Worst of times is best of times for Shore company USA Fulfillment thriving on rebates, catalog orders

THE BALTIMORE SUN

CHURCH HILL -- Keith Moore doesn't like to admit it, but these hard times are good for business.

So good, in fact, that Mr. Moore, who is president of the family-run company USA Fulfillment on the Eastern Shore, is thinking about expanding into a bigger building and perhaps even getting rid of some people -- not workers but clients.

"In improving our business strategy, we will probably fire a few clients," Mr. Moore said.

Most companies suffer during a recession, but USA Fulfillment expects to increase its business by as much as 45 percent this year, partly through improved sales efforts but also because the recession brings in more business.

The company provides a service called "promotions fulfillment," better known to consumers as rebates.

Sixty percent of its work is fulfilling manufacturers' rebates -- those offers of money back on the purchase of a new product. Manufacturers use rebates to entice consumers to buy their products, but when economic times are good, many consumers never get around to mailing the money-back coupons, usually worth $1 to $10.

"In a recessionary period, people will make greater use of rebates then when times are good," Mr. Moore said. At the same time, "manufacturers will offer more rebates and value-oriented products to move their products."

Since USA Fulfillment is paid by piece rate -- 10 cents to $3.50, depending on the value of the item being processed -- the more consumers use rebates and promotional offers, the more money the company makes. Consequently, it prospers in a recession.

The rest of USA Fulfillment's work is divided among three related areas. Twenty-five percent is filling "direct response" mail orders, usually from television commercials. Ten percent is filling catalog orders for medium-sized catalog companies that don't have the warehouse space for their growing inventories. And 5 percent is storage and other miscellaneous work.

Every workday, the company's 60 employees process 10,000 to 12,000 phone calls and pieces of mail. Some employees "qualify" the mail, that is, make sure the consumer has met all the restrictions put on the offer by the manufacturer. Others type data, including names and addresses, into computers for mailing labels, then send checks or products through the mail.

Each day, thousands of rebate checks, most for $2 or $3, and many promotional items, from Ninja Mutant Turtle jumpsuits and Playtex bras to quit-smoking kits, go out the doors of USA Fulfillment's three warehouses.

Last year, USA Fulfillment processed 3.5 million orders and paid more than $1.3 million to send those orders through the mail. After mailing costs, it had $1.5 million in revenue from its clients, which include international manufacturers such as Fuji film, RCA and General Foods.

In considering whether, and how much, to bid for new business, Mr. Moore grapples with the same questions consumers face when they spy a promotional offer in a newspaper ad or a rebate offer on a store shelf: Is the rebate worth it? Is the redemption process too much trouble? Is the economy tight enough to encourage consumers to redeem rebates?

"We see offers that are calculated to have very little response. They [the manufacturer] wanted dealers to give them more shelf space," Mr. Moore said.

But his company occasionally handles a sales promotions so popular that some consumers send much more than their rebate coupons and proofs of purchase. Such was the case with Playtex's "Buy Two, Get One Free" bra ads.

"We've had women send in pictures of themselves modeling their bras," said a bewildered Mr. Moore, who described the models not as slender young women looking for a career in modeling but as pudgy, middle-aged housewives. "Now what husband in his right mind would take this picture?" he asked.

Mr. Moore hopes to generate more catalog business, as the company did with Success, a business magazine that uses full-page ads to sell books and computer software to its readers.

"There's over 10,000 catalogs, and 8,000 do $1 million to $5 million in business a year. They're not big enough to warrant the overhead of a warehouse," Mr. Moore said.

"Direct marketing will grow, despite increases in the cost of doing business. It lends itself well to the emerging marketplace."

USA Fulfillment has come a long way in the eight years since Mr. Moore and his wife, Patty, started the business in their Annapolis home with his parents, Al and Shirley Moore, as business partners and $10,000 in capital.

The business has grown so rapidly that it now is scattered among three warehouses in three locations on the mid-Eastern Shore, including its main office near Church Hill in Queen Anne's County.

The Moores probably never would have gotten into such an unusual business had Shirley Moore not managed the operations of a similar company.

In 1978, Mrs. Moore left her job as an aide in a nursery school so that she could be at home when her children got home from school. Her former employer asked whether she would be interested in running a new business out of her home. She remembers not understanding what type of business he was talking about but agreeing to do it anyway.

"It was supposed to be part-time, but it ended up a very, very full-time thing," said Mrs. Moore, who worked out of her home for almost two years. She typed addresses for the rebates on the kitchen table and used her own house as storage for the promotional material of her employer, Nationwide Fulfillment.

She vividly remembers the day a tractor-trailer pulled into her Kent Island driveway to deliver 2,000 picnic baskets, part of a manufacturer's promotion. The baskets filled the living room, family room and dining room from floor to ceiling, leaving little more than a passageway from the kitchen to the upstairs bedrooms for the family.

"It's a good thing I didn't have any furniture," said Mrs. Moore, who had just moved into the house.

Shirley Moore and her husband, Al, who retired from a state job in 1978, became full-time employees of Nationwide Fulfillment when it moved into its own building in 1980. Three years later, however, they left the company over a disagreement with the owner about management policies.

At the time, they had no intention of starting a similar business. It was their son, Keith, who suggested that the four family members join forces and open their own business.

Keith Moore, who was an insurance salesman in Annapolis, offered to develop clients for the new business if his parents would run the day-to-day operations. His wife, a former legal secretary, also helped in the business when she was not too busy with their four children.

"We experienced all of the traditional problems of getting a business going," Mr. Moore said, including, "We were severely under-capitalized. And none of us had any real industry experience."

In addition, they were slapped with what Mr. Moore calls a "nuisance" lawsuit by his parents' former employer, who claimed that they had used knowledge gained from his business to start their own. After eight months and $12,000 in legal fees, it was thrown out of court, Mr. Moore said.

In 1983, they made a meager $35,000, much of which was used to fight the lawsuit. As they improved their sales effort and learned how to more accurately bid on jobs, revenue grew rapidly, 26 percent in 1989 and 28 percent in 1990, Mr. Moore said.

Few sales promotions last longer than six months, and each one is different, but that's what Mr. Moore finds challenging about the business.

"Even though there can be tremendous similarities, every program is technically a unique entity," Mr. Moore said. "That's what keeps it nice. It's fun. I thoroughly enjoy it."

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