Made to Order

Starting a catalog business looks easy: no office, no storefront, no employees. But in a field of 9,000 competitors, will Kathleen Mahoney's get lost in the clutter?

It would be quite a wedding. The nuptials would take place in the stone chapel at the school from which the bride and groom had graduated. A reception for 400 guests would follow at the seaside home of the bride's parents. And from start to finish, the festivities would be imbued with Gatsby-esque elegance and style. Kathleen Mahoney, the bride herself, would see to that.

"I researched every aspect of it to the nth degree," she says, recalling the year of preparation. "I went haywire. I looked at 20 guest books, 20 bridesmaids' gifts, 20 different goblets, and so on. I wanted everything to be perfect."

Only the finest items would do, and finding them was frustrating. "There's a decentralized flow of information and goods in the wedding industry," Mahoney says. "There was no source for the upscale bride to find all the high-quality, tasteful wedding accessories she'd need." Her search took her to some 50 stores from Boston to San Francisco -- gift shops, bridal boutiques, stationery stores.

All of which got her thinking. And by the time Mahoney and Ozzie Ayscue were married, in June 1990, she had a new business on her hands. One-stop shopping for brides -- the idea seemed irresistible. "It made intuitive sense to me, from my own experience," says Mahoney, 31. "I did some research with friends, and it made sense to everyone."

With 2.5 million weddings a year in the United States, a huge and lucrative market beckoned. The most promising targets, Mahoney reasoned, were career women, brides age 26 and up. They'd have the discretionary income to purchase topflight wedding goods but not the time to hunt for them.

How best to capitalize on the opportunity? She had dismissed a retail store as too limiting -- hers was a national concept. A catalog, though, could put the products right at brides' fingertips. Mahoney was a catalog nut -- she loved them. She didn't know the first thing about publishing one, she admits, but she figured she could learn.

The timing was fortunate. Mahoney was at American Express in Manhattan, in the direct-mail travel business. Ayscue was working for a travel-industry start-up in San Francisco, where the couple had decided to settle. In late 1989 Mahoney left American Express and moved west, itching to take a crack at the catalog game.

It's no cakewalk to start a consumer catalog from scratch. Typically, retailers branch into mail order to augment established store-based operations. Other merchants tiptoe into the field by first advertising a few items in magazines. That's a cost-effective way of learning what sells while building a buyer file. Gradually, their product lines expand to fill full-blown catalogs. That's how Lands' End got started, for example.

One impediment to launching cold is capital. Catalogs inhale money. One might open a retail store for, say, $50,000, but that won't even get you off the ground in the catalog trade. It can easily cost $150,000 or more to get that first book in the mail, and follow-on editions are needed to build a buyer file. First come production costs for photography, copy writing, layout and design -- the "creative" end of the business. Then come costs for list rental, photographic color separation, printing, fulfillment, data processing, and postage. And even before that first order comes in, a start-up needs to stock most of the featured items.

Mind you, all that happens before you know if the phone will ever ring. What if all the recipients throw your catalog in the trash? By definition, a start-up has zero name recognition. And with an estimated 9,000 consumer catalogs in the country, mailing hundreds of millions of copies, it's easy to get lost in the clutter. Given that saturation, catalogs are creeping into ever smaller niches, staking out tiny franchises in hopes of survival.

Even so, most of them don't last long. Industry lore is replete with tales of first-timers who sank $1 million or more into a black hole before calling it quits. The market is ruthless in weeding out the glut. According to Leslie Mackenzie, publisher of The Directory of Mail Order Catalogs, between 1,000 and 1,500 of them fail or cease operations every year.

It is a business, analysts stress, in which you must get everything right. For instance, you might have terrific merchandise, a superb shipping operation, and a good mailing list. But you drop the ball on the creative -- the product photos and the copy don't quite click. In that case, says consultant Bill Nicolai, "you are toast. It's a very tricky business, but it's one where sharp entrepreneurs can find their way in."

As Mahoney mapped her plans, however, she felt confident. A private investor had promised her $1 million, for 30% of the company, plus a $500,000 loan. That would sustain the business for two years or more. The wedding niche, moreover, seemed solid. "I knew in my heart it was a good idea, so I didn't do much formal market research other than some demographics," she says.

She presented her concept to Jeff Haggin, chairman of the MoreNow Corp., a catalog-production firm in Sausalito, Calif. Over the years MoreNow had handled the creative work for many prominent catalogers -- Smith & Hawken, Sierra Club, Playboy, and dozens more. Haggin knew the industry cold, and he thought Mahoney's idea had real merit.

That's all she needed to hear. And thus was born, in February 1990, the Wedding Fantastic Inc.

With that start date, the earliest Mahoney could mail her first catalog would be July. That wasn't optimal. The big wedding season is spring and summer, and she would miss most of it. But impatient to get something into the market, she plunged in, headquartered in her San Francisco apartment.

Ayscue pitched in and joined the company in July as copresident. Two years as an analyst with Morgan Stanley had given him strong number-crunching skills. He'd handle strategic planning, statistical analysis, and financial management, while Mahoney concentrated on merchandising and marketing. Working with list brokers, she identified between 3.5 million and 10 million rentable names that met her demographic profile. Industry wisdom has it that you must mail at least 100,000 books to get a reasonable response. To reach her target market, she rented 100,000 names from Bloomingdale's, Williams Sonoma, Victoria's Secret, Nieman-Marcus, and 16 other upscale catalogers. She also rented from bridal-magazine subscriber lists. "I wanted to reach not just brides but brides' mothers, aunts, and shower throwers," she says.