95% of the orders at Hallmark Business Connections are processed online, CEO Tressa Angell says.
The rising costs of online customer acquisition and the desire to establish a brand are driving e-retailers back to catalogs.
As e-commerce continues to shake off the hype that marked its debut, the web is finding its place among retail channels. Instead of nosing stores aside as once predicted, for example, web sites are seeing some of their greatest return in working in tandem with store operations. And while there was once talk of the web shrinking or replacing catalog circulation, retailers with a strong catalog base have instead leveraged that expertise into web success.
Now, some pure-play web retailers hope to work that angle from the other side and borrow the proven strength of the catalog channel to help build web sales. Among them, Altrec.com and BackcountryStore.com launched their first catalogs last year in time for the holidays. TShirtKing.com, an online retailer of licensed and other t-shirts, expects to roll out its initial catalog this spring. EBags Inc. released its first catalog 18 months ago and even mega-chain Home Depot Inc. last year issued a catalog with the intention of driving customers to its web site.
Surprisingly, after early buzz about how the web would reach customers without the production and shipping cost of a catalog, it’s an effort to reduce what’s become the increasingly pricey cost of acquiring customers online that’s driving TShirtKing’s foray into paper catalogs. “Pay for click has gotten so expensive that sending anything from a postcard to a small catalog starts becoming more cost effective,” says TShirtKing.com president Bill Broadbent.
At Altrec and BackcountryStore, adding catalogs is about brand positioning and building brand strength. But these are not your mother’s phonebook-sized catalogs. “Publishing a 200-page catalog is fine if you’re a cataloger, but a bad idea if you’re an Internet company,” says Altrec.com CEO Mike Morford. “Where catalogs are moving today is toward being a sample of what’s available online. That’s optimal because the book size doesn’t need to be as large or the mailing frequency as often. Yet the customer is still walking away with something tangible.”
BackcountryStore.com was curious about catalogs long before it had the numbers to support one. “You’ve got a fixed design cost in addition to your other costs, so you need a list that’s big enough before it gets interesting,” says vice president of business development John Bresee. Discovering this summer that the house list had reached 125,000, Bresee researched catalog response rates, assembled a spreadsheet for costs, and found that for the first time, the numbers might just work.
Broadbent recalls that not long ago, TShirtKing.com paid virtually nothing for its traffic because it got a healthy stream of it from natural search. But that was before paid keywords, paid inclusion and paid direct feeds. “Our standings aren’t what they used to be in natural search,” he says. “We now pay for almost half of our traffic. We used to pay for almost none of it. We think that cost can be improved with offline sales.”
To test that theory, TShirtKing plans to issue its first-ever catalogs in the spring and summer, to segmented customer lists of 50,000 for each mailing. They’ll follow an initial test mailing to about 5,000 on the house list. The lists will be drawn according to purchase history, with the first 8- to 10-page catalog, featuring about 200 of the company’s 2,000 products, targeting a younger audience with music-related and humorous t-shirts. The second catalog, targeting a different audience, will feature more lifestyle-oriented t-shirt messages, and the performance of each catalog will be tested against the other.
The catalogs will align with the web site, displaying items in the same category in which they’re to be found online, and underscoring the point that additional inventory beyond what’s in the catalog is available online.
To track catalog performance, catalog prices will initially be slightly cheaper than those on the web site. The catalog will provide a code for each item that shoppers can use to get the listed catalog price when placing an order online. “That will allow us to see how many people go from the catalog to the web site to order,” says Broadbent. He anticipates that catalog orders will be larger on average than online orders, based on input from other catalogers, something he’ll help along by selecting for catalog promotion products that tend to make the best margins and move the most quickly.
One thing TShirtKing hasn’t figured out is how to track pass-along sales from new customers who are not on the house list and who order from catalogs borrowed from friends-admittedly a bit frustrating, says Broadbent, since customers’ requests for something to take to school or work is part of what sparked catalog plans.
To reduce costs, TShirtKing is shooting product images for the catalogs in-house and working with a local printer on production. The catalog is supporting a web site upgrade as well, as TShirtKing plans to re-shoot all 2,000 SKUS, not just those immediately destined for the catalogs. It also will add product descriptions to the site as they’re written for the catalogs, which it hasn’t previously done. “Most catalogers would gasp that we don’t have product descriptions already, but on the web site we haven’t really needed to,” says Broadbent. “As new products come in we’ll write descriptions for every one of them.”
Broadbent says he’ll consider the catalogs a success if the cost of customer acquisition via catalogs equals or is less than his cost of online. He estimates that cost at $2 to $3 using search and other pay-per-click marketing, with some campaigns of shorter duration going as high as $6. “If this even comes close to what we are paying to acquire new customers online, we’ll just keep tweaking it,” he says. “I have confidence in catalogs. T-shirts are a good catalog item, and a lot of our customers have been asking for them.”
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