Internet and Mail Order Costs Are Rising Too!

We often hear about the constant cost pressures on the High Street and the claims that brick and mortar retail is at a cost disadvantage. Perhaps realty is not as clear cut as many think.

Mail order has been under constant cost rises which are forcing the traditional catalogue online. It is not the consumer switching to digital that is driving this as much of the constant rising cost of paper and postage. We may moan about the number of printed catalogues we receive, but each one is costing at least 10% more to produce than it did last year and in the UK, thanks to some exceptional steep increases from Royal Mail it is costing some 25% more to deliver. As mail order operators look to find new ways to get their inventory in the homes more catalogues are now being inserted with other materials and catalogues in an attempt to share costs. However it’s the weight the determines the price paid so sharing is more about speculation for new customers than reducing costs on existing ones. A catalogue doesn’t guarantee an order and even regular customers can often become irregular but they all still need to be mailed. Without the catalogue the retailer is not reminding his customer that he is there and showing them new products and offers.

We live in an increasingly mixed marketing environment. Research from Marketing production form Charterhouse suggests that 70% of marketers use printed media to interest audiences in online content and to drive extra web traffic. Catalogues4Business claims that their recent research highlights that businesses still see catalogues and direct mail in general as an important part of their marketing mix. Their MD Ian Simpson says, ‘While many customers place their order online or by tablet or smartphone, the trigger is very often a catalogue or piece of direct mail.’ Clearly Google Ad words only goes so far and is great for search and discovery of specific products but doesn’t create spot buys or cover the items the customer didn’t know the retailer had on offer.

However, once the customer has bought online or offline, the goods have to be picked, packed and shipped to them. Here we find another urban myth, that shipment is ‘free’. Sadly it isn’t and increasingly this cost is rising far greater than any inflation benchmark.

Yodel, which distributes 25% of the market in the UK, handles some 1.2 million parcels a day at peak times and its contracts include the likes of; ASDA, Amazon, TESCO and Littlewoods. Yodel has some 55 depots and employees 14,000 staff. Two years after buying up the competitive DHL Domestic parcel business is now seeking a “double digit per cent” hike in its fees. Their pressures are many but they claim the sheer volumes alone are making their current model unprofitable. They state that the UK infrastructure is not developed sufficient to handle the current explosion in online shopping. They also see the need for thousands more local collection points, the introduction of six days a week delivery and the choice of morning or afternoon deliveries and customer text updates.

It’s a sobering thought that each order is today exposed to potential service cost increases of some 30%. The lower the value of the order the higher the margin impact and books are in the main not expensive items. So as we listen to increased cries of unfair from the High Street remember the direct mail and internet channel is also experiencing cost increases and not everyone is 100% virtual.

Cartoon with kind permission of BibliophileBooks.com

PayPal Bans PayPorn!

Tomorrow what we can read, watch and the art we observe may not be decided by ourselves or governments and laws but by a new breed of censors. These censors may have no qualification or experience, just the ability to switch off those who they deem unfit. It’s like a McCarthy witch hut without the senate hearings, flag beating and just a darkened room and anonymous censor.

The latest technology censor has deemed erotica and pornography the evil and corrupting element that must not pass their doors. PayPal doesn’t even host any content it merely facilitates online payments. Yes, a financial service operator is now deciding what is appropriate to read and what isn’t. It can achieve this level of moral censorship by having a virtual monopoly over the business of controlling cash transfers made via the internet and also having a dominant market share over the online self-publishing channel.

Last week, without warning, PayPal merely wrote to every major self-publishing website and announced that it would refuse to process payments for clients that sell books which contain what it regards as "obscene" content. Paypal will aggressively prohibit erotic literature which contains scenes of bestiality, rape, incest and under-age sex. Ebook websites that sell such works will have their PayPal accounts deactivated. PayPal claim that they are acting under pressure from credit card companies (the likes of Visa, MasterCard, American Express, etc). This alone begs the question of hypocrisy and double standards as these companies are happy to take money from all sorts of services that are far more corrupting than erotic literature. PayPal is also owned by EBay who happily sell erotica and therefore its one rule for them and another for its customers.

It doesn’t matter how many books are effected it is the stupidity of a censorship based on subjective and unqualified self judgement in an area that they are ill qualified to judge. Will their ban apply to physical books, art , movies, music and will they come down heavy handed on all publishers or merely the self publishing market. More ridiculous is the question of how PayPal believes it is going to enforce its moral high ground. Will they ban any site from selling Nabacov, DH Lawrence, Stig Larson, Shakespeare, Suskind, Belle de Jour, Cleland, Harris, Neret, Zola, Joyce, Nin, Miller, Reage, Swinburne, Boccaccio Etc. Many artists and photographers,such as Mapplethgorpe, Newton and many more, would fall foul of these rules. After all it is ridiculous to effective ban one form of expression, literature without impacting other forms such as art, film, photography etc.

So PayPal and others have draw the line on their own definition of obscene adult content that it believes is extreme or potentially illegal. What comes next, political expression?

Advocacy groups are considering taking on the PayPal censorship case and some have already written on the subject; Electronic Frontier Foundation (EFF), and The American Booksellers Foundation for Free Expression (ABFFE) and the National Coalition Against Censorship (NCAC).

Perhaps someone at PayPal should enter the word 'erotica' on the parent EBay's own site!

Bye Bye Book Of The Month

Remember those ‘Book of the Month’ Book Clubs, where you often forgot to send the unwanted title back and then spent an age sorting it out? Bertelsmann were the ‘Book club’ with the leading Book Club services in many countries and a club for every taste.

Today, the once giant club has fallen on hard times and laid the blame on the internet, Oprah, deep discounting and much more. The US Direct Group’s business alone has shrunk by some 75% from its peak. The truth is that they, like many others, thought the end would never come and they had a licence to trade for ever. Today the Direct Group has sold off most of its international subsidiaries, U.S., UK, Italy, Spain, Australia, Asia, and France, and plan to wind up the rest.

Webb bought up the UK BCA business and have proudly declared that they intend to increase sales by 30%, but after all that is easily when the beast is on its back and sales are rock bottom. Najafi Companies, a Phoenix-based private equity firm, have bought Direct Group North America and clubs such as the Book of the Month Club and Columbia House.

So what went wrong for what on reflection was an obvious internet service? After all they understood managing mail lists and direct marketing. They understood the book market and product mix. The had a diverse demographic of heavy book buyers and they did business from the armchair.

The problem was the model which was based on, locking members into buying cycles, dumping a book of the month on members and ‘twigging ‘. Twigging is were one starts with a branch, say History then that twigs into ancient civilisation, medieval, 20th century and so on and these can even twig further. They missed two significant changes; one that readers were becoming and probably always have been eclectic in their reading and secondly depth of range was becoming available in a click through the likes of Amazon. In fact Amazon is the new book club sending you alerts to titles you may be interested in and given you the range at your convience in a one click operation.

The challenges that the old Book Clubs that have not already adapted now face are huge and that is without digital content. However, their skills and ability to rise to the challenge is still possible as they still have a community or communities but will they understand that twigging is for the past? Will they open themselves up to discounting? Will they leverage their huge lists before they become inactive or die? Will they understand how to digitally direct market? Is it possible for them to step forward to take on digital rentals?

In our hearts we want them to change, throw out the old and antiquated business model and practices, but somehow in our heads we fear that leopards don’t change their spots.