But losses mount for the home furnishings e-retailer that went public in October.
Far from pushing retail catalogs aside, the web has given them new life.
The paper catalog has been around seemingly forever in retail, and the advent of the e-commerce channel, against some early predictions, has done little to dim its prospects for remaining a fixture in how consumers shop and buy. Instead, smart retailers are now looking for ways to combine web and catalog strategies in the knowledge that by working in tandem, each channel can make the other stronger.
One such retailer exploring tighter integration between web and catalog is Lillian Vernon Corp., which is working to develop a deeper cross-channel view of customers following a recent move to a new, more facile customer database. “We’re trying to understand the value of a customer coming in through the web channel through search or some other means vs. coming in online or on the phone through a catalog mailing,” says John Buleza, vice president of marketing.
While retailers thrash out such numbers, what’s clear already is that catalogs are continuing to thrive in the Internet age. Though some retailers in the first surge of online retailing were quick to paint catalogs as the equivalent of a horse and buggy on its way to extinction, in fact, catalog circulation is up in recent years, even as the volume of retail sales transacted online has continued to climb. According to recent findings from Forrester Research Inc., 39% of multi-channel retailers surveyed say they have increased the number of customer segments to which they mail catalogs.
Why so? Though the notion of simply cutting catalog circulation in an economy move as more customers shop on the web is tempting to retailers, that can be a short-sighted strategy. For many retailers with a web site, the catalog is a prospecting tool and a way to reach new customers-Forrester’s data shows. 39% of retailers surveyed focus catalogs specifically on customer acquisition.
Attempts by multi-channel retailers to cut back on catalog mailings to save on production and mailing costs haven’t generally benefited those retailers. “Cut back on catalog mailings and you will do a disservice to your year-over-year comparable sales, your e-commerce sales and your total sales,” says Forrester analyst Sucharita Mulpuru.
Early on, Internet-only retailers realized the online channel wasn’t driving in droves of customers to new sites. “A catalog was a much cheaper way to reach out to more customers than building a bricks-and-mortar store, so you had companies like Red Envelope start catalogs very early,” Mulpuru says.
RedEnvelope since has been joined by e-retailers such as Backcountry.com, Altrec.com and eBags.com. Home Décor Products Inc. is the latest web retailer hoping to borrow the proven strength of the catalog channel to help acquire customers and build web sales. CEO Mike Golden calls the first paper catalog the company launched last year one of the most successful marketing initiatives the retailer has ever undertaken.
Web-based retailers such as Backcountry.com use their paper catalogs as a way to draw existing customers back to their web site. Not only does a catalog drop remind its best customers a seasonal assortment is in, it gives Backcountry a way to reach out to past customers who haven’t opted into e-mail who otherwise can’t be contacted. “It’s a customer reactivation tool,” says vice president of marketing Dustin Robertson.
By the same token, multi-channel retailers should know their sites’ best use isn’t as a stand-in for catalog mailings or vice-versa. “People should definitely realize catalogs and web sites work together,” Mulpuru says. “Online can do things even a store can’t do, like present content and more extensive advice, and details on a product 24-7. You can go online, see alternative views, and see what people have said about a product. But the catalog is the equivalent of a store window,” she says. “It draws you in.”
Backcountry’s catalog operation looks to blend the best of the two channels by using data gleaned from analysis of online sales to inform its catalog strategy. After experimenting with an initial catalog in November 2003, a self-developed effort, it hired catalog consultants for 2005 and began to appreciate how much it still had to learn about the catalog business.
Based on the catalog metrics of recency, frequency and monetary value, the consultants told Backcountry that a portion of its house list, for example, was “pure gold,” according to Robertson. No matter how often they were contacted, these customers placed orders in response. Accepting this intelligence initially with some skepticism, Robertson said over the course of the year Backcountry came to see the consultants had been right. “It was absolutely true. There is a good chunk of people who have bought recently and spent a lot who are very responsive to any offer you send them,” he says.
For a year, with the guidance of the consulting firm, Backcountry tried everything a traditional paper catalog company would do, mailing about 3.5 million catalogs in seven mailings and experimenting with page count, at one point boosting its initial 24-page catalog up to 42 pages.
Not everything recommended by the consultants, with deep roots in the catalog world, adapted well for this online retailer, however. Backcountry tried other established catalog practices, such as using catalogs for prospecting, which ultimately proved too expensive for the return generated. The cost of buying lists from Powder and other magazines targeting its audience pushed the cost of acquiring a new customer up from $25 to $30, for example, in contrast to the estimated $10 it costs Backcountry to acquire a new customer online.
The catalog consultants also advised against smaller-scale mailings such as postcards and fliers, saying any mailing should put as much of a company’s store in front of customers as possible. “But with 25,000 products we never were going to get everything into the book, and we never were going to pick exactly what people were going to buy. The reality is 80% of what people buy is not in the catalog,” Robertson says.