Direct Marketing Association, The v. Huber

Filing 63

MOTION to Exclude the Testimony of Plaintiff's Expert Witnesses F. Curtis Barry, Thomas Adler, and Kevin Lane Keller by Defendant Roxy Huber. (Attachments: # 1 Exhibit A- Barry Dep., # 2 Exhibit B- Barry Report, # 3 Exhibit C- Barry Dep. Exhs., # 4 Exhibit D- Adler Report and Decl., # 5 Exhibit E-1of5- Adler Dep. Exhs, # 6 Exhibit E-2of5- Adler Dep. Exhs, # 7 Exhibit E-3of5- Adler Dep. Exhs, # 8 Exhibit E-4of5- Adler Dep. Exhs, # 9 Exhibit E-5of5- Adler Dep. Exhs, # 10 Exhibit F- Adler Dep., # 11 Exhibit G- Lichtenstein Decl. and Report, # 12 Exhibit H- Keller Dep., # 13 Exhibit I- Keller Report and Decl., # 14 Exhibit J-1of3- Keller Dep. Exhs., # 15 Exhibit J-2of3- Keller Dep. Exhs., # 16 Exhibit J-3of3- Keller Dep. Exhs.)(Snyder, Melanie)

iN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO
Civil Action No. lO-CV-01546-REB-CBS
The Direct Marketing Association
Plaintiff,
V
Roxy Huber, in her capacity as Executive
Director, Colorado Department of Revenue
Defendant

EXPERT REPORT OF F. CURTIS BARRY

I am F. Curtis Barry, the Founder and President ofF Curtis Barry & Company, with
offices in Richmond Virginia. I have been retained by the law firm of Brann & Isaacson,
counsel to the Direct Marketing Association (“DMA”), to offer my expert opinions regarding the
costs of compliance with certain requirements of a new Colorado statute and regulation that will
be incurred by retailers located outside of Colorado subject to the law.
My compensation is on a per consulting day used at $1,850 (or $231.25 on an hourly
basis). We are paid regardless of the outcome.
I.

STATEMENT OF OPINIONS.
After reviewing and considering the data and information described in Section II, I offer

the following opinions:
•

The Colorado regulation is an expensive process for out-of-state retailers to implement
for a small number of purchasers spending over $500 annually.

•

This regulation requires a considerable effort be spent on Information Technology (IT)
systems. IT costs will vary between retailers and software vendors depending on the age
of the order processing and website technologies; the flexible of the development
technology; and the internal IT cost structure.

IT

1L
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Exh. C

•

This analysis has been formatted into categories of costs:
o Costs incurred to satisfy basic statutory/regulatory requirements
o Costs that are necessary but not discretionary
o Costs that are discretionary but good business practice

Colorado in state retailers will have a competitive advantage.
Because of the customer sensitivity to costs and privacy, we anticipate that this regulation will
cause out-of-state retailers to lose customers and sales.
There are a number of potential Customer Service issues in the Call Center and Customer
Privacy Policies which out-of-state retailers will need to deal with.

DATA AND INFORMATION CONSIDERED IN FORMING OPINIONS.

II.

The data or other information I considered in forming my opinions includes:
A. Court Documents and Regulations

•

House Bill 10-1193

•

Colorado Regulation 39-21-112.3.5

•

State of Colorado enacted House Bill 10-1193

•

DMA Amended First Complaint

•

DMA Exhibit 2— Colorado Regulation 39-21-1 12.3.5

B. Sources For Supporting Data
Over the course of 25 years we have worked with hundreds of customers, software
companies and marketing service bureaus. In this section we cite our sources for the data
and experience that we have used to develop these estimates.
1. Systems Development Costs
The cost to develop systems, whether designed and programmed internally or using
commercial software vendors, is extensive in general. On a constant basis, we experience
company management reactions of what it costs to develop systems. When you consider
the costs which are in this expert opinion, we feel it is important to look at them in several
contexts:

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Exh. C

•
•
•

Professional Programming Rates
Systems Development Process and tasks involved to make the change
Complexity of Evaluating, programming and Implementing Colorado’s Regulation

a. Professional Programming Rates
i. Commercial Systems Development Rates
We assist our clients with Request For Proposals for commercial systems from software
vendors, 3rd party fulfillment services and marketing service bureaus on a continual basis.
We look at dozens of vendor responses each year for proposed work.
From external vendors, commercial programming rates for evaluating, programming and
implementing program changes are charged back to the customers. These are the typical
commercial rates that we see currently in the marketplace. The rates within the same
software company vary from $140 per hour ($1,120 per day) to $225 per hour (or $1,800
per day) depending on the position and level of skill that is required. Examples of skill
levels within a service provider are Trainer; various programmer skill levels; business
analysts that analyze the business problem in terms of the system’s design; software
architect that understands the higher level design and data base changes; to project
manager that leads the project. Trainers would be at $140 per hour and Project Managers
at $225 per hour.

ii. Internal IT Systems Development Costs
Internal IT programming rates can vary widely depending on the skill level and
marketplace. Much like the commercial rates cited above for skill levels and the positions,
the labor costs can vary from $50,000 per year ($24.00 per hour) to $100,000 ($48.00 per
hour) for experienced programmers. Project managers can earn more than $100,000 per
year.
In addition, company benefit rates often add 20% to 30% to the cost of employing
professionals. A 25% benefit rate added to these hourly costs brings the labor rate to $31
and $62 per hour.
b. The Systems Development Process
When you review the costs of implementing the Colorado regulation changes, we think it’s
important to take into account the types of work required to develop and implement the
change. System development is a multi-phased process which is governed by industry best
practices and company IT standards to insure the best solution for the company.
i. Cost to Evaluate Requested Systems Change
IT industry best practice both internal IT departments and commercial systems providers
-is to conduct an evaluation of proposed changes and gain approval by provider and
3
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Exh. C

customer management. In most cases the customer or requesting department has to pay
for a detail evaluation of the programming requested which can be $1,000 to $5000 on the
low end to much higher costs for complex changes and new subsystems.
These evaluation tasks include how the proposed changes will impact the system or
services; how many hours are required and for what skill levels; what programming
resources availability; IT’s opinion of the change; a schedule that can be met; and a
requested sign off between the parties. In addition, the customer or vendor may choose to
not proceed with the evaluated change. This evaluation process must take place and the
customer must pay even if it’s a mandatory legal or accounting change.
ii. Program Development Costs
All the tasks to develop user requirements; design program changes; develop program
specifications; program the changes; testing at program, subsystem and total system level.
At various control points in the process management signs off on the work.
iii. Implementation Costs
The cited costs include all the costs to implement the system within the company
departments. These include IT training the user and program documentation for the
change and operational production tasks.
iv. Complexity of Evaluating, Programming and Implementing Colorado’s
Regulation

As we mentioned earlier, we review and negotiate software contracts and modifications for
clients with vendors on a regular basis. We have used our knowledge and experience to
make a judgment about the complexity and an estimate of some of these order
management systems and e-commerce costs.
How difficult the changes will be for companies to make will vary based:
•

•

How flexible the system application and technology is. The vendors of commercial
systems that have newer designed systems will have an easier time of
implementing the regulation (new programming technologies, documentation and
specialists, etc.).
Whether outside programming resources are required to make the changes. With
older order processing systems, systems can be in use 10 to 20 years because of the
large investment.

In our interviews with retailers and software vendors the cost will vary considerably. We
believe we have provided conservative estimates.
We will also aid that the IT industry has a poor track record of delivering on time and with
budget. We find that 50% of the projects after completion are over budget.
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2. Cost For Marketing Service Bureaus
For the costs we have cited, we have knowledge of a number of marketing service bureaus
pricing models for building, updating and analyzing customer purchases. For this opinion
we have used knowledge of mailing service costs to print and insert the Annual Purchase
Summary and mailing First-Class.

