Focus On: Merchandising: Show 'Em Your Wares

The variable costs, which include printing, paper, the assembly and binding process, list rentals, and postage, etc., are per-copy costs and vary depending on how many copies you print and mail.

Call center, fulfillment. Consulting firm F. Curtis Barry & Co.’s proprietary benchmarking studies of catalog companies have shown that the most cost-effective call center and fulfillment costs are typically 8 percent to 15 percent of net sales. For smaller entities, it’s important — and often difficult — to get costs under 20 percent of net sales.

Net sales comparisons can vary widely based on average order. From a cost-per-order perspective, efficient companies average $8-$13 for fully loaded costs.

Front-end costs: Efficient order processing costs $3-$5 for data-entry and customer-service operations, including direct and indirect labor, benefits, credit processing, occupancy and telecom costs.

Back-end costs: Efficient order processing costs $4-$7 for merchandise processing and fulfillment, including direct and indirect labor, benefits, occupancy and shipping materials. It does not include outbound shipping costs or an offset with shipping and handling revenue that varies widely between catalogs. When these are taken into account, they distort the picture of the cost of fulfillment between catalogs.

General costs. These are the costs of buying, marketing, accounting, human resources and IT that are part of the business unit. Typically, in profitable catalogs, G&A costs are 9 percent to 11 percent.

Returns and cancellations. Everyone knows that sales is what gets booked in accounting and deposited in the bank. But demand — orders in the door — is very important. There are two ways that demand gets eroded to yield lower net sales: cancellations and returns. Customer cancellations because of back orders are ideally 2 percent or less. For hard goods, this is often achievable. For apparel and soft goods that have a higher fashion design and more new products that are difficult to forecast, the average may be more typically 3 percent to 4 percent. When bestsellers strip the inventory, cancellations can range into high single digits.