The web and TV retailer, formerly ShopHQ, grew e-commerce 0.3% in the first quarter.
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Not only does that possibly skew the results, bolstering weak mailings or dragging down strong mailings, but it also doesn’t take into account that different lists might contain customers with different propensities to shop online. “Say we rent lists from Red Envelope and Tiffany,” Bradley says. “Red Envelope probably has a higher percentage of customers who order online than Tiffany. There will end up being a major difference between the two lists.” Without a way to match web orders to catalog orders, the lists could appear to perform at different levels when it’s possible that they performed the same, or vice versa. “I’m not sure we’re ever going to know,” Bradley adds.
But that doesn’t mitigate the importance of the issue, which will loom even larger as more sales migrate to the web. “If 4% of your sales come from the Internet, it doesn’t matter much,” Bradley says. “It does matter when 80% of your sales come from the Internet.”
Changes in stocking
Furthermore, accurately matching of sales to catalog drops includes matching of sales to customer records. With fragmented shopping options, retailers run the risk of not recognizing their customers in multiple channels and thus undervaluing their most important customers.
Moving significant sales online also affects how a merchant stocks product. For one thing, inventory planners need to understand the new order flow. With a catalog, a merchant didn’t have to have the inventory on hand at the same time the catalog mailed. Years of experience showed how soon after the catalog drop the first orders would arrive, when they would crescendo, and when they would taper off. The Internet changed all that. Catalogs now generate their first orders within days of a drop and orders could reach a peak much sooner than in pre-web days.
Further, because products are continuously available on the web, a merchant can keep something in stock much longer than before. “In the past, you might have wanted to keep red dresses, say, in stock for six weeks after you mailed a catalog at a particular time of year,” says Hess of Norm Thompson. “Today, if they sell OK, you can keep them on your web site and in stock for two years if you want.”
In addition, the web makes product testing more flexible. Many merchants by now have tested products on the web site, then added them to the catalog when they sold well. But the web’s flexibility extends to product extensions as well. “Internet-only products can act as a relatively low-risk test to see if a new category fits the brand,” Okamura says. Further, he adds, “Drop-shipping really gives you the freedom to test.”
The web also forces catalogers to re-think their staffing. “From an organizational point of view, there have been big changes,” Hess says. “And it affects every single department.” For example, many catalog production departments didn’t understand the requirements of product presentation online, she says. “They may not have digital designers that understood what it meant to have a 72 dpi image to use online,” she says. Or, she notes, copywriters may not understand how online copy differs from catalog copy. In addition, IT support is different if the staff is dealing with internal systems than if it is dealing with internal systems as well as customer-facing web-based systems.
Today, online skills are crucial yet many catalogers are still not at a level at which online knowledge pervades the business. “It’s evolutionary,” Hess says. “As departments hire people, they look to see if the candidates have Internet skills. Five years ago, we wanted people with total catalog experience. Five years from now, everyone will have to have multi-channel experience.” The biggest challenge in hiring, Hess predicts, will be for people who are skilled in research and analysis because the Internet has changed the way catalogers analyze their results. “Those people will be hard to find to find because the area is so new,” she says.
The dynamics of how the web influences catalog sales is in such flux that there is far from universal agreement on how to approach the market. Bradley of Cuddledown, for one, argues that catalogers shouldn’t fiddle with proven marketing success. Consumers expect the catalog to present a merchant’s array of products, and if a broad representation of selection is not there, consumers may turn to another catalog, Bradley says. “If you try to push people to the web instead of trying to capture the impulse at the very moment they’re looking at the catalog, you run the risk of losing sales to a competitor,” he says. “If you send a smaller catalog with less merchandise and rely on them to go to the web, they may not have enough information to make their decision.”
Some analysts point out that whether customers will move to the Internet ultimately will rest on how well the web sites do their job. “Push, don’t pull is back; catalogs will be very much something to push customers into using the Internet,” Muldoon says. “But driving people to something that is not interesting won’t work. This concept will test out if the web sites are improved.”