Home Depot rethinks catalog strategy

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There's been a lot of talk in the past year about the power of marketing to consumers across stores, the Web and catalogs, with brick-and-mortar stores driving much of the news as they launched, relaunched or expanded direct businesses. Then last week Home Depot told DM News it is folding two catalogs it introduced only a year ago.

Many people in the industry were surprised that the Paces Trading Company and 10 Crescent Lane books will cease mailing, especially since the news follows Home Depot's spring acquisition of the Home Decorators catalog business. Folding the two catalogs doesn't reflect a wholesale retreat from direct marketing, Home Depot said, since its direct sales are on target to reach $1 billion this year. Instead, it is a testament to the strength of the Home Depot brand.

"As we monitored the progress of [Home Depot's] direct business, it became apparent that Homedepot.com and Home Depot Direct catalogs were drawing the most traffic," said Jean Osta Niemi, a Home Depot representative.

The merchandise in 10 Crescent Lane and Paces Trading Company is now available at the company's flagship site at www.homedepot.com and will be featured in the Home Depot Direct catalogs as well. The two brands will continue to exist online, she said.

The catalogs were an attempt by Home Depot, Atlanta, to expand beyond its core brand. 10 Crescent Lane was a home decor title targeting upscale women while Paces focused on high-end lighting.

Not everyone was shocked to hear the news.

"This was no surprise," said Lois Boyle, president of direct marketing agency J. Schmid & Assoc., Shawnee Mission, KS. Her firm frequently works with large companies that have a successful business model and want to start a separate catalog business that doesn't necessarily support the core brand. She tries to explain that catalogs have a different financial model, but even if they do understand this they usually don't last more than two years in the catalog arena.

"Just because you have a database of names, it doesn't mean you understand their wants and needs or that they want to relate to you in that way," she said.

Home Depot is a good example. The company is incredible at retailing and thought it would try a new model, Ms. Boyle said. It hired a team of direct marketers and launched 10 Crescent Lane, which has received praise from the industry. But a year into the venture, the company probably realized that a new catalog brand "doesn't make the kind of money" it is interested in, she said.

"Why stick with it when you could put those same investment dollars into something that already works?" she said, referring to the Home Depot Direct catalog.

This raises the question of Home Depot's plans for Home Decorators. Ms. Boyle said she could see the company selling it or, since the brand is already profitable, trying to take it to the next level.

"If they had stuck to it [with 10 Crescent Lane], they probably could have done well, but they would have had to learn a lot about merchandising and a brand new audience," said Glenda Shasho Jones, president of Shasho Jones Direct Inc., New York. "They're probably being more realistic about what they want to commit to."

Home Depot may start to use its Home Depot Direct catalog as more of a traffic-generating piece for its stores, Ms. Shasho-Jones said.

Ms. Boyle agreed that Home Depot Direct should do OK. However, she thinks its main reason for being will remain as a catalog but, if the firm gets the formula correct, it could use the book to drive store and online traffic with coupons and copy that directs readers to find a wider selection of items within a particular category on the Web site.

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