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Exh. C

EXHIBITS.
The Exhibits are used to summarize or support my opinions. The Exhibits below include:
Exhibit A

The Transactional Notice

—

—

Exhibit B. Annual Purchase Summary

Requirements and Costs

—

Requirements and Costs

Exhibit C. The Customer Information Report

—

Requirements and Costs

Exhibit D. Other Potential Costs Not Discussed

In Exhibits A

—

C, we have organized costs into three categories:

o
o

Costs that are necessary but not discretionary

o
Exhibit A

Costs incurred to satisfy basic statutory/regulatory requirements

Costs that are discretionary but good business practice

—

The Transactional Notice

—

Requirements and Costs

The regulation requires that the customer be notified that they are responsible for Colorado sales
tax when purchasing from out-of-state retailers. This is required on every purchase.
1. Costs incurred to satisfy basic statutory/regulatory requirements
a) Change web order path
We believe that companies’ e-commerce system will need to be modified by Information
Technology (IT) personnel to notify the customer while they are in the order path but have not
completed the transaction, of the Colorado requirements. The e-commerce shopping system
would alert the purchaser to the fact that they will be required to pay Colorado sales tax on
merchandise purchased through out-of-state retailers. We would expect that the customer would
then be referred to the e-commerce sites Frequently Asked Questions (FAQs and answers) to
learn more about the customer’s sales tax obligations and the retailer’s responsibilities. The
customer would have the option to abort (cancel) the shopping cart or basket and void the
transaction.
Companies strive to make the checkout process in e-commerce streamlined and with as few
“clicks” or steps as possible. A slow complicated checkout process is one of the e-commerce’s
leading reasons for abandoning the sale.
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Generally, companies avoid changing the order path because of the desire to move quickly
through the transaction.
Retailers we have talked to are looking at a variety of solutions and workarounds including
having the sales person or Call Center rep input a short phrase message that will print on the
customer order and refer the customer to the website for more details. Another is that e
commerce customers to force the Colorado customer, when they enter their delivery address, to
have to click a button before proceeding with the sale that they understand their sales tax
obligations.
There are a variety of workarounds that we have heard discussed which probably do not meet the
regulation. One is using e-commerce trigger e-mails to inform the Colorado customer after the
order is accepted by the system. Another is flagging any Colorado customer order in the
fulfillment system to be suspended in the warehouse and for Colorado literature to be inserted at
the pack station.
Estimated cost to modif’ order the order path for the message is estimated $5,000; for older
technologies and outside vendors up to $10,000.
b) Print statement on invoice / packing slip
Changing how the computerized order prints can be a significant change because of the
comprehensiveness of the program logic. A message about sales tax payment will need to print
on the order or pack slip. The message will be triggered by the Colorado state abbreviation
“CO” in the customer or ship to address record.
Estimated cost to modify the computerized order or pack slip is estimated $5,000; for older
technologies and outside vendors up to $10,000.
2. Costs that are necessary but not discretionary
a. Call center training and procedures. Call centers develop written scripts and procedures for
training the representatives and handling transactions and exception conditions. Because of the
negative customer impact for Colorado purchasers, call centers will need to develop procedures
on how to explain the Statue and “save the sale” and/or “save the customer”.
Costs estimated at $2,000 to $3,000. This does not include the actual training time which will
vary by the call center size (i.e. number of reps).
b. Customer service call center costs to answer inquiries and complaints. Colorado purchasers
typically represent about 1.6% of a direct marketer’s house file based on Colorado population.
We would expect that inquiries and complaints of this sensitive nature will result in a three to
four minute call. Typically the fully loaded cost per call is between $1.50 and $2.00. In
defining this as fully loaded costs we include call center rep direct hourly wages, management,
employee benefits, space, telecom, etc. Our estimate is that 50% of the customers in Colorado
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will have questions about sales tax. We did not estimate a cost as it varies with the size of the
house file and therefore the number of customers and inquires.
c. Professional assistance. This Statue will require assistance from expert legal or accounting
firms to ensure company’s compliance. Also, the systems developed will have a need to be
highly accurate and treated as a financial system even though the information may come from a
marketing system. Companies will need to change their published Customer Privacy Policies.
In addition, it will require effort from the company’s creative department to create descriptions
which are customer friendly as possible because of customer sensitive nature of this information
Costs estimated at $3,000 to $5,000. Initial costs of experts to set up disclosure and reporting
and assure compliance.
d. On-Going Compliance Costs. Because of the customer implications and need for accuracy of
reported purchases we believe there will be the necessity for on-going compliance review.
The estimated costs of on-going compliance costs: $1,500 to $2,000
3. Costs that are discretionary but good business practice
a. Modify the order processing system to calculate sales tax amount. We expect that retailers
will want to provide the information as a service to customers when the call center rep or the e
commerce system informs the customer they have to pay the sales tax. This is especially true for
Call Centers inquiries or orders when the customer is on the phone. They have an opportunity to
“save the sale” when the customer starts to question the added cost and liability.
Presently, systems use zip codes or geo codes combined with merchandise categories and dollar
limits to determine if a customer is subject to sales tax. In all cases where there is customer tax
liability (nexus), the system calculates it and stores the tax total on the ordering systems’
customer order.
In this case the retailer would not be collecting taxes. There is no “info only tax field” in
systems to store the calculated sales tax value. In order to advise the customer, the order
processing system would have to be changed either by the software vendor or internally.
The estimated costs for this modification may be in a $5,000 to $10,000 range.

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Exh. C

Exhibit B. Annual Purchase Summary

—

Requirements and Costs

I). Costs incurred to satisfy basic statutory/regulatory requirements
This section identifies the associated costs to create the tracking and reporting system for the
Annual Purchase Summary including:
•

Systems costs resulting from year end disclosure requirements.

•

Identifying purchasers with sales of $500+ sent as orders or ship tos (gifts) to Colorado.
The retailer must run the analysis and report all customers even if the retailer has only
one purchaser over $500.

•

Total capture all purchase info (dates, amounts, categories).

There are two potential sources for this detail order information operational order processing
system and the direct marketing system. The order and customer number associated with the
transaction will also be required to answer customer inquiries back to the operational file. As
explained later in this section, Complication to Tracking and Notification Programming, there
are complexities involved with the data base programming and identifying how to aggregate
purchases.
—

•

The regulation requires the production of the Annual Disclosure Notice by extracting the
order files, to print and mail First Class letter, etc.

a. Program Development of the Colorado Tracking and Reporting Required
The retailer will have to develop a tracking and reporting system to meet the regulation’s
requirements. in a generalized way, we have outlined the production processing steps the system
and the various departments would need to accomplish to meet the statue’s annual requirements.
The production steps are:
1. The new system will use as its base data a high data integrity marketing or
operational customer purchase file. It must have all detail order/purchase activity
data and customer name and address and ship tos. it must be totally accurate as a
financial system would be.
2. IT Department extracts by state of Colorado purchases by customer for the year
3. IT Department extracts by state of Colorado ship tos and gift recipients names and
addresses?
4. IT system logic determines which customers exceed $500 annual purchases.
5. IT system will track all Colorado customer purchases and report all purchases
regardless of amount.
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Exh. C

6. IT Department runs preliminary Notices of customers purchasing over $500 and
Annual Purchase Summary to customers.
7. Retailer’s Accounting Department would make a visual check and identify if any
corrections are necessary.
8. Retailer Accounting Department makes any corrections and approves final IT
production run.
9. IT Department runs final Notices and Annual Purchase Summary purchasers and ship
to and gift recipients.
10. IT system outputs Annual Purchase Summary disclosures to magnetic media or
transmits the required data and formats to mailing house.
11. Mailing house produces disclosures and Annual Purchase Summary; inserts the
printed material in #10 envelops; and mails First Class
12. IT Department runs Customer Information Report for Department of Revenue
13. IT Department transmits the Customer Information Report to the Colorado
Department of Revenue
Within the Retailer’s organization the responsibilities cited above could be performed by
different departments.
If the company chooses to run the new Colorado system at an outside service bureau, then the
service would process the year end file of purchases. If the company hasn’t done marketing
system updates earlier in the year this would need to take place first. In many companies these
updates take place monthly or quarterly.
Many smaller companies do not use merchandise categories and detail transactions are not
satisfactory for this tracking and reporting. Is there any Colorado sales taxing by category of
product that will be part of the systems logic?
The estimated costs for developing the system to track and produce the Annual Purchase
Summary are as follows:
Company internal development costs to develop system internally internal costs of
$8,000 to $10,000; or
External programming by marketing or software vendor to create system: $15,000 to
$20,000
b. Annual Costs to Produce the Annual Purchase Summary
Essential to estimating the annual costs of all the steps in the process cited above, is to estimate
how many customers will be affected by the Jan 31 Annual Purchase Summary For Total Sales
Exceeding $500. Because of the variable nature of a) the number of Colorado customers, b) the
size of marketing customer files and c) the expense incurred to produce the Annual Purchase
Summary, the total costs and calculation on a cost per piece will vary.
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Exh. C

