Cataloging to multichannel retailing: A long, strange trip
Cataloging to multichannel retailing: A long, strange trip
"We were still weighing the mail" in the early 80s, recalls Michael Sherman, who at the time was EVP of the catalog division of Horn & Hardart, later known as Hanover Direct. Because the vast majority of orders still came in through the post office at that time, catalogers would weigh each day's mail in order to calculate the daily sales volume.
Things changed rapidly, however, during the ensuing years, which was a period of rapid growth for catalogers. Toll-free numbers took off during the 1980s, giving consumers another way to place their orders.
This would have been meaningless, however, without another development. The decade "was the first time there was widespread access to credit cards," says Coy Clement, who was VP of direct marketing at Eddie Bauer in the mid-'80s.
Armed with credit cards and 1-800 numbers, consumers — especially females — embraced catalog shopping.
"For the women entering the workforce in large numbers at this time, catalogs offered convenience and a choice that was easy," says Sherman. The decade was the "Golden Age" for catalog growth — thanks in large part to these trends, he continues.
For example, Hanover launched the Domestications catalog in the mid-'80s and it experienced a 40% growth rate for several years.
Also during the decade, credit cards and the desktop computers helped pave the way for what would become a big part of catalogers' lives a decade later: customer relationship management.
"Beginning in the '80s, we could keep not just a mailing list, but also data about what customers bought and a lot of other information. This began to allow us to figure out things like the long-term value of a customer, which nobody could figure out previously," Clement says.
In 1990, two further developments would have long-lasting implications for the next two decades. That fall, the first national online service, Prodigy, launched. The new service was a joint venture between IBM and Sears, Roebuck.
"Prodigy was the first consumer-friendly information resource online," recalls Clement. Catalogers such as Eddie Bauer and Talbots experimented with selling on Prodigy but, "people didn't really know what to do with it," he says.
It wasn't until AOL's rapid growth several years later that online selling really took off, ushering in major online brands such as Amazon.com and eBay. Both of those companies debuted in 1995.
Abacus, the first cooperative database for catalogers, also launched in 1990. Despite initial resistance, most catalogers eventually embraced co-ops in order to get a more complete view of their market.
"Catalogers were always extremely proprietary about their customer names, which is what made Abacus such a transformational event and big idea," says Clement.
This contributed to the growth of CRM, which became a buzzword in the '90s, says Jack Schmid, who had already started a catalog consultancy — J. Schmid & Assoc. — after working at catalog companies for years. "The companies that understood how to acquire and work customer lists were successful," he says, pointing to brands such as Land's End and LL Bean as leaders in this area in the 1990s.
Specialty and niche catalogs took off in this decade, following the rapid growth of J. Crew, which helped make the "preppy" style fashionable, and Victoria's Secret, which brought sexy lingerie into the living room. Soon, catalogs from Abercrombie & Fitch, Pottery Barn, J. Peterman and Sundance, among others, were gaining popularity as well.
"Niche catalogs really did well because they easily targeted a specific group and had real personality," says Robin Cherry, author of Catalog: The Illustrated History of Mail Order Shopping.
In contrast, catalogs showcasing hundreds of pages of merchandise — also known as big books — faded away in the 1990s. The Montgomery Ward catalog, long an iconic mail order brand, folded in 1985, and Sears discontinued its Wish Book in 1993. General merchandise catalogs made something of a comeback in the second half of the current decade, but they are significantly smaller.
By the end of the 1990s, the Internet had begun to change the retail landscape forever — although not everyone fully understood the ramifications yet.
"A lot of people were concerned that the Internet was going to eliminate catalogs," says Clement. However, many of the companies that tried to transform themselves from catalogers into Internet brands didn't survive the Internet bust because "they forgot to print," he adds.
By the dawn of the new millennium, savvy merchants had begun to realize that catalogs and the Internet aren't mutually exclusive, and the term "multichannel retail" gained traction. Some of the bigger catalog brands tested other channels — namely, retail stores — for years, beginning with Talbots in the 1980s and continuing with Pottery Barn, Williams-Sonoma, Eddie Bauer and Sharper Image, among others. This was typically referred to as "catalog retail."
What is unique about the Internet is just how similar it is to cataloging, Clement says. Both are communications channels and "once an order comes in, an Internet company is exactly like a catalog company," he explains.
Early on, most people didn't realize this, which is why many ran their e-commerce businesses separately from their catalog and retail ventures. The e-commerce businesses suffered as a result, because they didn't yet understand the importance of customer service. A Gartner Group survey from 2001 reported that 24.5 million consumers spent $6.2 billion online during the 2000 holiday season. However, almost as many consumers stayed away from the Internet in 2000.
E-commerce sales continued to grow despite these early problems, because of the convenience the channel offered consumers. Many multichannel merchants struggle to integrate the Internet with their other channels to provide consumers with a better experience. These efforts were complicated by a proliferation of media channels — e-mail, mobile, social media — and rising paper and postage costs. As a result, response rates for catalogs have diminished and multichannel merchants strive to figure out how to mail more efficiently while optimizing their use of other channels.
"The big transformation happening now is that direct marketing is turning into a brand oriented experience that serves customers the way other brands do," says Clement.
With consumers getting content from anywhere, the question for direct merchants is "How do you build and strengthen the relationship with customers?" says Sherman. Embracing new technology, like social media, is the answer, he believes.