>>Web Merchandisers Catalogue Advantages of Direct Mail
By Martha McNeil Hamilton
Washington Post Staff Writer
RedEnvelope Inc., an upscale purveyor of luxury gifts that started out as a "pure play" in the once heady ether of the Internet, now does about half of its sales through catalogues.
Electronics retailer Crutchfield Corp., a 27-year-old catalogue company that went online six years ago, now does almost a third of its sales in cyberspace.
This synergy between the old -- Benjamin Franklin produced the first catalogue in 1774 -- and the new has been an unexpected success story of online retailing, according to retailers and analysts.
"Direct mail is seeing bit of a renaissance. A couple of years ago when the Internet was thriving, a lot of people speculated that catalogues and direct mail were going to become irrelevant quickly," said Ken Cassar, e-commerce analyst for Jupiter-Media Metrix Inc. Instead, Internet retailers have discovered their value, he said. Online and catalogue sales have grown in tandem.
Target Corp. stores, for example, have never sold by catalogue before, but Target owns Rivertown Trading Co., a company that produces catalogues, including public radio's Wireless. Target.com is experimenting with a catalogue that will be distributed for the holiday season, according to Target.com general manager Cathy David.
Even Amazon.com, which dominates online sales, experimented with a catalogue earlier this year. In April it mailed several thousand copies of an Amazon.com Home catalogue, offering tools and hardware, kitchen and housewares, and outdoor items such as grills and furniture. The book was produced by Tool Crib, one of two catalogue companies Amazon has acquired.
Although the company, best known for its sales of books and music online, had used direct mail to advertise promotions on the Web site, it was the first time it has tried a true catalogue, offering shoppers the option of ordering by mail or by calling a toll-free number.
"Earlier this year Tool Crib's people did a test of a catalogue with very limited circulation just to see if people would buy the Amazon products via a catalogue," said Amazon spokesman Bill Curry. He wouldn't say whether the experiment was a success or not or whether it would be repeated. "I can tell you we haven't repeated it yet," he said.
The high mortality rate among many online retailers helped underscore some hard truths, according to retailers and e-commerce specialists.
"The reality is that customers shop across channels. They don't just shop online," said Evie Black Dykema, senior analyst in the online retail group at Forrester Research Inc.
In most cases, she added, the cost of building an online presence is so high that selling only on the Internet seldom justifies the investment. It's most often worthwhile for companies selling through more than one channel -- stores, catalogues and online, she said.
Early on, many online retailers realized that catalogue companies had the expertise to help them deliver to online customers. As a result, some online retailers acquired catalogue companies or contracted out their order-fulfillment and customer-service chores to them.
While Amazon may dominate online selling, many old hands at catalogue sales are among the top online retailers, including Sears, Roebuck and Co. and J.C. Penney Co. Other cataloguers, such as J. Crew Group Inc. and L.L. Bean Inc. have also developed successful online sales.
A study by the Direct Marketing Association, a trade group of catalogue companies -- online retailers, books and record companies and others that sell by using databases -- found that 95 percent of all catalogue companies also sold on the Internet and that online sales account for an average of 13 percent of their sales.
"Keep in mind that cataloguers have been doing essentially what the Internet does for a long time," said H. Robert Wientzen, president of the Direct Marketing Association. "It's another way to reach customers but with the same transaction. There's not much difficulty for them to conquer other than the technical part."
And conquering the technical part turned out to be less complicated than conquering some other aspects of retailing, such as delivering the goods and maintaining customer relations, as the online retailing disaster of two Christmases ago demonstrated, he said.
"The part that some of the virtual retailers never did master was customer relations, logistics, the ability to understand merchandise and what consumers will buy at a distance versus that they won't."
"During the dot-com frenzy, we said, we don't see this as anything new," said Alan Rimm-Kaufman, vice president of marketing for Crutchfield. "It's just a new channel. It's really helped our business grow, and we've been enamored with the channel," he said. Internet sales haven't replaced catalogue sales but have brought in new customers, he said.
Retailers say catalogues and Web sites complement each other. Catalogues have the edge when it comes to presenting images -- which is important for higher-priced items or items where design is important -- such as a designer dress -- while Internet sites are good for selling commodity items such as T-shirts, retailers said. And, while most shoppers go to the Internet with an idea of what they want to buy, catalogues are good at creating desire in consumers.
Once a customer decides to buy something, however, especially if it is something complicated, a Web site can deliver much more information. Catalogues are portable. A shopper can peruse a catalogue in the subway or on the bus and then order or seek more information on the Web at work or at home.
But the most important reason for the synergy between catalogues and online sales is economics, retailers and online experts said. "We feel the ideal situation is where you acquired customers via the catalogue but encourage the customer to place that order over the Web," said Martin McClanan, RedEnvelope's chief executive.
Although RedEnvelope started out as a "pure play," only available online, it moved quickly to create its first catalogue. That was the plan all along, McClanan said.
McClanan came to the company with a background in catalogues, as did most of the company's executive team, he said. "When we launched, we were much quicker to get the Web site portion of the business going than the catalogues. But we had anticipated having catalogue and Web retail at the outset."
The company anticipates mailing more than 5 million catalogues this holiday season.
Depending on what the overhead is, a Web order generally costs one-third to one-half what a phone order does, said McClanan.
Elaine Rubin, president of Shop.org, now the online division of the National Retail Federation, said one "big, significant thing is that Internet retailing is about the convergence of traditional retailing, the science of direct marketing and the use of the Internet.
"I think there was a belief early on that the Internet was a whole new thing and that everything we knew about direct marketing wasn't going to apply," she said. "The wisdom today is that the best Internet retailers are embracing the science of direct marketing" -- and its ability to reach out to specific customers, through catalogues mailed to specific Zip codes, rather than just opening the doors of a store to everyone. |