In order to get a estimate of the number of customers, one has to develop an estimate of the
number Colorado customers that are affected by the regulation. In general we feel there are
several factors which will determine how many customers get the Annual Purchase Summary:
•
•
•
•

Size of the 12 month buyer (purchaser) file varies by sales volume
Average order in dollars many businesses have less than $100 average order
The number of times annually a customer purchases annually is often less than 2 times
Number of one time buyers most businesses experience that 50% of all first time buyers
are opportunistic and never buy again.
—

—

—

We had a occasion to talk with one mailer that had for Jan-Sept 2010 year to date only 600
orders (and less than 600 purchasers) for Colorado. Only 50 of those orders exceeded $500.
This reflects orders; customer count will be lower because of repeat buyers.
Our conclusion is that less than 20% of the Colorado purchasers on a company file will buy $500
or more per year. We have used this in calculating the number of disclosures and the associated
annual costs. This yields a relatively small number of customers for most out-of-state retailers.
As we said earlier, the costs of the annual IT production processing, the mailing house insertion,
postage and mailing of the customer disclosures is a variable cost based on the number of
customers over $500.
•

Production run time costs annually. The cost of computer processing and the IT labor
has a cost per hour which is not easily identified. This will be true whether internal
company processing or through a marketing service bureau. If a computer requires a
marketing service bureau generally will include a minimum set up charge (which could
be $200 to $300) and a cost of $2 per 1000 names processed. We have not estimated this
cost.

•

Mailing service costs. Costs to run and insert the Annual Purchase Summary is a variable
cost based on typically minimum set up cost (of $100 to $200 dollars bundled into the per
piece cost) and a variable cost for 500 to 1,000 customers mailed. We would expect this
will cost $1.25 to $1.50 per piece.

•

Supplies will cost $0.10 to $0.20 per piece.
We assumed up to two inserts and a #10 envelop.

•

Annual Purchase Summary must be mailed First-Class Mail for $0.44.

When all costs are summed and the estimated number of Colorado customers purchasing over
$500 annually is determined, the estimated costs on the average will cost on the low end $2.00 to
$3.00 per customer disclosure (per piece costs) including all minimums and set ups.

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Exh. C

Every company will be different based on the size of the house file, average order value, repeat
Opurchase and one time buyer percentage.
Complication to Tracking and Notification Programming
As mentioned earlier, there are several direct marketing data base IT system concepts that
complicate the programming of “who the purchaser is” and who will receive the Annual
Purchase Summary and be required to pay the sales tax. The details are:
•

Business-to-Business (B2B)- it is not uncommon for B2B to have a complicated
marketing data base structure and mailing concept. If we use a school district as an
example, it may be better understood. Public schools are part of an entity like a county or
city. There are often many contact names, addresses, billing information, c-mails and
telephone numbers in the total scheme of a customer record. For example, a teacher in a
local school may be the one ordering the product.
Customer purchase data might be grouped with other purchases under a school district; or
school’s department (e.g. science department). A county purchasing agent may pay for
the order. Or a school purchasing agent. Or the individual teacher may pay for the
shipment. By definition who is the customer that gets the notification and is reported?

•

In consumer retailing, there is the concept of “house holding”. Think of a house that has
two children and an adult. They all live at the same address. Is the “customer” each
individual purchasing or the household in total?

•

To complicate tracking and reporting purchases customers often use different names. In
the case of myself, my given Christian name is “Fred Curtis Barry”. The name I choose
to use for my company is “F. Curtis Barry & Company”. The name many people know
me as “Curt Barry”. The complexity often generates multiple catalogs and other
correspondence. For purchase tracking and reporting, who is the customer?
These are technical programming questions that every direct marketer responding to the
Colorado regulation will need to answer and develop programming around.

2. Costs that are necessary but not discretionary
Regarding the language on the Disclosure, we would expect that Statue’s details would need to
be disclosed similar to bank card and accounts receivable notices. However, retailers will want
their notices to be more customer friendly in format and language than financial notices so that
they do not lose the customer. No costs estimated.
3. Costs that are discretionary but good business practice
We believe that it would be prudent to have an internal person on site at mailing service to assure
privacy when running and inserting the Annual Purchase Summary. No costs estimated.

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Exh. C

As discussed earlier from a customer service perspective, we can envision companies wanting to
be able to inform the customer of the amount of the sales tax. They may feel this will ease some
of the negative impact.

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Exh. C

Exhibit C. The Customer Information Report

—

Requirements and Costs

1. Costs incurred to satisfy basic statutory/regulatory requirements
In Exhibit B Annual Purchase Summary we described the 13 steps involved in processing the
Annual Purchase Summary. The last two steps list the transmission or mailing of the report to
the Colorado Department of Revenue. The steps are:
12. IT runs The Customer Information Report for Department of Revenue
13. IT transmits or mails The Customer Information Report.
The final specification for the transmission of the Annual Purchase Summary are not completed
and are not included in these costs, if the regulation requires specialized software that retailers
don’t normally use.
Customer information and purchase information is protected by privacy statutes and the data is
encrypted when sent between locations. This is not specified in the Colorado regulations and
could increase costs.
These systems development costs were included in section B.
2. Costs that are necessary but not discretionary
None identified.

3. Costs that are discretionary but good business practice
None identified.

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Exh. C

Exhibit D. Other Potential Costs Not I)iscussed
There a number of potential costs which we wish to point out that but have not been estimated or
discussed earlier in the report.
Over 50% of the companies retailers and software vendors we have talked to have little of
no
knowledge of this regulation or the requirements. The larger retailers have more awareness. We
are concerned about companies for non-compliance costs.
—

These estimates do not include the management time spent by Call Center, Marketing,
Accounting and General Management personnel required to understand, develop and implement
the required systems, changes in Customer Service and Privacy Policies, etc. These could easily
exceed the stated costs in this opinion.
Cost of Litigation. Settling customer privacy and legal challenges by customers arising from
inadvertent disclosure or customer privacy issues of the Statute.
High cost of losing customers and losing sales. Out-of-state retailers have existing relationships
with Colorado purchasers and inquirers for their products. They have acquired Colorado
customers promoting and mailing to Colorado purchasers. For example, the cost to acquire a
customer can be $10 to $25 because of the low response nature of direct marketing. It often
takes 2 or 3 purchases for retailers to have a profitable customer relationship because of these
acquisition and fulfillment costs. We anticipate that this statue’s requirement will cause a major
percentage of the customers to abandon the shopping cart or stop and call the Call Center.
Ultimately, the customer may stop shopping through these channels.
Retailers may unfortunately find that it’s far cheaper to not advertise and solicit business in
Colorado compared to spending additional money to acquire the customer and building
relationship with the customer. Therefore, Colorado retailers have a competitive advantage over
out-of-state retailers because they do not have to incur these tremendous costs.
For larger companies, many of these costs will be higher, when they have to meet
Sarbanes/Oxley requirements.

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Ill.

QUALIFICATIONS AND PUBLICATIONS.
I
Attached hereto is a copy of my current curriculum vitae, including a list of publications

have authored in the previous four years.

IV.

RECENT TESTIMONY.
I have testified as an expert at trial or at deposition during the past ten years in the

following matters:
Casual Male Retail Group, Inc. and Casual Male RBT, LLC vs. Robert H. Yarbrough, RKC
Mail LLC, cl/b/a Mile Post Four and Westport Big & Tall, LLC; United States District Court,
District Court of Massachusetts, 2007, Civil Action No. 05-12049; Case 1 :05-cv-12049-NMG.

