Navigating the Paper and Postal Shortages of 2022
Catalogers continue to face monumental challenges caused by paper, postage, and print manufacturing availability. These issues are a difficult road to navigate. Availability is one issue, price in another. Competitive pricing is a thing of the past, at least for now. In these times, just be relieved to secure paper at any price as well as a catalog printer who can print it.
Paper prices, print manufacturing and postage costs have increased the catalog breakeven points that we use to determine how many catalogs to circulate. The higher the breakeven, the fewer books in the mail. The past 6 months, we have seen the incremental breakeven point increase an average of 15%. Since March of 2020, it has increased 29%. What does this mean to catalogers? Reduced circulation and fewer catalogs in the mail. Fewer R-F-M segments can reach the breakeven threshold.
When a catalog company is faced with marketing cost increases, a new breakeven point needs to be calculated. The result is a higher breakeven point which means fewer house file cells defined by R-F-M can be profitable at or above this point. When circulation needs to be reduced enough to offset a 30% percent increase, catalog print runs are also reduced. A reduction in the print quantity causes the print manufacturing costs to increase thus another new incremental breakeven point is needed. It’s a self-fulfilling prophecy making it impossible to get off the merry go round.
These are challenges we must own, whether we like it or not. They are not going to vanish into the sunset anytime soon. Therefore, what can be done to offset these unprecedented challenges? The first thing is planning. Build longer lead times into your planning cycle. If you normally plan your circulation 3 or 6 months ahead of your scheduled mail date, start planning 12 to 18 months in advance. Make sure your printer and paper merchant know your mail dates and quantity requirements at least one year in advance. Stick with the plan as much as possible and try to avoid frequent changes. You don’t want to give your suppliers a reason to doubt your plans or to cause them to think you might cut back. When you reduce your paper order, there is someone waiting in the wings to secure the extra allocation. And don’t try to increase your print quantity. Apply any extra or leftover paper to the next print run if you find it necessary to reduce your print quantities after the paper has been ordered/delivered.
Something else you can do is be willing to print on paper that is available. This past year, we have experienced situations where certain grades and weights are no longer available. Some of our clients have had to move from a coated paper to SCA. Other clients have had to increase the basis weight due to availability. No time to be picky. Be glad you have paper to print on. In the past, catalogers have always had the option to change the basis weight and/or the grade of paper to save money. These are not options that are available today. It is a matter of securing the paper that is available currently.
From Fall 2020 to Fall 2022, paper prices have increased at least 20%; some increases as high as 45%. Postage is another cost issue. During this same period, postage costs have goneup 10% to 12%. This does not include the upcoming increase in July of 8.5%. Ouch!
If you are a start-up, it is extremely difficult finding a catalog printer who has press time availability. Or, if you want to change printers your options are limited. It is best to maintain a good relationship with the printer you are currently using. Here are the qualifications that are attractive to a printer:
- No Seasonality – Printers desire customers who print and mail throughout the year. Seasonal mailers that put more pressure on 3rd and 4th quarter print schedules are not as attractive.
- Paper – Most printers are glad to know that a cataloger is supplying their own paper. Purchasing your own paper from a merchant is an advantage.
- Payment – As always, a printer wants to know that a catalog company can pay within the agreed upon payment terms.
The cost of doing business continues to increase substantially with no end in sight. It puts more pressure on your digital marketing channels. There is no way to sugar coat the situation. It is not all doom and gloom. Catalog marketing is still a strong option and remains a big driver of traffic to the web. We are all in this together and as it is often said, this too shall pass.