Internet's Rising Tide Benefits All, Including CatalogsA year ago, the buzz was all about the Internet and holiday 1998 sales. True enough, there was concern about the performance of many of the e-commerce sites, and whether the public would come back this year because of poor service levels. Well, they did return -- and in greater numbers than ever. The guesses as to holiday '99 commerce sales are still coming in, and will probably settle around $8 billion-to-$10 billion. In any case, it's a significant number, and it's all the more amazing when we realize that this medium is only a couple of years old.
Unfortunately, one of the problems will be the treatment by the media, who have to have a winner and a loser in almost every story. I suspect that the majority of the media will declare the winner to be the Internet and the losers to be the catalogs. Why it is so important to have a winner and loser at this stage of the Internet's evolution -- its infancy --is beyond me. It's too early and it's irrelevant. After all, many of the e-commerce players mailed catalogs this holiday season to both drive traffic to their site, and to capture sales from those who want to shop from a paper catalog. In fact, some companies, such as eToys, mailed more than 8 million catalogs.
What Is the Impact for Catalogs?
Like it or not, e-commerce is here to stay and it will impact cataloging: It will be responsible for a dramatic increase in remote shopping, new service levels, improved targeting, new marketing tactics, consolidation and heightened awareness or oversight by governments.
The greatest effect is the increase in remote shopping. The Direct Marketing Association estimates that consumer catalog sales are around $60 billion annually, 37 percent of which occurs during the holiday period. Thus, in just two years, e-commerce sales already make up 40 percent of catalog sales. A growth that everyone will agree is phenomenal. However, when we recently conducted a mini-survey on holiday sales, the respondents reported a 3 percent sales increase on a 2 percent increase in circulation. Therefore, what really happened is that remote shopping increased by 43 percent last year, a number that dwarfs all reported increases by the bricks-and-mortar retailer sector by far. The reason I combine cataloging and e-commerce companies is that the distinguishing activity by the consumer is that they are shopping remotely, which is distinctly different than going to a store. This experience is only going to increase with time and the beneficiaries will be catalogs and e-commerce companies -- the "Rising Tide Raises All Boats theory."
The second impact on catalogs will be the raised bar in customer service. This will be harder for many catalogers to achieve. What are the new services? First, the customer now has a paper trail of their order in the form of the order acknowledgment, which includes costs, expected shipping dates, written confirmation of any gift message and more. Something that, to date, has not been available to consumers. Second, many e-commerce players notify consumers when their order is shipped, including method and anticipated delivery date. This is something that catalogers have in place only for back-orders.
Yet, if one puts themselves in the shoes of a customer, think how much they would appreciate notification of shipping and method. This only enhances the shopping experience. The only way I can see catalogers matching this, since they will still receive a substantial portion of their sales via the telephone, will be to have their customer service reps capture e-mail addresses. This will require companies to reevaluate their standards on talk time as well as their systems.
The third impact of Internet selling on catalogers will be the need to match the improved targeting techniques that the e-commerce companies are employing. Overall, the e-commerce companies' abilities to target prospects are not great. That is primarily caused by the unavailability of good lists. However, once a customer comes to a Web site and starts to shop, many e-commerce companies do a much superior job of extracting every possible dollar from the consumer's wallet. The best example is the amazon.com scenario, of which everyone is probably familiar. That is where when someone has filled out a profile and buys a book, then suggestions are made for other sales based upon this information. This, as with providing better customer service, will require catalogers to capture more information at the time of purchase -- the same demographic data that e-commerce companies capture. This again will require more time by CSRs and will require a significant rethinking of practices and systems. However, if catalogers do not make the necessary changes in both of these circumstances, customer service and targeting of sales, they will end up losing in the end to the e-commerce players.
Therefore, catalogers will have to face up to major investments, and thinking through of their systems and practices over the next 12-to-18 months.