F. Curtis Barry

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CURRICULUM VITAE

Fred Curtis “Curt” Barry, President
F. Curtis Barry & Company
1897 Billingsgate Circle, Suite 102
Richmond, VA 23238
804-740-8743, fax [phone]
cbarry(fcbco.com
www.fcbco.com
Curt Barry is founder and president ofF. Curtis Barry & Company, a national fulfillment and
operations consultancy, with a specialty in systems for the multichannel industries (retail, e
commerce and catalog). These systems include website and e-commerce, call center and order
management, warehousing, marketing, merchandising, inventory control, finance, point of sale
(POS) and retail merchandising systems, etc.
Mr. Barry has extensive experience with clients that are developing direct and retail systems
internally as well as with clients that are selecting and implementing commercial systems.
In his work with clients to select and implement commercial systems, his experience includes but
is not limited to:
•

Developing user requirements for the new system at a management, department and
system functional level;
• Project management and participation in the vendor selection process including
development of Requests For Proposal (RFP), evaluating vendors against the RFP,
leading user demonstrations by vendor software, vendor due diligence (e.g. reference
checks, site visits) and helping to make final vendor selection.
• Working with the vendor and the client to guide the system modification process
including macro level and program specifications, cost estimation and understanding the
severity of modifications to the base system;
• “Best of breed” systems integration to other systems including high level and detail data
flows;
• Negotiating vendor software services contracts including defining client and vendor
scope and deliverables, required system modifications, payment schedules, license and
service agreements, project schedules, training and implementation plans, client/vendor
responsibilities, etc.;
• Planning system testing prior to implementation including program testing, full systems
and acceptance by the client;
• File conversion planning and execution for the new system;
• Project planning and management of client and vendor tasks for successful
implementation;
• Gaining client and vendor project sign-offs at critical points in the project;
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Exh. C

•
•
•

Status reporting daily and weekly involving detail task plans. estimates and task
completion management for clients and software vendors;
Working with clients on best practices for selecting systems;
Applying industry best practices in functional areas with the new application software
system;

Mr. Barry’s internal design, programming and implementation experience includes:
•
•

•

•

F. Curtis Barry & Company development of proprietary systems for measuring product
profitability and inventory forecasting systems.
Currently, through a partnership with Taurus Software, F. Curtis Barry & Company co
develops an executive dashboard and analytics system, Manage Metrix
(managemetrix.com).
Mr. Barry was a principal in Moister, Barry & Mason, Inc. 1983 to 1985. The firm
designed and programmed catalog order management systems for catalog companies
Tiffany & Company, Henri Bendel and DH Holmes.
Manager of Research and Development for the Corporate Data Center of Garfmckei,
Brooks Brother, Miller & Rhoads from 1973 to 1983. The department Mr. Barry
managed designed and programmed all of the information systems for the retail and
catalog chain of 250 stores with sales of $500 million.

Mr. Barry has extensive experience with point of sale (POS) and store level merchandising
systems. From 1970 to 1973, Mr. Barry was employed by NCR Corporation in selling and
installing point of sale and retail systems in dozens of major retail department and specialty store
chains.
In the F. Curtis Barry & Company, they have completed assignments for selecting and
implementing POS systems for multichannel clients.
Bachelor of Science degree, Cornell University, 1970.
Published Articles By Curt Barry 2006 to 2010
Since 1983, Mr. Barry has authored hundreds of articles in catalog and e-commerce trade
publications (Multichannel Merchant, Catalog Success, catalogue + c-business, Catalog Age).
Other articles appear on the firm’s blog and website. Mr. Barry authored the book Best Practices
in Multichannel Operations & Fulfillment, ISBN 13:978-1-4196-9298-7. Published in 2008.
Additional articles and blog opinions are available on www.fcbco.com.
Multichannel Merchant Magazine and Operations & Fulfillment Magazine
These are Penton Magazines and the articles are available from the magazines’ website archives.
How Barcode Use Can Help Reduce Warehouse Costs
Sep 13, 2010, Multichannel Merchant, By Curt Barry

18

FCB 00308

Exh. C

How to Reduce Warehouse Costs
Sep 01, 2010, Multichannel Merchant, By Curt Barry
Proper Slotting Can Reduce Warehouse Costs
Aug 30, 2010, Multichannel Merchant, By Curt Barry
How to Reduce Labor Management Costs
Aug 17, 2010, Multichannel Merchant, By Curt Barry
12 Mistakes to Avoid in Systems Selection
Jul 01, 2010, Multichannel Merchant, By Curt Barry
Evaluating Web platform systems
May 01, 2010, Multichannel Merchant, By Curt Barry
Tips for Finding Third-Party Fulfillment
Mar 29, 2010, Multichannel Merchant, By Curt Barry
Managing Your Fulfillment Folks
Mar 01, 2010, Multichannel Merchant, By Curt Barry
The state of free shipping offers
Feb 01, 2010, Multichannel Merchant, By Curt Barry
Web Expenditures: Sharpening your e-commerce Spend
Dec 01, 2009, Multichannel Merchant, By Curt Barry
Why Some Merchants are Saying Yes to SaaS
Nov 23, 2009, Multichannel Merchant, By Curt Barry
Sharpening Your F-Commerce Spend
Nov 19, 2009, Multichannel Merchant
Is outsourcing an option for you?
Oct 01, 2009, Multichannel Merchant, By Curt Barry
10 steps to better manage your stock Take a financial view of inventory
Sep 01, 2009, Multichannel Merchant, By Curt Barry
Sorting Out Warehouse Automation
Jul 07, 2009, Multichannel Merchant, By Curt Barry
Tips to help with technology options with budget costs Time to automate your DC?
Jul 01, 2009, Multichannel Merchant, By Curt Barry
Bean Backorder Customer service Says The Magic Words
Jun 10, 2009, Multichannel Merchant, By Curt Barry
On which version of data should we base our decisions? Business information systems across
the enterprise
May 01, 2009, Multichannel Merchant. By Curt Barry
19

FCB 00309

Exh. C

Surveying the software landscape E-commerce platform providers are expanding offerings into
order management
Apr 01, 2009, Multichannel Merchant, By Curt Barry
Is Now a Good Time to Invest in Systems? Excellent time to invest in the e-commerce, order
management and warehouse management software that your business needs
Apr 01, 2009, Multichannel Merchant, Curt Barry
Paying for free shipping and handling High shipping and processing has been driven upwards
by record freight increase and accessorial charges
Feb 01, 2009, Multichannel Merchant, By Curt Barry
A Database Marketer’s Perspective on Free Shipping
Jan 06, 2009, Multichannel Merchant, By Curt Barry
Virtualization and Going Green in IT
Dec 23, 2008, Multichannel Merchant, By Curt Barry
OEConducting a Post Season Audit, Part I
Dec 18, 2008, Operations & Fulfillment, by Curt Barry
Sales Without Inventory
Dec 03, 2008, Multichannel Merchant, By Curt Barry
Prioritizing your tech spend I Where to put your technology dollars during downtown
Dec 01, 2008, Multichannel Merchant, By Curt Barry
IT Spending Priorities
Nov 25, 2008, Multichannel Merchant, By Curt Barry
Keeping contact center costs in line I Balancing expenses with service levels
Oct 01, 2008, Multichannel Merchant, By Curt Barry
Home Agent Trend Key to Reducing Attrition
Oct 01, 2008, Multichannel Merchant, By Curt Barry
Tough Times or Opportunities Knocking?
Sep 30, 2008, Multichannel Merchant, By Curt Barry
More Green Thoughts
Sep 10, 2008, Multichannel Merchant, By Curt Barry
Let Them Know You’re Green
Sep 03, 2008, Multichannel Merchant. By Curt Barry
Eying IT expenditures Where merchants should put information technology dollars I SaaS
Aug 01, 2008, Multichannel Merchant, By Curt Barry
IT Investment Intelligence
Jul 30, 2008, Multichannel Merchant, By Curt Barry
20

FCB 00310

Exh. C

Keeping DC costs at bay
Apr 01, 2008, Multichannel Merchant, By Curt Barry
Post-Holiday Liquidation Strategies
Feb 01, 2008, Multichannel Merchant, By Curt Barry
Clear It Out
Feb 01, 2008, Multichannel Merchant, By Curt Barry
Liquidation Tactics for the Holiday Hangover
Jan 29, 2008, Multichannel Merchant, By Curt Barry
Post-Season Audits, Part 2: Reducing Costs in the DC
Jan 02, 2008, Multichannel Merchant, By Curt Barry
OThe Fulfillment Doctor. .On Third-Party Fulfillment
Jan 31, 2007, Operations & Fulfillment, By Curt Barry
Multichannel Inventory Management
Jan 01, 2008, Multichannel Merchant, BY Curt Barry
Give me the Goods
Jan 01, 2008, Multichannel Merchant, by Curt Barry
Conducting a Post Season Audit, Part I
Dec 18, 2007, Multichannel Merchant, By Curt Barry
15 Tips to Combat Parcel Rate Increases
Nov 28, 2007, Multichannel Merchant, By Curt Barry
Rising Transportation Costs and What To Do About Them
Nov 13, 2007, Multichannel Merchant, By Curt Barry
Fulfillment Doctor: The Real Cost of Employee Turnover
Nov 07, 2007, Multichannel Merchant, By Curt Barry
Twelve Trends in Fulfillment
Nov 01, 2007, Multichannel Merchant, BY CURT BARRY
The Fulfillment Doctor on... The Price of Free Holiday Shipping
Oct 31, 2007, Multichannel Merchant, By Curt Barry
E-commerce isn’t the only facet of multichannel marketing to advance
Oct 01, 2007, Multichannel Merchant, by Curt Barry
Merchandising 2,0
Oct 01, 2007, Multichannel Merchant, by Curt Barry
21

