Marketers are generally a persistent lot, but they're beginning to think that bombarding your mailbox might not be worth it.
At the rate things are going, credit card companies will send a billion fewer unsolicited offers to consumers by the end of the year, dropping from 5.2 billion offers last year, according to data released yesterday by Synovate Mail Monitor, a market research firm. Home-equity credit mailings dropped 66 percent in the third quarter this year to 72.9 million, compared with 215 million in the same period last year, according to market research firm Mintel Comperemedia. Mortgage mailings dropped 44 percent to 182.4 million from 324.1 million in same period last year.
Among large institutions, Citibank and Charles Schwab cut back the most, reducing 98 and 95 percent, respectively, of their consumer-banking solicitations in the third quarter of this year compared with the second, according to Mintel. Bank of America mailed 49 percent fewer credit card offers and HSBC, one of the first banks to announce big subprime write-offs in the housing crisis, sent 44 percent less. Representatives of the four companies had no comment.
"People who have good credit don't need another credit card," said Barry Kassel, chief executive of RTC Relationship Marketing in Georgetown. "And other people are overextended. It's an over-commoditized category in which anybody who passes a credit screening pretty much has too much credit card in their wallet already."
WHAT??? Credit card companies are saying that they are reducing the number of junk mail to consumers because they have good credit? I would say that it is the other way around. According to this October 30, 2008 MSNBC story, banks are now asking the federal government for credit card debt forgiveness:
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
Amid rising job losses, consumers — even those with strong credit records — have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises are bleeding tens of billions in red ink from the losses. The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.Graph showing increase in credit card delinquency rate, and credit card debt outstanding. From MSNBC News.
The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.
Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.
Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures. People who are in credit counseling, on average, carry seven cards.
Many of the people now having trouble making their credit card payments are in a double or triple whammy: their mortgages or car loans also may be under stress.
Here are some graphs showing just how much debt Americans have accumulated, from the Prudent Bear via Bonddad:
If a greater number of Americans are defaulting on their credit cards, possibly due to mortgage problems, or job losses, then these Americans are obviously not going to be credit-worthy for card solicitations in the mail. The last thing these credit card companies are going to admit is just how much money they are losing to the rising default rates on credit cards, and that they don't want to spend money sending even more credit card solicitations to Americans who have defaulted on their credit cards. So we get this PR-marketing BS from the marketing companies saying that people with good credit shouldn't get more credit card solicitations. If anything, the different credit card companies would want to solicit those Americans with the good credit ratings for their cards, and their business. The banks are mailing fewer credit card offers because there are probably fewer Americans with good credit ratings.
However, the catalogue companies might just be in a different pinch. Back to the MSNBC News story:
Catalogue companies, already pinched by a postal rate increase last year, began scaling back earlier this year. Late last month, the Postal Service projected that it would carry 9 billion fewer pieces of all types of mail in fiscal 2008 than it did the year before.
"All of the catalogers I'm talking to are working to reduce their dependence on mail," said Hamilton Davison, executive director of the American Catalog Mailers Association, which estimates that companies spend $5.6 billion on postage annually. "The industry is feverishly trying to figure out a way to find viable [customers] in other ways and when it does there'll be an enormous migration away from mail."
Look at intimate apparel, but never buy? That slinky lingerie catalogue may stop showing up. High-end houseware companies, feeling the ripple effects of the housing downturn, are cutting back, too. Earlier this year, after reporting a 42 percent revenue loss, Williams-Sonoma said it would trim its mailing list. Neiman Marcus, renowned for its holiday wish book with trinkets such as the $20 million personal submarine or $12 million Bombardier Learjet, is cutting back.
"We have reduced the number of catalogues by double digits over our original budget, reduced the paper weight, looked at alternative, more efficient formats, taken pages down per book," said Stan Krangel, president of catalogue retailer Miles Kimball, which has multiple brands including Exposures and Walter Drake. "Many of these options hurt response from the consumer, but we have to reduce our costs and are constantly seeking efficiencies. We are looking at the same trend for next year."
Earlier this year, a survey by the Direct Marketing Association showed a 55 percent drop in the number of companies that said a paper catalogue was their primary market channel for business.
For average American households, Mintel analysts estimate, the trend points to more room in their mailboxes. Last quarter, for example, 8.3 fewer pieces of credit card junk mail showed up compared with the same period in 2005.
Here, I would say there are two factors in the cutting back on catalogues. The first, obviously, is the rising cost of postage to mail all of the catalogues to Americans' mailboxes--especially in this time of a slowing economy. The stores are probably also feeling the pinch, as consumers are cutting back on their spending. The stores need to cut back on their expenses. One way is to cut back on the printing and mailing of these catalogues to American consumers, which will probably be dumped into recycling bins.
The second factor would be the internet. It is cheaper to create a store website, show the products you are selling in your store, and then provide an online order form for those Americans willing to purchase your product via their credit cards (If they still have a credit card). The product could then be shipped to a mailing address. Internet shopping is big news for retailers:
Forrester Research predicts online retail sales will grow 12% this holiday season, the slowest growth to date but more than five times the tepid 2.2% increase the National Retail Federation predicts overall in November and December.
"The brick-and-mortar retailers who haven't made online a priority are going to be most challenged this holiday," says Matt Poepsel, a vice president at Web experience manager Gomez. "If their attention wasn't on the Web before, it certainly is now."
Research out Wednesday by NRF's digital division, Shop.org, and shopping search site Shopzilla, shows online retailers even more optimistic: 56.1% expect their holiday sales will be up at least 15% from last year. They, too, predict slower growth: 77.5% of the retailers surveyed last year expected their sales to grow more than 15% — and they were right. Online holiday sales overall rose 19% between 2006 and '07, according to Web marketing firm ComScore.
Internet shopping is cheaper for consumers, since they don't have to use gas to drive to stores to shop, and can shop anytime they wish--even late at night or early morning, when such stores are closed. It is certainly cheaper for the brick-and-mortar stores, since the entire transaction is processed online, and the product can be shipped from the warehouse to the customer's address, eliminating the high cost of keeping a store open. Internet shopping also eliminates the need for sending out catalogues, since the customer can access the store online. That is not to say that overall retail sales will increase due to internet shopping, but rather internet shopping may have a greater impact on retail sales for this holiday season.
Of course, I will probably not be able to afford all the credit card offers, the high-end housewares, or the slinky lingerie products gracing the pages from the even fewer catalogues that will fill my mailbox during this cliffhanging holiday season. Then again, a reduction in junk mail could reduce the number of trips I would be forced to take in stuffing this useless paper in my recycling bin.
Now if only I could figure out how to reduce the amount of junk in my email box.
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