The call for an audit of Facebook’s metrics comes a week after the social network acknowledged inflating its video metrics.
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J.C. Penney isn't alone as a catalog operation looking to morph more quickly into online retailing. For some catalogers, making that transition, and cutting the heavy costs of print operations, is literally a matter of life or death. In late 2010 and early 2011, some of the biggest names in traditional direct marketing and cataloging were filing and then reorganizing under Chapter 11 bankruptcy protection. In February, nearly a year after filing for Chapter 11 protection, Oriental Trading Co. (No. 64) emerged from bankruptcy. Other Top 500 catalog companies also filing for bankruptcy and reorganizing include Orchard Brands Corp. (No. 79) and Harry and David Holdings Inc. (No. 103).
"A lot of traditional catalogers are struggling with growing the web side of their business and making a bigger transformation into e-commerce because they still need to support the print side of their operation where the costs of publishing and mailing continue to increase," says Ronald Ramseyer, managing partner, Ramseyer & Associates, a Doxbury, Mass., retail consulting firm, and a former senior direct marketing executive with Casual Male Retail Group (No. 330), Bass Pro Shops (No. 86) and The Talbot's Inc. (No. 112). "For some traditional catalogers generating more business online isn't just a necessity, it's all about survival."
In 2010, the collective web sales of all catalog/call center companies ranked in the new Top 500 increased year over year 10.8% to $20.43 billion from $18.44 billion—the slowest growth rate among the four types of online merchants: catalogers, consumer goods manufacturers, retail chains and web-only merchants.
The catalogers growing the fastest and making the most rapid transformation from traditional direct marketing to online retailing are reaching out to new types of customers and doing more segmented marketing. PC Connection Inc., for instance, is streamlining its business model and rethinking parts of its e-commerce strategy to keep pace with a rapidly changing information technology market, chief financial officer Jack Ferguson recently told Wall Street analysts.
Ferguson described how PC Connection (No. 37) has been organized into five major units, with each unit serving a distinct customer segment. One unit, PC Connection, now focuses on small- to medium-sized businesses, while another unit—GovConnection—serves local, state and federal government agencies in addition to schools, colleges and universities. MoreDirect now services medium-sized to large corporate customers and Merrimack Services Corp. targets the health care and professional services market. "We're building a multiple brand strategy that leads with solutions selling," Ferguson told analysts.
But the segment undergoing the most change is PC Connection's business-to-consumer e-commerce unit. In 2010, PC Connection launched PC Connection Express, which focuses on consumers, home office workers and small businesses with fewer than 20 employees. In mid-January, PC Connection also launched PCConnectionExpress.com as a separate web site with nearly two dozen merchandising categories. The new business-to-consumer site features live chat, daily "hot" deals and free shipping on orders over $99, with some restrictions.
To support its new consumer web site and other business-to-business web sites, PC Connection is spending more than $6 million on search engine marketing and other forms of digital promotion, the company says. The reorganization—and the ongoing transformation into a more diverse web retailing operation—helped PC Connection grow e-commerce sales 29.3% to $605.9 million in 2010 from $468.6 million in 2009. "We are building a compelling online experience with an analytics and a customer-driven model," Ferguson told analysts.
To survive and then prosper in e-commerce, more catalogers, especially smaller, more traditional direct marketing companies with annual sales of less than $15 million, need to control their print and mail costs, invest more time and money online and develop Internet marketing strategies that will attract more web shoppers, says Jim Padgitt, managing director of catalog and e-commerce consulting firm Direct Marketing Insights Inc. "When it comes to e-commerce, more catalogers need to do a better job of building an effective site that will attract and retain more shoppers," says Padgitt. "They need to control costs and put the savings into the web in a way that's going to do more than just maintain their business."
In 2010, Potpourri Group Inc. (No. 141), which operates multiple niche catalog and e-commerce brands such as TheStitchery.com, Expressions.com and NorthStyle.com, turned to new technology to boost sales by recommending more relevant products to visitors. After installing a product recommendation engine from iGoDigital, Potpourri was able to recommend more relevant products to shoppers based on their previous buying history. The iGoDigital engine also uses other collective demographic and merchandising information stored in Potpourri's customer service database to make better recommendations of related items for products already in a customer's shopping cart, says the retailer's director of e-commerce Bob Morrison.
The improved technology helped Potpourri increase web sales 27.3% to $118 million in 2010 from $92.7 million in 2009 and improved sales conversion rates in some instances by double digits. "We used to spend a lot of time and energy manually merchandising products on all 13 of our web sites, especially as new items became available," says Morrison. "A personalized recommendations platform enabled us to streamline this process across multiple sites and channels and improve the shopping experience by helping customers quickly discover the most relevant products."
Identifying and then retaining more new web customers will become an even greater priority for catalogers as they look to make a faster transition from conventional direct marketing to more emphasis on e-commerce, says Padgitt. "One advantage smaller niche retailers have is the unique products that a bigger retailer doesn't carry, such as a ham that's just injected with smoke flavor at the grocery store versus placing an order with a second-generation family catalog operation that only sells hams that have been cured in a smokehouse," he says. "But the small catalogers have to make sure any new and repeat customers can keep on finding them online, and that won't happen unless they develop a first-class e-commerce site."