FCE3 00311

Exh. C

Juuglin Web and Phone Contacts
Nov 01, 2006, Multichannel Merchant, by Curt Barry
OFThinking of Relocating Your DC? Consider These 5 Factors
Oct 4, 2006, Operations & Fulfillment, by Curt Barry
OEQuick Tip: Little Touches Can Yield Big Gains in Customer Service
Sept 13, 2006, Operations & Fulfillment, by Curt Barry
Multichannel Inventory: What You Need to Know
Sept 1, 2006, Operations & Fulfillment, by Curt Barry

Exhibit E. Report Supporting Details
Matt- I need to rewrite this section.
How many customers will be affected by the March 1 disclosures exceeding $500?
This is important so to understand the number of customers that a company may be disclosing to
in the March 1 timeframe. In general we feel there are several factors in this calculation?
•
•
•
•

How large the 12 month buyer (purchaser) file
The average order in dollars
The number of times annually a customer purchases annually
Percentage of first time buyers that never buy again

Our conclusion is that not more than 20% of the Colorado purchasers on a company file will buy
$500 or more per year. We have used this in calculating the number of disclosures and the
associated annual costs. This yields a relatively small number of customers for most out-of-state
retailers.
Here are the details of these calculations and assumptions:
Size of company 12 month buyer file
The size of the 12 month buyer file was used to estimate the number of purchasers.
Examples
Small to moderate sized companies

FCB 00312

Exh. C

Companies larger than start ups may have 20,000, 12 month purchasers (or 320 Colorado
customers) to 80,000, 12 month purchasers (or 1,280 Colorado customers). This
figures in the
mailing response rate. We expect this will create a large number of inquiries.
Curt will correct this-For start ups up to 80,000, 12 month buyers: $1,120 to $5,120???wh
at is
this????
For larger companies
For larger companies with 200,000, 12 month buyers:
Large company with 200,000, 12 month purchasers or higher (or 3,200 Colorado
purchasers).
$11,200 to $12,800
Average Order
Many consumer businesses are $100 or less for average

High Percentage of One Time (Purchase) Buyers
Many customers are opportunistic in terms of their direct commerce purchases. In analyzing
most customer marketing files 50% to 70% of all
(one time) buyers never buy again. This
low response rate are for a variety of reasons: great price, great offer or from the
results of a
comparison shopping engine between retailers.
Annual Customer Purchases
Most consumer catalogs are on the average less than 2 purchases annually.

23

FCI3 00313

Exh. C

DISTRICT OF COLORADO
IN TIlE UNITED STATES DISTRICT COURT FOR THE
Civil Action No. 10-CV-01546-REB-CBS
The Direct Marketing Association
Plaintiff,
V
Roxy Huber, in her capacity as Executive
Director, Colorado Department of Revenue
Defendant
EXPERT REPORT OF F. CURTIS BARRY
Barry & Company, with
I am F. Curtis Barry, the Founder and President ofF Curtis
law firm of Brann & Isaacson,
offices in Richmond Virginia. I have been retained by the
my expert opinions regarding the
counsel to the Direct Marketing Association (“DMA”), to offer
do statute and regulation that will
costs of compliance with certain requirements of a new Colora
t to the law.
be incurred by retailers located outside of Colorado subjec
(or $231.25 on an hourly
My compensation is on a per consulting day used at $1,850
basis). We are paid regardless of the outcome.
STATEMENT OF OPINIONS.

I.

ed in Section II, I offer
Afler reviewing and considering the data and information describ
the following opinions:
Matt

—

inarily my conclusions are:
I will add these once I’ve got the base report straight. Prelim

•

retailers to implement.
The Colorado regulation is an expensive process for out-of-state

•

for purchasers over $500 we
The requirement to produce the Annual Purchase Summary
customer mailed.
feel will affect a small number of customers, at a high cost per

•

This analysis has been formatted into categories of costs:

EXH81T

I
—

—

ii
FCI3 00182

Exh. C

1. Costs incurred to satisfy basic statutory/regulatory requirements
$mmm,mmm

—

costs estimated at

2. Costs that are necessary but not discretionary costs estimated at
$bbb,bbb. Some of these
anticipated costs could not be accurately estimated.
—

3. Costs that are discretionary but good business practice
these anticipated costs could not be accurately estimated.

—

costs estimated at $ccc,ccc. Some of

Colorado in state retailers will therefore have a competitive advantage.
This regulation requires a considerable effort be spent on Information
Technology (IT) systems.
We anticipate that this regulation will lose customers and lose sales for
out-of state retailers
which has a significant cost.
There are Customer Service issues n the Call Center and Customer Privac
y Policies which outof-state retailers will need to deal with.
IL

DATA AND INFORMATION CONSIDERED IN FORMING OPINI
ONS.
The data or other information I considered in forming my opinions includ
es:
•
•

Colorado Regulation 39-21-112.3.5

•

State of Colorado enacted House Bill 10-1193

•

DMA Amended First Complaint

•
III.

House Bill 10-1193

DMA Exhibit 2— Colorado Regulation 39-21-112.3.5
EXHIBITS.
The Exhibits are used to summarize or support my opinions. The Exhibi
ts below include:

Exhibit A

The Transactional Notice

—

Exhibit B. Annual Purchase Summary

Requirements and Costs

—

Requirements and Costs

Exhibit C. The Customer Information Report

—

Requirements and Costs

Exhibit 1). Other Potential Costs Not Discussed
Exhibit E. Report Supporting Details

FCB 00183

Exh. C

In Exhibits A

—

C, we have organized costs into three categories:

1. Costs incurred to satisfy basic statutory/regulatory requirements
2. Costs that are necessary but not discretionary
3. Costs that are discretionary but good business practice
Many of the costs that we have estimated have been developed from our experience over the past
40 years in fulfillment and systems work:
•

With marketing, e-commerce and order processing system vendors on new functions and
pricing of modifications.

•

Improving Call Center’s improve customer service.

•

With processing systems to fill customer orders in the warehouse.

•

Assisting Finance Departments to implement accurate and auditable systems.

Exhibit A

—

The Transactional Notice

—

Requirements and Costs

The regulation requires that the customer be notified that they are responsible for Colorado sales
tax when purchasing from out-of-state retailers. This is required on every purchase.
1. Costs incurred to satisfy basic statutory/regulatory requirements
a) Change web order path
We believe that companies’ e-commerce system will need to be modified by Information
Technology (IT) personnel to notify the customer while they are in the order path but have not
completed the transaction, of the Colorado requirements. The e-commerce shopping system
would alert the purchaser to the fact that they will be required to pay Colorado sales tax on
merchandise purchased through out-of-state retailers. We would expect that the customer would
then be referred to the e-commerce sites Frequently Asked Questions (FAQs and answers) to
learn more about the customer’s sales tax obligations and the retailer’s responsibilities. The
customer would have the option to abort (cancel) the shopping cart or basket and void the
transaction.
Companies strive to make the checkout process in e-commerce streamlined and with as few
“clicks” or steps as possible. A slow complicated checkout process is one of the c-commerce’s
leading reasons for abandoning the sale.
Generally, companies avoid changing the order path because of the desire to move quickly
through the transaction. We anticipate that this statue’s requirement will cause a major

