Catalog Merchants Need to Come up to Speed
I was in Chicago for ACCM 2006. Chicago's a terrific city and a few minutes after my plane landed at Midway Airport, I was racing toward the downtown area on a fast suburban train that got me to my destination in about 20 minutes at a $2.00 cost. Frankly, it continues to amaze me that New York, my home city, has never brought a direct rail link to either of its two major airports (although it's been talking about it for more than 40 years). How could the Big Apple have fallen so far behind? Well, it's a long story, but unfortunately, after I'd spent a few hours at ACCM, it seemed to me that many catalog marketers are making exactly the same mistake that New York is making in terms of not investing in the future.
The good news is that catalogers have invested in their online infrastructure in the past five years, and they've come a long way in terms of the quality of their Web sites. They're generally faster, more logically laid out, and the best of them are optimized for organic SEO. The bad news is far too many catalogers are clearly behind the times, both in terms of having a Search strategy, and in terms of investing enough in technology generally.
At the exhibit hall, I spoke to several catalogers who told me they were spending "a lot of money," in Search.
"How much is 'a lot of money?'" I asked her.
"Well, between $500 and $1,000" she replied.
"No, a month."
Naturally, "a lot of money" means different things to different people, and I suppose that $500 a month is "a lot" to tiny catalogers on a shoestring. But it's not much when you consider the possible ROI that some of these merchants might be able to realize, especially those in product niches where competition is limited and keyword prices are low.
Unfortunately, for merchants in more competitive verticals it's much harder to get positive ROI happening when you're spending this little money. Here's the problem: at $500 a month, your campaign just doesn't have the click volume to produce a statistically valid model against which you can begin to perform fine-tuning. For example, let's say you want to do a split-test of a landing page. If you're only spending a few dollars a day, maybe 16 people will click on the new page, and maybe 20 will click on the old one. Is this enough data for you to conclude that the old page should go away? Well maybe, but you'd be on much firmer ground if you had 160 people clicking than 16, and getting those clicks means investing some money.
It might sound unfair, but the Search Economy is biased toward marketers who can afford to spend more than a few dollars a day, because their testing decisions will be more intelligent and their campaigns therefore will be more effective. Add the fact that hybrid auction systems such as Google (which reward high Click-Through rates with lower costs for given SERP positions) offer what is tantamount to a discount to marketers investing more money in Search and you'll see that spending just a few dollars a day is penny-wise and pound-foolish.
Unfortunately, the inability or refusal to spend enough money in Search is just part of a larger problem that's not limited to catalogers. One cataloger I spoke to reported that his company (a very large cataloger) had "gotten badly burned" by a SEM agency when it rolled out its initial search campaign in 2005, but after top management came to the conclusion that it needed to be in the Search game (because all its competitors were), he was now shopping around for a new agency, the goal being to be "back in Search by Q1 2007."
"That's a long time to wait," I offered. "Do you think your competitors are waiting?"
The cataloger shrugged his shoulders.
"Probably not, but it takes a long time to set budgets in my company, so that's the best we can do."
I could only shake my head. If this guy's top management knew how competitive and complicated this business was getting, this guy would already have a budget and the support he needed to get the basics of a smart campaign running by Q3 2006, not Q4 2007. But that's unfortunately not the way the world works -- people all too often do nothing until reality kicks them in the teeth (often in the form of a dented bottom line or a pink slip).
I find catalogers' "wait and see" attitude toward Search puzzling and really can't explain it, except to say that if you're making money using tried-and-true methods, it's hard for anyone to persuade you that you're doing anything wrong or missing out on any opportunities. But my fear is that many catalogers won't wake up to the fact that they should be in Search until their bottom lines begin to be eroded by wily competitors who DO see Search's potential and have already hit the ground running. Sadly, I expect this awakening to be rude; after all, business is Darwinian and only the strong and swift are likely to survive.
I hope catalogers get more serious about Search, but I'm not going to be holding my breath, especially after I had a conversation with a vendor of CMS (Content Management Systems) for catalogers. Both he and I have been in this business for a long time, and at one point, the vendor began reminiscing about Version 1 of his product, a DOS application his company rolled out more than 10 years ago.
"It's amazing how we got any of that old stuff to work," I noted.
"You'd be even more amazed if you knew how many catalogers are still using my old DOS version to run their operations," he answered.
I almost fell through the floor when he said that, but I guess I shouldn't have been too surprised that there are folks out there who seem to believe you only need to invest in technology once every ten years or so. How they stay in business is anybody's guess.
I had some good conversations at ACCM, but I left Chicago concerned that catalog merchants have a lot of catching up to do if they're going to thrive in a Web ruled by search engines. Like it or not, catalog merchants have to invest in the future, or they'll face the retailing equivalent of the nightmare I faced after my plane landed back in New York: a 45-minute wait for a cab, a ridiculously bumpy ride over ancient roads, and a $50 bill to travel eight miles.
David Pasternack is president of Did-it.com, a New York search engine marketing firm. Reach him at firstname.lastname@example.org