PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
Just a year ago, Sharper Image Corp. and Lands’ End were speaking blasphemy about cutting catalog pages to fund expansion on the Web. But Internet sales, though soaring, represent just 10% of both companies’ revenues today. And the cutbacks have proved harder to pull off in the face of declining revenue.
Sharper Image, home of trendy high-tech gadgets, has trimmed catalog pages by 30%-from an average of 76 to 52 per issue. Yet the company raised circulation by 40%. “We were trying to find a balanced way to reach more people,” explains Kathryn Grant, senior manager of Internet strategy.
Was the strategy an attempt to segue from catalog to Web and reach new customers? “We wanted to bring in more customers from a broader market,” Grant says. “We concentrated on the products we design and manufacture ourselves, which are among our most popular.”
In fact, the company has found it’s better to cross-pollinate between catalog and Web site, rather than replacing one with the other. “We run an ad in the catalog promising a $2 discount on shipping for Web site customers,” Grant says. It also conducted a sweep-stakes promoted in all three venues.
Up 479% last year, the Internet is the fastest growing piece of Sharper Image’s business. But the bulk of the company’s revenue comes from its 87 stores, with a quarter coming from the catalogs. “However,” Grant adds, “about 70% of the customers we get through the Web site are new to us, making this a very cost-effective way to get new business.”
Cutting catalog pages is becoming a pattern, says Maxwell Sroge, a catalog and Internet consultant based in Evanston, Ill. “Williams-Sonoma, Lands’ End and Eddie Bauer all have done it,” he says. Sroge quickly points out that direct marketers can never eliminate catalogs entirely. “Some of their lists are so productive that would never happen.” Last quarter, though, he says 34% of Williams-Sonoma’s new business came from its Web site. “At half the acquisition cost.”
A spokeswoman at Lands’ End, Dodgeville, Wis. says the company sees a spike in Web sales when catalogs mail, so synergy exists. Circulation is up 6% this year. As for pages, “we are trying to decide how many are enough.”