Working again with MoreNow, they developed a 32-page version known in the trade as a "slim jim." By virtue of its dimensions, 6 inches by 11 inches, it was cheaper to print and mail. To give the new catalog a better product mix, Mahoney and her employee sidekick, Georgina Sanger, scoured gift shows all over the country and developed several exclusives with California artists.
As with the wedding catalog, the products in The Christmas Fantastic were eclectic and fairly expensive. The new book featured about 150 items, everything from personalized tree ornaments and stockings to a hand-painted "kitty privy" and a $795 "Grand Mr. President" desk set. There were books and CDs, festive party invitations, even a beer-brewing kit. Some old favorites encored -- the silver ice-cream scoop, the Victorian birdhouse, and the Zen rock garden.
The company sent out a test quantity of 112,000 catalogs in three mailings (early returns provide a "product read" that removes some inventory guesswork), and this time it hit pay dirt. The response rate topped the national norm, orders averaged $97, and sales per 1,000 catalogs mailed hit $1,584, beating the industry standard by $566.
So compelling were the overall economics that Mahoney and Ayscue retooled, shifting entirely away from the bridal market and into the gift business. There will be no new Wedding Fantastic this spring, although some of its products are featured in full-page ads in bridal magazines, and a leftover 10,000 copies are available for $3 each. Instead, they launched another new catalog -- The Celebration Fantastic -- and changed their name to the Fantastic Catalogue Co.
The newest book, a 32-page slim jim, is billed as a way to "celebrate life's special occasions with romance, whimsy and imagination!" While some core items remain -- the birdhouse, for one -- the new catalog is heavy on unusual gifts for Easter, Mother's Day, Father's Day, graduations, anniversaries, and new babies. Its 120 items include everything from a complete gourmet picnic hamper for six ($525) to donkey and elephant earrings for this election year ($34). Like Mahoney's other books, it strikes an upscale and upbeat tone. "We think now we are sending the right message to the right people," she says. "Our targeting is getting more refined."
* * *
If The Celebration Fantastic yields results comparable with the Christmas edition's, as Mahoney expects, she will have a strengthening, nonseasonal business and a more secure foothold in the $2-billion mail-order consumer gift market.
But as they say, that's a big if. Having virtually abandoned the wedding niche, she is stepping into a gift sector already sated with some 630 catalog companies, many of them large and resource rich. The Fantastic Catalogue Co. has to establish itself fast. "We need to become the household name, the completely trusted brand name for this whole celebration segment," Mahoney says.
To do that she feels she has to expand quickly. She'd like to circulate a million copies of The Christmas Fantastic this fall to aggressively build her buyer file from its current 15,000 names. But with the initial financing of $1.5 million fast depleting, that hinges on raising $1.25 million or so by summer. And another $1 million will be needed in 1993 to move The Celebration Fantastic beyond the test phase.
As the company expands and Mahoney increasingly understands exactly who her customer is, she has begun to focus on servicing that customer better. Toward that end she brought the company's fulfillment operations in-house early this year, a move that will require more employees and might produce as-yet-unseen complications.
Then there are also problems looming for the whole catalog industry: the always worrisome possibility of postal-service and UPS price hikes and a U.S. Supreme Court case that could require catalogers to pay sales tax to states other than the one in which they are based. That would create a paperwork nightmare and chip away at catalog sales overall.
To try to raise the cash all these plans and contingencies will require, Ayscue is probing the venture-capital market. Meanwhile, central to the whole operation is the idea that there is an expanding, loyal, and non-price-sensitive market for innovative gift merchandise. That's a tall order in recessionary times, but one Mahoney is sure she can fill.
EXECUTIVE SUMMARY
THE COMPANY
The Fantastic Catalog Co., San Francisco
Concept: Build a one-stop-shopping mail-order company offering top-quality wedding goods and gifts for brides and guests. After disappointing results, switched to distinctive, celebration-oriented gift catalogs, one for Christmas and one for such springtime occasions as graduations and Mother's Day
Projections: A loss in 1992 of $884,000 on net sales of $3.05 million. Reach profitability in 1994 with sales of $12.5 million. By 1996, when catalog circulation reaches 11.5 million, attain a pretax income of $2.08 million on sales of $24.3 million.
Hurdles: Building a substantial house file of buyers -- 236,000 needed by 1994; establishing a brand-name identity and customer loyalty strong enough to withstand heavy competition in the mail-order gift business, possibly including copycat catalogs by large retailers; raising $1.25 million this year and $1 million in 1993 to finance operations
THE FOUNDER
Kathleen Mahoney
Age: 31
Family: Married; no children
Personal funds invested: $20,000
Equity held: 70%, together with husband and co president, Ozzie Ayscue
Salary: $60,000
Workweek: 60 to 80 hours
Education: B.A., political science, Princeton University; M.B.A., Stanford Graduate School of Business
Other companies started: None
Last job held: Product manager at American Express Travel Related Services Inc.
FINANCIALS
The Fantastic Catalogue Co. Projected Operating Statement for All Catalogs
($ in Thousands) 1991 1992 1993 1994 1995 1996
Net Sales $890 $3,054 $8,265 $12,498 $17,723 $24,271
Cost Of Goods Sold $445 $1,493 $3,937 $5,801 $8,008 $10,718
Gross Profit $445 $1,561 $4,328 $6,697 $9,715 $13,553
