In its second-largest acquisition, Amazon buys the company for $970 million.
With the dawn of the e-Age, newly minted web companies sniffed at the ink-stained wretches in direct mail. Theirs was a clean, cheap, evolved world, unsullied by such irritants as nth-select testing and postal codes.
But all that’s old is new again. Brought to heel by the NASDAQ, some pure-plays are turning to catalogs as an alternate channel of marketing. Others incorporated paper catalogs in their business plan from the jump.
Tom Bazzone, president and COO of RedEnvelope.com, San Francisco, a toney overnight gift delivery service formerly known as 911gifts.com, rolled out around 1 million Valentine catalogs in 1999. Bazzone, who comes from a catalog culture (Williams-Sonoma), says a catalog has advantages. “It’s easier for the prospect to see my value proposition in a 24-page catalog than going to my site,” he explains.
According to Bazzone, the photos and graphics also come out better in a catalog. “We had a dad and son on the Father’s Day catalog,” he says. “It was such a moving picture, it made you just stop. That’s emotion. And that’s easier to communicate in a catalog.”
Although no one is keeping track, it’s clear that former pure-plays are not so pure any more. “You won’t find too many pure-plays in a while,” says Andrew Batkin, CEO of Interactive Marketing Inc. in Manhattan Beach, Calif., and chair of the 700-member Promotion Marketing Association in New York. He says the migration toward catalogs is an economic necessity. “There needs to be profitability or at least traction toward profitability,” he says. “The time has come to show you can create a model that works.”
Some e-retailers now are hyping the fact that they are sending catalogs. In September, Allpets.com not only announced that it had re-launched its web site but also touted that it was the first online pet supply retailer to publish a catalog. “This expands our market reach, and allows us to combine the proven success of direct mail order with the immediacy of the Internet,” Allpets.com Top Dog (yes, that’s the title) Niloo Howe said in a prepared statement.
Batkin says the cost of mail-order can be offset for some companies by the built-in advantage of sending a catalog to those known to buy online. Browsers turn into buyers with those catalogs at a rate of 15-20%, he says, orders of magnitude above normal catalog returns.
Online retailers who send catalogs publish their URLs all over the catalogs, of course. This creates some interesting scenarios that further muddy the waters of online retailing. For instance, 12% of RedEnvelope’s house lists are now analog customers, meaning they have no email address on file with Red-Envelope. “This means we can’t stop the catalog even if we wanted to,” Bazzone says. “You can’t dabble in this.”
Another advantage, particular to RedEnvelope, was that a catalog could convert the secondary customer-the gift recipient-into a customer. “Our customer is not the recipient,” Bazzone points out. “So, we knew a lot about the sender, credit card number, and so on, but very little about the recipient except his or her address. More importantly, the recipient got the gift but knew little about us. What if that person wanted to send a gift to someone else?” Thus, RedEnvelope sent a catalog to the gift recipient, with the result that a fair number of them have become RedEnvelope customers.
In a slightly different category are operations that have been both catalog and online from the beginning. Alloy Online Inc., headquartered in New York City, falls in that category. Appealing to teens with its trendy clothing, kicky accessories and catchy columns such as “Dig or Diss,” Alloy, a relative oldster at 4 years old, knew it needed a real world presence to grab teen eyeballs, according to co-founder and CEO Matt Diamond. “You can create all the great sites you want, but people need to go to them,” he says.
Alloy mails as many as 40 million books a year and tests anything and everything. “Everything must produce a certain number of sales per square inch or per insertion,” Diamond says. Nonetheless, Batkin cautions: “If I were an e-retailer, I would see my catalog as a marketing expense, not as a cost-effective way to get people to buy.”
The key point is that direct marketing is the right offer to the right person at the right time. Sometimes that offer will be sought out online, sometimes it can be sent to the buyer on paper. “We did our first web site and our first catalog alongside each other,” explains Mike McCann, chief marketing officer of Awards.com, a Lyndhurst, N.J., company offering sports and corporate awards.
Awards.com started in July 1999 as a brickless click with a built-in catalog. The catalog is a full-blown 76 pager, with the second one coming in at 68 pages. Although the company does not emphasize one over the other, it does steer customers online to view its 125,000 products.
Again, the company’s catalog extends its reach. Many of Awards.com’s customers are coaches and schools. These are more readily accessed by a mailing list rather than by an ad sending them to a web site. Yet, as in all these cases, the customer can open the catalog on the computer desk and order online. “We have a place right on the home page to insert the SKU number of the item you want,” McCann says.
Isn’t sending a catalog with an order blank getting into the mail order business? Not necessarily. Bazzone says 70% of RedEnvelope’s catalog customers place the order online.
McCann says, “We cross-pollinate. The catalog is full of mentions of the site and crawling with mouse icons.” Online, the Awards.com customer can also request a mailed catalog.