Culture, Economics, Marketing

Along The Amazon: The Real Invasion

The Brown Marmorated Stink Bug: perennial invader.

For the two previous summers, our community has been infiltrated by legions of quietly intrusive stinkbugs.  They seemed to magically appear, just out of the corner of our eyes, posing on a wall or lampshade.  

Amazon Prime van passes the broken shell of a Macy’s store.

Little did we know that these were just the first wave, doing reconnaissance for the main invasion: Amazon. Now, virtually on every street, at every corner, we catch a glimpse of an Amazon delivery truck slipping in and out of view.

Amazon first broke into our consciousness in 1995 with a simple concept: a place to buy books online.  Their ads claimed access to all of the world’s contemporary literature available, and their warehouse was in outer space, “The World’s Biggest Bookstore”.  We might have listened.

Today Amazon is the world’s second largest company, by market capitalization, following Microsoft, and just ahead of Apple.  It has the world’s second largest retail sales volume, following Walmart.  

Barbarians at the gate: Amazon vans use shuttered Macy’s parking lot in Northbrook, IL.

It has up-ended the retail business model.  In 1997 3% of its sales were attributed to third party sellers.  Today, 58% of its sales come from third party.    In response, 2019 saw the closing of 9,300 big brand retail stores in the U.S.  The shift will continue.

The most physical sense of Amazon’s presence is its growing fleet of delivery vans.  In 2019, Fedex and UPS and the United States Postal Service delivered approximately 13.9 billion parcels in the United States.    But on its own, Amazon dropped 2.5 billion pieces at our doors.  According to Morgan Stanley, that will increase to 6.2 billion in the next 3 years.

The Amazon convoy. Dispatched regularly in 10-15 vehicle sorties on Butterfield Road.

I remark on these stats primarily because we watch the daily procession of Amazon trucks that travel Butterfield Highway, between Libertyville and Mundelein. The company has leased space to stage its fleet in an available lot on Technology Way on Libertyville’s west side.   There, independent owners and employees are regularly dispatched in squads of 10-15 vehicles at a time to head south to Allanson Road in Mundelein where they will pick up their allotted parcels for delivery.  The system is efficient, and it is supported by a good road, courtesy of Lake County.

Staging area in west Libertyville.

Just over the Illinois/Wisconsin Line, there is a vast Amazon distribution center off of US Route 94.  It measures several football fields in size, plus parking lot.  Not coincidentally, directly across the highway sits an equally large U-Line facility that makes shipping boxes. One wonders if there is a tunnel.  According to Amazon’s 2018 statements, the company has 230 million square feet of fulfillment space.  Its premises house nearly 650,000 employees.  One might also wonder how many of those people used to work for Sears, Macy’s, Pier One Imports, Abercrombie & Fitch, Office Depot, Victoria’s Secret, The Gap, and Payless Shoes.

This is not a critique of Amazon in any way.  The company’s mission statement is in part to serve a “customer-centric obsession”.  To that end, it has grown from simply books to sales of more than 100 million items.  Its website lists not a few business diversifications, but a vast portfolio of divisions relating to fashion, video streaming, groceries, pharmaceuticals, publishing, music, movies, web services, home automation and home security.

We can mourn the loss of the local store, but we have gravitated toward a business model that for much of our wants and needs, is just plain easy.

I wish I could feel as good about the stink bugs. 

 

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direct mail, Economics, Marketing, Media, USPS

The Last Post

This is my last post on USPS performance. If you are in the direct marketing or direct mail business, you have seen these before, but unless things stabilize, I don’t want to report, thanks.

The USPS Postal Regulatory Commission has just released the latest Revenues, Pieces and Weights quarterly report. They call it FY Q1/2020.This covers October 1 to December 31, 2019.

Cutting to the chase, I highlight these numbers:
1. First Class revenues are off $161 million, down 2.3% just for the quarter. This was supposed to be the Christmas, Thanksgiving, Halloween and holiday greetings season.
2. Direct Mail or “Marketing Mail” as they have renamed it, down $252 million, or off 5.4% during what was traditionally a good season.
3. Direct mail volume for the quarter was off 1.7 billion pieces…down 7.9%. Hello??
4. Periodical mail continues its slide, revenues off 7.7%, volumes off 7.4%
5. Competitive Packages and Parcel mail, revenues up $137 million, or 2.1%, but quantities down 68 million pieces, off 4.0%.