FCI3 00184

Exh. C

percentage of the customers to abandon the shopping cart or stop and call the call center rather
than take their time to study the FAQs.
Estimated cost to modify order the order path for the message is estimated from $15,000 to
$25,000. This is a significant change which will need to involve vendor’s when commercial
systems are involved.
b) Print statement on invoice / packing slip
Changing how the computerized order prints can be a significant change because of the
comprehensiveness of the program logic. A message about sales tax payment will need to print
on the order or pack slip. The message will be triggered by the Colorado state abbreviation
“CO” in the customer or ship to address record.
Estimated cost to modify order the order for the message is estimated from $15,000 to $20,000.
This is a significant change which will need to involve vendor’s when commercial systems are
involved.
2. Costs that are necessary but not discretionary
Call center training and procedures. Call centers develop written scripts and procedures for
training the representatives and handling transactions and exception conditions. Because of the
negative customer impact for Colorado purchasers, call centers will need to develop procedures
on how to explain the Statue and “save the sale” andlor “save the customer”.
Costs estimated at $2,000 to $3,000. One week develop procedures and training materials. This
does not include the actual training time which will vary by the call center size (i.e. number of
reps).
Customer service call center costs to answer inquiries and complaints. Colorado purchasers
typically represent about 1.6% of a direct marketer’s house file based on Colorado population.
We would expect that inquiries and complaints of this sensitive nature will result in a three to
four minute call. Typically the fully loaded cost per call is between $1.50 and $2.00. In
defming this as fully loaded costs we include call center rep direct hourly wages, management,
employee benefits, space, telecom, etc. Our estimate is that 50% of the customers in Colorado
will have questions about sales tax. We did not estimate a cost as it varies with the size of the
house file and therefore the number of customers and inquires.
Professional assistance. This Statue will require assistance from expert legal or accounting firms
to ensure company’s compliance. Also, the systems developed will have a need to be highly
accurate and treated as a financial system even though the information may come from a
marketing system. Companies will need to change their published Customer Privacy Policies.
In addition, it will require effort from the company’s creative department to create descriptions
which are customer friendly as possible because of customer sensitive nature of this information
4

FCB 00185

Exh. C

Costs estimated at $3,000 to $5,000. Initial costs of experts to set up disclosure and reporting
and assure compliance.
On-Going Compliance Costs. Because of the customer implications and need for accuracy of
reported purchases, we believe there will be the necessity for on-going compliance review.
The estimated costs of on-going compliance costs: $1,500 to $2,000
3. Costs that are discretionary but good business practice
Modify the entire order system to calculate sales tax amount. We expect that retailers will want
to provide the information as a service to customers when the call center rep or the e-commerce
system informs the customer they have to pay the sales tax. This is especially true for Call
Centers inquiries or orders when the customer is on the phone. They have an opportunity to
“save the sale” when the customer starts to question the added cost and liability.
In order for order processing systems an e-commerce website, order management or enterprise
systems to be able to provide support to the call center to inform the customer of their tax
liability and notices. This would require a major programming change from current industry
practices for sales tax logic.
-

-

Presently, systems use zip codes or geo codes combined with merchandise categories and dollar
limits to determine if a customer is subject to sales tax. In all cases where there is customer tax
liability (nexus), the system calculates it and stores the tax total on the ordering systems’
customer order.
In this case the retailer would not be collecting taxes. There is no “info only tax field” in
systems to store the calculated sales tax value. In order to advise the customer, the order
processing system would have to be changed either by the software vendor or internally.
The estimated costs for this modification may be in a $20,000 to $25,000 range.

FCB 00186

Exh. C

Exhibit B. Annual Purchase Summary

—

Requirements and Costs

a). Costs incurred to satisfy basic statutory/regulatory requirements
This section identifies the associated costs with the Annual Purchase Summary including:
•

Systems costs resulting from year end disclosure requirements.

•

Identifying purchasers with sales of $500+ sent as orders or ship tos (gifts) to Colorado.
The retailer must run the analysis and report all customers even if the retailer has only
one purchaser over $500.

•

Total capture all purchase info (dates, amounts categories).
,

There are two potential sources for this detail order information operational order
processing system and the direct marketing system. The order and customer number
associated with the transaction will also be required to answer customer inquiries back to
the operational file. As explained in this section there are complexities involved with the
data base programming and identifying how to aggregate purchases.
—

•

The regulation requires the production of the Annual Disclosure Notice by extracting the
order files, to print and mail First Class letter, etc.

The retailer will have to develop a tracking and reporting system to meet the regulation’s
requirements. In a generalized way, we have outlined the production processing steps the system
and the various departments would need to accomplish to meet the statue’s annual requirements.
The production steps are:
1. The new system will use as its base data a high data integrity marketing or
operational customer purchase file. It must have all detail order/purchase activity
data and customer name and address and ship tos. It must be totally accurate as a
financial system would be.
2. IT Department extracts by state of Colorado purchases by customer for the year
3. IT Department extracts by state of Colorado ship tos and gift recipients names and
addresses?
4. IT system logic determines which customers exceed $500 annual purchases.
5. IT system will track all Colorado customer purchases and report all purchases
regardless of amount.
6. IT Department runs preliminary Notices of customers purchasing over $500 and
Annual Purchase Summary to customers.
7. Retailer’s Accounting Department would make a visual check and identify if any
corrections are necessary.
8. Retailer Accounting Department makes any corrections and approves final IT
production run.
6

FCB 00187

Exh. C

9. IT Department runs final Notices and Annual Purchase Summary purchasers and ship
to and gift recipients.
10. IT system outputs Annual Purchase Summary disclosures to magnetic media or
transmits the required data and formats to mailing house.
11. Mailing house produces disclosures and Annual Purchase Summary; inserts the
printed material in #10 envelops; and mails First Class
12. IT Department runs Customer Information Report for Department of Revenue
13. IT Department transmits the Customer Information Report to the Colorado
Department of Revenue
Within the Retailer’s organization the responsibilities cited above could be performed by
different departments.
If the company chooses to run the new Colorado system at an outside service bureau, then the
service would process the year end file of purchases. If the company hasn’t done marketing
system updates earlier in the year this would need to take place first. In many companies these
updates take place monthly or quarterly.
Many smaller companies do not use merchandise categories and detail transactions are not
satisfactory for this tracking and reporting. Is there any Colorado sales taxing by category of
product that will be part of the systems logic?
The estimated costs for developing the system to track and produce the Annual Purchase
Summary. Computer programming costs to develop system internally internal costs of $8,000 to
$10,000; or
New service from external marketing service bureau providing customer data base creation and
update services that maintain customer master file. External programming by service to create
system: $15,000 to $20,000
Annual Costs to Produce the Annual Purchase Summary
Essential to estimating the annual of all the steps in the process cited above, is to estimate how
many customers will be affected by the Jan 31 Annual Purchase Summary For Total Sales
Exceeding $500. Because of the variable nature of a) the number of Colorado customers, b) the
size of marketing customer files and c) the expense incurred to produce the Annual Purchase
Summary, the total costs and calculation on a cost per piece will vary.
In order to get a estimate of the number of customers, one has to develop an estimate of the
number Colorado customers that are affected by the regulation. In general we feel there are
several factors in this calculation:
•
•
•
•

Size of the 12 month buyer (purchaser) file
Average order in dollars
The number of times annually a customer purchases annually
Number of one time buyers
7

FCB 00188

Exh. C

Our conclusion is that not more than 20% of the Colorado purchasers on a company file will buy
$500 or more per year. We have used this in calculating the number of disclosures and the
associated annual costs. This yields a relatively small number of customers for most out-of-state
retailers. Exhibit E. Report Supporting Details contains the details of calculating the number
of customer affected.
As we said earlier, the costs of the annual IT production processing, the mailing house insertion,
postage and mailing of the customer disclosures is a variable cost based on the number of
disclosures. Here are more details about cost considerations:
•

Production run time costs annually. The cost of computer processing and the IT labor
has a cost per hour which is not easily identified. This will be true whether internal
company processing or through a marketing service bureau. Processing through a
marketing service bureau generally will include a minimum set up charge (which could
be $200 to $300) and a cost per 1000 names processed which could be $2 to $3.

•

Mailing service costs. Costs to run and insert the Annual Purchase Summary is a variable
cost based on typically minimum set up cost of $100 to $200 dollars and a variable cost
for 500 to 1,000 customers mailed. These are the Colorado purchasers exceeding the
$5OO+ in annual purchases. We assumed up to two inserts and a #10 envelop.
•

Annual Purchase Summary must be mailed First-Class Mail for $0.44.

When taken all costs together and considering the estimated low number of Colorado customers
being effected, the estimated costs on the average will cost $4 to $5 dollars per customer
disclosure (per piece costs) including all minimums and set ups.
Complication to Tracking and Notification Programming
As mentioned earlier, there are several direct marketing data base IT system concepts that
complicate the programming of “who the purchaser is” and who will receive the Annual
Purchase Summary and be required to pay the sales tax. The details are:
•

Business-to-Business (B2B)- it is not uncommon for B2B to have a complicated
marketing data base structure and mailing concept. If we use a school district as an
example, it may be better understood. Public schools are part of an entity like a county or
city. There are often many contact names, addresses, billing information, c-mails and
telephone numbers in the total scheme of a customer record. For example, a teacher in a
local school may be the one ordering the product.
Customer purchase data might be grouped with other purchases under a school district; or
school’s department (e.g. science department). A county purchasing agent may pay for
the order. Or a school purchasing agent. Or the individual teacher may pay for the
shipment. By definition who is the customer that gets the notification and is reported?

