Fighting for Turf in the Internet Jungle
Amid the collapse of "pure play" e-commerce businesses, you'd think the Internet is wide open for companies with offline components to drive customers online. It's not. Pure play Internet companies may not destroy cataloging, but the Internet has transformed conventional direct marketing into a jungle where only the fittest can build their businesses.
As the dot-com shakeout continues, it's obvious that any company wanting to play online has to drive traffic to its Web site. And driving traffic doesn't just mean advertising your URL in your catalog. That's "channel shift," or getting orders that used to come in over the phone through the Internet. You may move 10 percent (or ultimately 30 percent) of your business online, but saving $4 an order in telemarketing costs doesn't build your business.
Let's face it: The future is about a bunch of 800-pound gorillas that can afford to build their businesses by driving Web traffic through multiple media. Wal-Mart and The Gap can (and do) advertise everywhere. Gap bags and ads drive traffic indiscriminately to stores or to the Web, and other large firms are moving to this level of integration.
These companies have tens of millions of dollars to spend on marketing, branding and advertising. When they toss their hefty budgets around, they crush the smaller to midsize companies that also want to swing on the Internet vine. Most catalogs don't have limitless marketing budgets. And worse, the Internet is not adding enormous incremental sales to the economy. If the 800-pound gorillas are building their businesses online, they're doing it at your expense.
There's another reason that midsize catalogers will be squeezed in the near term.
By now everyone has learned that success doesn't just happen to catalogs online. Marketing is a big part of that, but so is the medium. Paper catalogs are a "push" medium. Buyers can't avoid sorting through their mail every day, and catalogers have taken advantage of that, plotting mailing schedules to land catalogs in mailboxes at strategically opportune moments (say, four weeks before Christmas).
In a "pull" medium like the Internet, people don't turn on their computers and have unsolicited catalogs waiting for them (or if they do, they find another Internet service provider). More likely, people buy things online when they hunt for commodities (like books or CDs they know they want) or compare prices on VCRs. Buying clothes or home decorations (something sold by a large number of catalogs) doesn't really lend itself to lowest-price search engines.
Getting out of the Internet jungle isn't impossible for smaller companies; it just requires teamwork. Any viewer of the popular CBS show "Survivor" knows that the people who can be part of the team are more likely to make it to the next episode.
But catalogers already know this. They always have been and always will be a cooperative industry. Catalogers thrive in the only business in the world where competitors deliver the names and addresses of their best customers to their closest competitors. Every day.
Getting the most out of collaborative databases is key to finding new customers online. The other key to being an Internet survivor is building traffic. And that doesn't have to be expensive. For instance, instead of bringing customers to your Web site, why not bring your Web site to where customers are? I'm not advising that everyone go buy sponsorship positions on Yahoo. That won't help anyone's customer acquisition costs.
But by banding together and building coalitions, catalogers can extend their reach. And they are extending their reach. A bunch of catalogs collectively can put their products (and a smidgen of content) onto a valuable, event-oriented addition to any high-traffic Web site.
Alliance-building is what the Internet is all about, and it's through it that we can build the ultimate Quonset hut from which we can watch the sunset and eat our bananas on the beach.