I suppose I am naiively conservative, but I really expected for this past quarter to shine, and I have been rudely shaken to grasp what everyone else has been saying for years.

On an annual basis, the numbers are no more encouraging. I have created the chart below, converting the USPS fiscal year reports to normal business calendar years: January to December.

Compared to 2018, here are a few highlights about 2019 volumes:
1. First Class revenues off 2.2%; pieces off 3.4%
2. Direct mail revenues off 3.7%; pieces off 5.6%
3. Packages and Parcels revenues up 3.5%; pieces down 2.8%

Clearly, email, chat, web, and social media has displaced the need to use the mail. The only beneficiary in this trend is the package delivery business, which the USPS has carefully cultivated, though the decline in pieces is still a concern.

If there is any bright spot in this numbers soup, it might be that the direct marketers who mail to live know what they are doing; that it’s the small local businesses which used to mail have opted for web and social media instead.

We’ll see, but unless they do, this is my last post on the USPS.

Thanks for reading and sharing.  If you are in the DM business, and have an alternative observation to make, I would love to hear it!

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Agriculture, Culture, Marketing, Thank You

Own Your Burger!

A welcome sign on route 94 into Wisconsin.

One of the great treats of living in northern Illinois is being able to hop over the state line into Wisconsin. The land of beer, cheese, sausage, milk, football, hunting, fishing, camping, farming and hard work is a near infinite portal to the pursuit of happiness.

I need to tell you about just one of those diversions: the Culver’s Butterburger.

In an era when dairy products are viewed as gateway fats, it’s crazy to promote a burger naming butter as a signature ingredient.  But in Wisconsin, what else is more appropriate?  This burger is not politically correct.  It’s frank, and honest.

In fact, the Butterburger is a winning trademarked name that has been touted proudly since 1984.  And its sidekick?  Fresh Frozen Custard, which is made with, yes, you guessed it, eggs.  Not a lot, but they are in there.

The Butterburger is raw culinary honesty at its best.  Culver’s makes no bones about promoting the zest and robust fullness of their foods.  Yep, it’s got fat, and it tastes good.   The Butterburger is a visual treat too.  Packed with yellow cheddar, red tomatoes, green lettuce, pickles, and purple sweet onion, it looks like a miniature carnival carousel.  It lacks only a calliope and an operator.

The Culver’s bag is all message. “Welcome to delicious”.

We were told about the Butterburger nearly 20 years ago, but never had the temerity to go to Culver’s and try one on. The thought of it repelled.  We visualized a hamburger swimming in butter, squirting mayonnaise, dripping juice with every bite.

And then the ads started.  We saw Craig Culver, capped and jacketed in blue, coaching the cook staff on the proper way to flatten the fresh beef patty on the grill.   It had a family feel about it, and somewhat reminiscent of another family burger business, Wendy’s.

We ordered two sandwiches, well beyond our appetites and good guidance.

But the ads persisted, and one day, they introduced the Butterburger Deluxe Double.  Two beef patties, mayo, and all the colorful rest.  That was when I learned that the butter was actually brushed onto the bun and grilled before the burger was assembled.  Well, that’s not so bad, is it?

So on a hot day in September, we drove to a Culver’s in Wisconsin, just over the line, and against all dining habits and trashing healthful instincts, guiltily ordered up two Deluxe Doubles to go. We waited a full five minutes as they actually cooked the burgers for us, squashing them down just like Craig instructed. Then, presented with a bulging bag of two you-know-whats, we drove like bootleggers off to a neighboring lakeside park to enjoy our feast with some ice-cold beers.