8

FCB 00189

Exh. C

•

In consumer retailing, there is the concept of “house holding”. Think of a house that has
two children and an adult. They all live at the same address. Is the “customer” each
individual purchasing or the household in total?

•

To complicate tracking and reporting purchases customers often use different names. In
the case of myself, my given Christian name is “Fred Curtis Barry”. The name I choose
to use for my company is “F. Curtis Barry & Company”. The name many people know
me as “Curt Barry”. The complexity often generates multiple catalogs and other
correspondence. For purchase tracking and reporting, who is the customer?
These are technical programming questions that every direct marketer responding to the
Colorado regulation will need to answer and develop programming around. It also
probably dictates that the more advanced marketing files rather than the internal
operational order files will need to be used. Those more advanced systems are often
external services which will increase costs.

b. Costs that are necessary but not discretionary
Regarding the language on the Disclosure, we would expect that Statue’s details would need to
be disclosed similar to bank card and accounts receivable notices. However, retailers will want
their notices to be more customer friendly in format and language than financial notices so that
they do not lose the customer.
c. Costs that are discretionary but good business practice
We believe that it would be prudent to have an internal person on site at mailing service to assure
privacy when running and inserting the Annual Purchase Summary. No estimated cost.
As discussed earlier from a customer service perspective, we can envision companies wanting to
be able to inform the customer of the amount of the sales tax. They may feel this will ease some
of the negative impact.

9

FCB 00190

Exh. C

Exhibit C. The Customer Information Report

—

Requirements and Costs

1. Costs incurred to satisfy basic statutory/regulatory requirements
In Exhibit B Annual Purchase Summary we described the 13 steps involved in processing the
Annual Purchase Summary. The last two steps list the transmission or mailing of the report to
the Colorado Department of Revenue. The steps are:
12. IT runs The Customer Information Report for Department of Revenue
13. IT transmits or mails The Customer Information Report.
The final specification for the transmission of the Annual Purchase Summary are not completed
and are not included in these costs, if the regulation requires specialized software that retailers
don’t normally use.
Customer information and purchase information is protected by privacy statutes and the data is
encrypted when sent between locations. This is not spelled out in the Colorado regulations and
could increase costs.

2. Costs that are necessary but not discretionary
None

3. Costs that are discretionary but good business practice
None

10

FCB 00191

Exh. C

Exhibit D. Other Potential Costs Not Discussed

There a number of potential costs which we wish to point out that but have not been estimated or
discussed earlier in the report.
Cost of Litigation. Settling customer privacy and legal challenges by customers arising from
inadvertent disclosure or customer privacy issues of the Statute.
High cost of losing customers and losing sales. Out-of-state retailers have existing relationships
with Colorado purchasers and inquirers for their products. They have acquired Colorado
customers promoting and mailing to Colorado purchasers. For example, the cost to acquire a
customer can be $10 to $25 because of the low response nature of direct marketing. It often
takes 2 or 3 purchases for retailers to have a profitable customer relationship because of these
acquisition and fulfillment costs.
Retailers may unfortunately find that it’s far cheaper to not advertise and solicit business in
Colorado compared to spending additional money to acquire the customer and building
relationship with the customer. Therefore, Colorado retailers have a competitive advantage over
out-of-state retailers because they do not have to incur these tremendous costs.
For larger companies, many of these costs will be higher, when they have to meet
Sarbanes/Oxley requirements.

11

FCB 00192

Exh. C

Exhibit E. Report Supporting Details
Matt- I need to rewrite this section.
How many customers will be affected by the March 1 disclosures exceeding $500?
This is important so to understand the number of customers that a company may be disclosing to
in the March 1 timeframe. In general we feel there are several factors in this calculation?
•
•
•
•

How large the 12 month buyer (purchaser) file
The average order in dollars
The number of times annually a customer purchases annually
Percentage of first time buyers that never buy again

Our conclusion is that not more than 20% of the Colorado purchasers on a company file will buy
$500 or more per year. We have used this in calculating the number of disclosures and the
associated annual costs. This yields a relatively small number of customers for most out-of-state
retailers.
Here are the details of these calculations and assumptions:
Size of company 12 month buyer file
The size of the 12 month buyer file was used to estimate the number of purchaser.
Examples
Small to moderate sized companies
Companies larger than start ups may have 20,000, 12 month purchasers (or 320 Colorado
customers) to 80,000, 12 month purchasers (or 1,280 Colorado customers). This figures in the
mailing response rate. We expect this will create a large number of inquiries.

Curt will correct this.For start ups up to 80,000, 12 month buyers $1,120 to $5,120 is
what
999
this????
For larger companies
For larger companies with 200,000, 12 month buyers:
Large company with 200,000, 12 month purchasers or higher (or 3,200 Colorado purchasers).
$11,200 to $12,800
Average Order
Many consumer businesses are $100 or less for average

High Percentage of One Time (Purchase) Buyers
1’)

FCF3 00193

Exh. C

Many customers are opportunistic in terms of their direct commerce purchases. In analyzing
most customer marketing files 50% to 70% of all l (one time) buyers never buy again. This
low response rate are for a variety of reasons: great price, great offer or from the results of a
comparison shopping engine between retailers.
Annual Customer Purchases
Most consumer catalogs are on the average less than 2 purchases annually.
IV.

QUALIFICATIONS AND PUBLICATIONS.
Attached hereto is a copy of my current curriculum vitae, including a list of publications I

have authored in the previous four years.

V.

RECENT TESTIMONY.
I have testified as an expert at trial or at deposition during the past ten years in the

following matters:
Casual Male Retail Group, Inc. and Casual Male RBT, LLC vs. Robert H. Yarbrough, RKC
Mail LLC, d!b/a Mile Post Four and Westport Big & Tall, LLC; United States District Court,
District Court of Massachusetts, 2007, Civil Action No. 05-12049; Case 1 :05-cv-12049-NMG.

F. Curtis Barry

13

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CURRICULUM VITAE
Fred Curtis “Curt” Barry, President
F. Curtis Barry & Company
1897 Billingsgate Circle, Suite 102
Richmond, VA 23238
804-740-8743, fax [phone]
cbarry(â’ fcbco.com
www. lèbco.com
Curt Barry is founder and president of F. Curtis Barry & Company, a national fulfillment and
operations consultancy, with a specialty in systems for the multichannel industries (retail, e
commerce and catalog). These systems include website and e-commerce, call center and order
management, warehousing, marketing, merchandising, inventory control, finance, point of sale
(POS) and retail merchandising systems, etc.
Mr. Barry has extensive experience with clients that are developing direct and retail systems
internally as well as with clients that are selecting and implementing commercial systems.
In his work with clients to select and implement commercial systems, his experience includes but
is not limited to:
•
•

•

•
•

•
•
•
•

Developing user requirements for the new system at a management, department and
system functional level;
Project management and participation in the vendor selection process including
development of Requests For Proposal (RFP), evaluating vendors against the RFP,
leading user demonstrations by vendor software, vendor due diligence (e.g. reference
checks, site visits) and helping to make final vendor selection.
Working with the vendor and the client to guide the system modification process
including macro level and program specifications, cost estimation and understanding the
severity of modifications to the base system;
“Best of breed” systems integration to other systems including high level and detail data
flows;
Negotiating vendor software services contracts including defining client and vendor
scope and deliverables, required system modifications, payment schedules, license and
service agreements, project schedules, training and implementation plans, clientlvendor
responsibilities, etc.;
Planning system testing prior to implementation including program testing, full systems
and acceptance by the client;
File conversion planning and execution for the new system;
Project planning and management of client and vendor tasks for successful
implementation;
Gaining client and vendor project sign-offs at critical points in the project;
14

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•
•
•

Status reporting daily and weekly involving detail task plans, estimates and task
completion management for clients and software vendors;
Working with clients on best practices for selecting systems;
Applying industry best practices in functional areas with the new application software
system;

Mr. Barry’s internal design, programming and implementation experience includes:
•
•

•

•

F. Curtis Barry & Company development of proprietary systems for measuring product
profitability and inventory forecasting systems.
Currently, through a partnership with Taurus Software, F. Curtis Barry & Company co
develops an executive dashboard and analytics system, Manage Metrix
(managemetrix.com).
Mr. Barry was a principal in Moister, Barry & Mason, Inc. 1983 to 1985. The firm
designed and programmed catalog order management systems for catalog companies
Tiffany & Company, Henri Bendel and DH Holmes.
Manager of Research and Development for the Corporate Data Center of Garfinckel,
Brooks Brother, Miller & Rhoads from 1973 to 1983. The department Mr. Barry
managed designed and programmed all of the information systems for the retail and
catalog chain of 250 stores with sales of $500 million.

