BUSINESS Gilt by Association

IF SOMEBODY PUT OUT A CATALOGU of mail-order giftware companies two years ago, Roger Horchow’s operation would have stuck out like a Rembrandt in a velvet-painting gallery. Seventeen years old, with well over $100 million in annual sales, the always-profitable Horchow Collection had some of the industry’s most valuable mailing lists. It also had its founder, Horchow himself, a recognized genius of taste.

When word went out that the company was for sale, who could blame Neiman Marcus for placing an order? For $117 million in cash and other considerations, NM collected its longtime cross-town rival. The pricey deal looked irresistible on paper.

NM’s traditional strength in apparel marketing, it was argued, would admirably complement Horchow’s robust giftware sales. The owlish merchandiser himself, then sixty and looking forward to a second career in public service, would stay on for Neiman’s in an advisory role.

But when the first year’s results arrived last summer, the merchandise seemed to have suffered in transit. Horchow sales were down. Steady profit growth had wilted into an $8 million loss.

In a way, it wasn’t surprising. Big companies like Massachusetts-based General Cinema, the parent of Neiman’s, are famous for buying successful organizations only to destroy the things that made them successful. But the Horchow Collection-comprising ’our divisions publishing as Horchow, Trifles, SGF, and Grand Finale-was an established concern. For the business to take such a startling nose dive so soon after the sale was, Roger Horchow himself admits, “almost embarrassing. It looks like we did something to pull the plug.”

The obvious cause of Hor-chow’s penthouse-to-poor-house performance is a surge of competition. When Horchow left his job as Neiman’s mail-order chief in 1971, there were just a handful of retailers vying for the high-dollar gift market. The catalogue company he eventually purchased and renamed after himself had a loyal band of affluent consumers hungry for the opportunity to buy unusual, top-quality goods from the comfort of their armchairs.

Horchow met their demands with exclusive and exotic offerings: elaborate (and expensive-$5,000) Reuge music boxes, antique toasting cups, handcrafted furnishings, and monogrammed linens. Sprinkled in with the exquisite was the less-pricey mundane, but the mix was calculated and successful.

Horchow’s expert exploitation of shop-at-home trends proved to be just a few years ahead of a flood of mail-order houses. This year, an astounding ten billion catalogues of every description will go out to U.S. customers.

The 1988 U.S. Postal Service price hike also helped the Horchow package come unglued, soaking up more than $2.5 million of erstwhile profit. The specter of the planned 1991 postal hike looms over the company’s hoped-for recovery.

“The postal rate impact conies right off the bottom line,” says Clay Johnson, the man Roger Horchow hired in 1982 and who eventually succeeded him at the helm, “It will reduce the profitability by several million dollars. That is a great element of concern,”

Even so, says Johnson, now president of Horchow and Neiman’s mail-order divisions, any finger-pointing is aimed inward.

“When we have a catalogue that does not do well, it’s rarely due to outside factors,” he says. “It’s almost always related to internal things. The major culprit is usually not finding merchandise customers want to buy… We got too risk-averse.”

In layman’s terms, the Horchow buyers danced with the ones that brung them in a world where jaded, fickle customers demand surprises. Among other things, as the mailing list went higher into the millions and the number of catalogue editions mailed annually reached dozens, it became harder to find unusual items available in enough quantity to satisfy demand. So buyers played it safe. To make sure they didn’t get caught with orders they were unable to fill, they used more mass-manufactured items and stuck with safe products for which solid distribution channels had been dug.

It’s clear that the company grew fast and big for a long time without hitting the wall before, so what happened? Looming over everything was the obvious: Roger Horchow was no longer the point man when it came to selecting items to put in those catalogues.

In the year after the sale, Horchow put in fewer than his usual nine or ten months at work. By the time he returned from his annual Nantucket sojourn in August, it was obvious that the company was stalling. He took matters immediately into his hands, axing a few items instinct told him wouldn’t sell. The January catalogues were already in production, so there was no time for leisurely shopping trips to faraway lands. Dashing down to the Dallas Home Furnishings Mart, Horchow strode through a few showrooms pointing out items and returning to the role that had made him a legend in the industry.

“Roger is a superb merchant, widely respected for his taste and ability to pick products that the customer needs and wants,” says David Hochberg, vice president of public relations at Lillian Vernon Corporation, a New York-based mail-order house.

Lillian Vernon, a forty-year-old company that’s catered traditionally to moderate-income buyers of housewares, liked the prospects in Horchow’s market enough to come out with its own upscale gift catalogue last year. Catalogue success, Hochberg stresses, depends on having someone who can pick out the right merchandise. “The key challenge for someone like Roger is to develop a staff under him who has that same talent.”

1990 catalogues once again are offering items like a $60 sterling silver cup designed to hold lost baby teeth and a $375 antique French lap desk. But the big question for the Neiman Marcus Group is whether the return of the Horchow touch will reverse the company’s fortunes. Not content to rest their hopes on Horchow’s buying skills, NM recently reshuffled Horchow, trimming mailings of Trifles and Grand Finale, and eliminating the SGF catalogue, to put primary focus on the Horchow catalogues themselves.

Fewer than fifty of the 500-plus employees lost their jobs in the cutback. But you can’t help but wonder whether, with enough whittling, the Horchow Collection itself will eventually disappear within Neiman’s. Not likely, Johnson insists, because Horchow and Neiman’s go after different customers.

“I’ve worked harder since August 1989 than I’ve worked in the past fifteen years,” says Roger Horchow. His friends wonder why, when he’s banked a nine-figure sum from the sale and no longer has any ownership position in the company, he doesn’t leave Neiman’s to fix its own problems.

“I have a moral responsibility,” Horchow says. “You have to remember, I was an Eagle Scout.”

If that sounds like a politician running for office, there’s a reason.

His true love all along has been public service. A Democrat who switched parties to support George Bush for president, Horchow lobbied hard for the job as head of the National Endowment for the Arts, but lost out to John E. Frohnmayer, a lifelong Republican. Horchow’s also been a rumored candidate for such plum jobs as U.S. ambassador to the United Kingdom.

Meanwhile, he works to ensure the survival of the company he founded, but, like a customer hoping her long-awaited china cat will soon arrive, Roger Horchow is also keeping one eye on the mailbox, watching for the letter that will guide his personal future. “I just keep thinking,” he says, “that when the time comes, something will emerge.”