The experience was “our first” of a sort, and it was sinfully delightful.  Forbidden foods should be like that.  Reaching into the bag, we pulled out two promising, boxed beauties.   They looked just like the ads.  Sitting down on a bench, we marveled at the sensory delights of a bulging fat, colorful, shameless sandwich, dripping in beef juice and mayo.  It was hot, succulent, cheesy, and messy, with chunks of tomato and purple onion escaping out the sides of our mouths.  To some it might just be a burger.  To me, it was ambrosia.

The sandwich bulges with color, meat and veg, and oozes cheese and mayo.

Just wondering how deeply we had entered into the badlands of fat, I checked the Culver’s website, and found that our Butterburger Deluxe Double weighed in at 810 calories, with 155 mg. of cholesterol.  Bad?  Eaten every day, not good.  But once in a while, I could live with.

Incidentally, I took the fight to Wendy’s and bought a “Double Dave” named after the late Dave Thomas, founder, and felt the experience similar, but lacking the purple onion and extra mayo and raucously celebrated butter, it was a second place presentation.  The Double Dave also boasted 810 calories and 175 mg. of cholesterol, but without the hutzpah, the bravado of the Butterburger’s brazen image, it didn’t deliver the guilty satisfaction I felt in Wisconsin.

To some, a burger. To me, ambrosia.

The Culver’s website also gave me a look at the larger picture.  It’s a family run, privately owned business, 736 restaurants sprinkled across the midwest and south.  Wendy’s has 6,000.  The company is HQ-ed in Sauk Wisconsin, a smallish town north of Milwaukee.

Culver’s targets its charitable giving and philanthropy towards agriculture, supporting the education of young farmers with activities in the National Future Farmers of America, Farm Wisconsin Discovery Center, and most intriguing, Cows on the Concourse, in Madison Wisconsin.

Welcome–a burger most proud!

 

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Culture, Government, Legal, Marketing, Media

When Your Number Comes Up

You know that funny feeling when the cell phone vibrates in your tight jeans pocket, and you struggle to extract it before the caller hangs up. Sitting in a movie theater is tougher because you know to leave it alone. But, it continues to zing—zing—zing, vibrating like a terrified june bug caught in your pants.

A couple days ago, my phone wouldn’t stop zinging. Starting at 10:30 in the morning, I got a call from San Antonio, TX. I know no one there. It’s hot, dusty, and except for the Alamo and the acclaimed Riverwalk, San Antonio doesn’t figure on my list of destinations, let alone origins. But the phone zings insistently.

It’s an unrecognizable number. Area code 210. I skip it.

A few minutes later, another call. San Antonio again. Flush it.

Two more calls after that, and I decide to pick up.

“This is to inform you that your Social Security Number has been suspended, and that there is a warrant for arrest under your name. Please call back immediately…”

I give high marks for originality on this call. It turns out that so does the caller, because they continue to zing in my pocket until a little after noon. 13 calls in total. 13 spoofs: each number changed, but the origin and area code remained San Antonio, Texas.

Next to our annual plague of stink bugs, I think the robo call is the most obnoxious–and noxious–element in our midwest existence. What amazes me is that nothing much is ever done about it.

The telemarketing channel has been a constant irritant to me, and to probably 99% of the adult American public.  In fact, it was the subject of my very first post in 2013: Let Me Get This Call.

In a typical day, we will receive at least 5 calls.  I am thankful for these, as:

  1.  They force me to get up and walk to the phone, providing necessary joint movement;
  2. They frequently remind me that I am eating dinner when they call;
  3. The calls provide a fleeting moment of excitement thinking a family member is calling.

We’ve nearly reached the tipping point to give up our land line, which was the main robo conduit into our normally quiet existence.  And then the cell phone becomes the new target.  What to do?

I looked up the Do Not Call registry, and confirmed that all three of our phones have been registered since 2005.  Fat lot of good that has done.

Checking the FCC page, I read some business-like claims by the department head that multi-million dollar fines have been handed out recently.  $80 million.  $40 million. Serious money, but the zinging doesn’t stop.

The government site points to the measures that phone companies are taking.  AT&T, my server, offers a Call Protect App for the zinging cell phone.  It’s free, and I install it.  Then quickly and effortlessly the app reports I have had no robo calls in the last 30 days!  What about the last three hours?