Mr. Barry has extensive experience with point of sale (POS) and store level merchandising
systems. From 1970 to 1973, Mr. Barry was employed by NCR Corporation in selling and
installing point of sale and retail systems in dozens of major retail department and specialty store
chains.
In the F. Curtis Barry & Company, they have completed assignments for selecting and
implementing POS systems for multichannel clients.
Bachelor of Science degree, Cornell University, 1970.
Published Articles By Curt Barry 2006 to 2010
Since 1983, Mr. Barry has authored hundreds of articles in catalog and e-commerce trade
publications (Multichannel Merchant, Catalog Success, catalogue + e-business, Catalog Age).
Other articles appear on the firm’s blog and website. Mr. Barry authored the book Best Practices
in Multichannel Operations & Fulfillment, ISBN 13:978-1-4196-9298-7. Published in 2008.
Additional articles and blog opinions are available on www.fcbco.com.
Muhichannel Merchant Magazine and Operations & Fulfillment Magazine
These are Penton Magazines and the articles are available from the magazines’ website archives.
How Barcode Use Can Help Reduce Warehouse Costs
Sep 13. 2010, Multichannel Merchant, By Curt Barry

FCB 00196

Exh. C

How to Reduce Warehouse Costs
Sep01, 2010, Multichannel Merchant, By Curt Barry
Proper Slotting Can Reduce Warehouse Costs
Aug 30, 2010, Multichannel Merchant, By Curt Barry
How to Reduce Labor Management Costs
Aug 17, 2010, Multichannel Merchant, By Curt Barry
12 Mistakes to Avoid in Systems Selection
Jul 01, 2010, Multichannel Merchant, By Curt Barry
Evaluating Web platform systems
May 01, 2010, Multichannel Merchant, By Curt Barry
Tips for Finding Third-Party Fulfillment
Mar 29, 2010, Multichannel Merchant, By Curt Barry
Managing Your Fulfillment Folks
Mar 01, 2010, Multichannel Merchant, By Curt Barry
The state of free shipping offers
Feb 01, 2010, Multichannel Merchant, By Curt Barry
Web Expenditures: Sharpening your e-commerce Spend
Dec 01, 2009, Multichannel Merchant, By Curt Barry
Why Some Merchants are Saying Yes to SaaS
Nov 23, 2009, Multichannel Merchant, By Curt Barry
Sharpening Your E-Commerce Spend
Nov 19, 2009, Multichannel Merchant
Is outsourcing an option for you?
Oct 01, 2009, Multichannel Merchant, By Curt Barry
10 steps to better manage your stock Take a financial view of inventory
Sep 01, 2009, Multichannel Merchant, By Curt Barry
Sorting Out Warehouse Automation
Jul 07, 2009, Multichannel Merchant, By Curt Barry
Tips to help with technology options with budget costs I Time to automate your DC?
Jul 01, 2009, Multichannel Merchant, By Curt Barry
Bean Backorder Customer service Says The Magic Words
Jun 10, 2009, Multichannel Merchant, By Curt Barry
On which version of data should we base our decisions? Business information systems across
the enterprise
May 01, 2009, Multichannel Merchant, By Curt Barry
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Surveying the software landscape F-commerce platform providers are expanding offerings into
order management
Apr 01, 2009, Multichannel Merchant, By Curt Barry
Is Now a Good Time to Invest in Systems? I Excellent time to invest in the e-commerce, order
management and warehouse management software that your business needs
Apr 01, 2009, Multichannel Merchant, Curt Barry
Paying for free shipping and handling High shipping and processing has been driven upwards
by record freight increase and accessorial charges
Feb 01, 2009, Multichannel Merchant, By Curt Barry
A Database Marketer’s Perspective on Free Shipping
Jan 06, 2009, Multichannel Merchant, By Curt Barry
Virtualization and Going Green in IT
Dec 23, 2008, Multichannel Merchant, By Curt Barry
OFConducting a Post Season Audit, Part I
Dec 18, 2008, Operations & Fulfillment, by Curt Barry

Sales Without Inventory
Dec 03, 2008, Multichannel Merchant, By Curt Barry
Prioritizing your tech spend I Where to put your technology dollars during downtown
Dec 01, 2008, Multichannel Merchant, By Curt Barry
IT Spending Priorities
Nov 25, 2008, Multichannel Merchant, By Curt Barry
Keeping contact center costs in line Balancing expenses with service levels
Oct 01, 2008, Multichannel Merchant, By Curt Barry
Home Agent Trend Key to Reducing Attrition
Oct 01, 2008, Multichannel Merchant, By Curt Barry
Tough Times or Opportunities Knocking?
Sep 30, 2008, Multichannel Merchant, By Curt Barry
More Green Thou ehts
Sep 10, 2008, Multichannel Merchant, By Curt Barry
Let Them Know You’re Green
Sep 03, 2008, Multichannel Merchant, By Curt Barry
Eying IT expenditures Where merchants should put information technology dollars SaaS
Aug 01, 2008, Multichannel Merchant, By Curt Barry
iT Investment Intelligence
Jul 30, 2008, Multichannel Merchant, By Curt Barry
17

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Keeping DC costs at bay
Apr 01, 2008, Multichannel Merchant, By Curt Barry
Post-Holiday Liquidation Strategies
Feb 01, 2008, Multichannel Merchant, By Curt Barry
Clear It Out
Feb 01, 2008, Multichannel Merchant, By Curt Barry
Liquidation Tactics for the Holiday Hangover
Jan 29, 2008, Multichannel Merchant, By Curt Barry
Post-Season Audits, Part 2: Reducing Costs in the DC
Jan 02, 2008, Multichannel Merchant, By Curt Barry
OThe Fulfillment Doctor.

.

.

On Third-Party Fulfillment

Jan 31, 2007, Operations & Fulfillment, By Curt Barry
Multichannel Inventory Management
Jan 01, 2008, Muhichannel Merchant, BY Curt Barry
Give me the Goods
Jan 01, 2008, Multichannel Merchant, by Curt Barry
Conducting a Post Season Audit, Part I
Dec 18, 2007, Multichannel Merchant, By Curt Barry
15 Tips to Combat Parcel Rate Increases
Nov 28, 2007, Multichannel Merchant, By Curt Barry
Rising Transportation Costs and What To Do About Them
Nov 13, 2007, Multichannel Merchant, By Curt Barry
Fulfillment Doctor: The Real Cost of Employee Turnover
Nov 07, 2007, Multichannel Merchant, By Curt Barry
Twelve Trends in Fulfillment
Nov 01, 2007, Multichannel Merchant, BY CURT BARRY
The Fulfillment Doctor on... The Price of Free Holiday Shipping
Oct 31, 2007, Multichannel Merchant, By Curt Barry
E-commerce isn’t the only facet of multichannel marketing to advance
Oct 01, 2007, Multichannel Merchant, by Curt Barry
Merchandising 2.0
Oct 01, 2007, Multichannel Merchant, by Curt Barry
18

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Exh. C

Jugglin2 Web and Phone Contacts
Nov 01, 2006, Multichannel Merchant, by Curt Barry’
OThinking of Relocating Your DC? Consider These 5 Factors
Oct 4, 2006, Operations & Fulfillment, by Curt Barry
OEQuick Tip: Little Touches Can Yield Big Gains in Customer Service
Sept 13, 2006, Operations & Fulfillment, by Curt Barry
Multichannel Inventory: What You Need to Know
Sept 1, 2006, Operations & Fulfillment, by Curt Barry

Not used
Exhibit Disclosure Statement

Costs incurred to satisfy basic statutory/regulatory requirements
Costs that are necessary but not discretionary
Costs that are discretionary but good business practice

compensation

19

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Exh. C