. Email us your comments at bholt@printsolutionsmag.com.

Thanks to Celtic Marketing Inc., a Centerville, Ohio, distributorship; Ennis Business Forms Inc., an Ennis, Texas-based manufacturer; and Paragon Visual Solutions Inc., a Spring Grove, Ill., manufacturer, for assistance.

Go to next page
Table of Contents