A Facebook friend has suggested I take a third party anti-robo app.  I may do so. We’ll see how AT&T performs over the next few weeks.

Surely AT&T wants us to keep all of our phones, right?  But mean time, I have this nagging concern.    AT&T is now HQ-ed in Dallas, Texas, area code 210.

Could it be possible?   No, don’t even think of it.

 

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Culture, direct mail, Marketing, Media, USPS

More Change In The Mail

For you marketers, the latest USPS Revenues, Pieces and Weights was just released. It is a good indicator of the health of the economy, but also reveals just how we count on the post office in a different way than what Ben Franklin had in mind.

First off, the USPS jiggles their year-end to March 31, so the numbers I show you here have been adjusted to report a full normal calendar year, January – December, 2018 and 2017.

First Class mail continues its slow descent, losing 4% of its volume over the past 12 months. That is, we mailed 2.2 billion less pieces. The big drop is again in business and financial mailings, as more and more consumers opt for email statements and invoices. Anyway, First Class mail shrank by 119,000,000 pounds, or nearly 60,000 tons.

The USS Ronald Reagan: 103,000 tons.

Marketing Mail, otherwise known as Standard, grew by 258,000,000 pieces. The percentage growth is negligible, which is mind-boggling, but considering the minimal, steady slide over the last few years, this is a big deal. Direct marketers put more money into mail. Remarkably, piece-weights are down.   Down 133,000 tons in fact. Hard to grasp?  It is a lot. Let me remind you, the USS Ronald Reagan only weighs 103,000 tons.

Periodicals, fell 7% year over year, representing 363,000,000 fewer magazines and newspapers. Put into terms you may relate to, that’s equivalent to 30 million monthly subscriptions, cancelled.  While page counts are hard to calculate, the average weight of a single magazine shrank by 0.178 ounces, too.

The rising success in postal delivery however is packages and competitive parcel services. Overall, thanks to Internet, catalog and direct mail order, the USPS volume grew 8% in 2018, by 477,000,000 pieces, or just over 1 billion pounds. That’s 530,000 tons, or for you navy folks: five USS Ronald Reagans.

Conclusions:

We are always pointing to the USPS as a struggling giant.  But it is a terrific barometer and thermometer for consumer behavior.  Why? Because it is the only organ in the U.S. that still takes the pulse of over 150 million business and consumer addresses every day.  It does not sample and extrapolate.  It measures the whole body of the nation.

Understanding that, we see the real change in ourselves: we write fewer letters and cards to one another, and prefer to get our important mail electronically: email and website.  We also shun the retail experience in favor of direct order over the Internet, and through catalog and direct mail.  Lastly, we are steadily running away from browsing the printed page for news. Instead, we go to a screen or tablet.  Still Benjamin Franklin watches.

Thanks for reading!  If you would like to see the entire USPS report for October-December 2018, check it out here: Revenues, Pieces and Weights.

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direct mail, Economics, Marketing, USPS

Geez, Wally, What Are We Gonna Do Now?

Did you ever have a little brother, or sister, look up to you, and ask how to get out of the latest jam some misadventure brought upon them?

We might wonder how the latest USPS postal increase jams up direct marketers. Bottom line, it comes down to cost per response, or indirectly, response rates. There’s a formula you need to apply now, and it’s coming up shortly.

First off, the added cost of postage is somewhere around 2.4% to 3.0%, depending upon postal densities. So if you used to pay as much as 30 cents per piece for a mail drop, effective January 27th you will fork out as much as 30.8 cents. Not insurmountable, but that heavily laden camel is looking nervously for any straw piles nearby.

But what counts in the direct marketing arena is ROI. What does the postal rate do to returns on investment?

Just because postal rates go up, say, 2.7% doesn’t mean your mailing costs go up 2.7%. The total in-the-mail-cost includes creative, art, print, list, letter shop, freight and postage. For the basic #10 kit with letter, flyer, reply form and BRE, you may be paying $450-$600/m. It’s shocking to think that half of that cost is postage, but there it is.

A USPS 2.7% increase adds $8 to a $300 postal bill. But that is $8 added to a total in-mail cost of $450, or an 1.8% increase in total cost.

Your figures will vary from this. If you are mailing simple post cards, the increase in total cost is more significant. If you are mailing expensive, feature-rich, multi-component, highly customized mail, the increase is not as noticeable.

Still, you will experience a hike in cost, and that means you will see an increase in cost per response. That means if you used to have a $450/m cost, and a 2% response, your historical cost per response is $22.50 each, ($450/20=$22.50) Add in an $8/m postal hike, and your cost per response has grown to $22.90. The 40-cent increase doesn’t seem like a deal breaker, but the accountants will point out that your entire business functions on controlling cost.

So what do you do?

Calculate what higher response rate is now needed to mitigate the effect of the postal increase:

(New in-mail cost) divided by (Old in-mail cost) times current response rate.

($458/$450) x 2.00 = 2.0355…..2.036% response.

Where you used to get 20 responses per thousand, you now need 20.36.

So now, we have a target, what do we do?

Go back to the basics: list, offer, format, copy.

Examine your list to remove low propensity response groups, ensure addressing is current, and at the same time consider list increases if higher densities will lower postage. Optimize delivery, too. Are you commingling and co-palletizing mail for maximum cost reductions?

Does your offer optimize pricing?  Do you include an incentive premium?  Is there an incentive with deadline?  What can you add to the offer for free?

Format changes can boost response.  Change your envelope shape and color.  Add in additional pieces: buckslip, lift note, testimonial letter, freemium, sample, cards, labels, personalization, variable graphics. Remember anything up to 3.5 ounces costs the same, so don’t be bashful.

What about your copy?  Is there another theme to test?  A letter change?  New outer envelope copy?

Your opportunities to kick up your response rates never evaporate.  There’s always more to test.  Quantum leaps in response are uncommon, but still, a simple postal increase is cause for finding those drivers that will deliver the increases you need to keep up with the USPS.

Lastly, isn’t it great to have a little brother or sister asking for advice, or better yet, to be one?  Enjoy your holidays with family!

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direct mail, Fundraising, Marketing, Media, USPS

USPS Cuts To The Chase

USPS pops you an email of today’s delivery.

140 billion images per year, some right to your smartphone.

Have you noticed what’s arriving in your mailbox these days? For many of us, getting Informed Delivery Service saves us from a trip down an icy driveway.

Over a year ago, we signed up for Informed Delivery, and I told you about it.  It’s like X-Ray vision, or electronic surveillance, though that sounds ominous.

American Girl’s catalog and URL are displayed in your email.

Their catalog arrives the same day.

The email alert provides a URL that takes you directly to their website.

The USPS emails you hours before delivery, sending a set of pictures of today’s mail.

In case you have forgotten, the USPS scans over 140 billion letters a year.

The Heifer letter follows their email.

Each of those scans creates a jpg file.  Because of the Intelligent Mail Bar code on the envelope, it tracks that mail to you.   When you sign up, they take your email address, and voila: you have x-ray vision, kind of.

What is really cool, and smart of the post office, is that they have now introduced a URL hyperlink service for advertisers to catch you at your computer, laptop, mobile phone.  Rather than wait for the hike to the mailbox, you can open the piece on line.

Hammacher is America’s oldest catalog company, and also a memorable tongue twister.

USPS knows a multi channel approach includes direct mail, email and web.

And that’s what people are doing.  Advertisers like Flemings Steakhouse, American Girl, Soft Surroundings, Heifer International, Hammacher Schlemmer are taking advantage of the USPS service to get into your heads, if not your hands, as rapidly as possible.

Soft Surroundings invites you into their catalog.

If you haven’t signed up for Informed Delivery at home, you should.  Not only does it tell you what’s coming, you are also on alert for when something does not arrive, like a paycheck, or a bill.

So: you can just wait for the mail, and pursue your daily rituals of fetching for it, or, cut to the chase, and see it now.

 

Thanks for reading!  No, I am not a shill for the USPS, but I do believe that it is taking the right steps to be relevant in a changing world.

 

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