Retailers Walk Catalogers' Multichannel Path
Traditional bricks-and-mortar retailers are jumping into multichannel with catalogs and transactional Web sites, and the move makes perfect sense. The retail industry is at a place the catalog industry knows well: the tipping point from a focus on one channel to a strategy that encompasses all of them.
A few years ago, catalogers realized it was not "OK" to be a pure-play catalog business. The foray into e-commerce was wrought with trying to find out what would work, how customers would take to the new channel and what role the medium would play in acquisition and retention. Now catalogers are informed on those issues and are expanding the horizon with new technologies and new applications for existing technologies, and standards are being developed to evaluate overall business performance.
And not a moment too soon, it's the retailer's turn.
A slow, powerful shift. When catalogers started e-commerce sites there was almost a fear that if they weren't in the space, the business would fail. Online shopping was expected to take over the world, and some small and large catalogers made immediate shifts to incorporate online marketing so that the business wouldn't be lost. For most that meant get a Web site, do some e-mail and get into the search market.
Maybe the catalogers didn't have as much to worry about as their perhaps less-fearful retail brethren.
A recent Nielsen//NetRatings survey found that 74 percent of Americans are online and 68 percent of the connectivity is broadband, up from 33 percent of Americans connected via broadband in 2003. Those broadband users spend an average of $158 per online transaction versus $118 for narrowband users. Any guess who's paying the price?
A separate study by Nielsen//NetRatings; Goldman, Sachs; and Harris Interactive (December 2005) indicated that in 2002, 78 percent of consumer spending was done at retail, 16 percent online and 6 percent by catalogs. By 2005 online sales had jumped to 27 percent of all consumer spending while catalogs had stayed relatively flat at 5 percent, leaving retail with 68 percent overall - still the lion's share, but losing ground fast. It wasn't the cataloger that was getting pinched the hardest by e-commerce; the retailers were and still are.
Retailers have the tools. But retailers aren't fighting a lost cause. They have almost everything needed for multichannel marketing. Like catalogers, retailers get more customers every day. Those that have the ability are capturing loads of information about customers and their transactions through point-of-sale systems built around telephone number capture, membership and rewards cards, proprietary credit cards, etc. Like a cataloger, those retailers that capture the data in a relational or cube-based database environment with the intent to use it for segmentation already have the fundamental piece in place: segmentable, marketable customer data.
With accurate data capture and manipulation come the ability to slice and dice the customer file and target an initial direct-to-consumer offering: product mix, price points, creative, messaging, positioning, customer acquisition opportunities and so on. An existing database also provides the basis from which to build the direct business (customers who already have bought from the brand and presumably had a good experience) and overlay other channel-specific transactional data to make targeting more effective.
And perhaps more than anyone, retailers understand product. They understand the importance of buying right, managing inventory, maximizing margins and building an assortment that is appealing to the customer and profitable to the business. Product is among the most important elements to any multichannel business. A catalog is, at its base, an assortment of products held together by a common thread - the brand - and sustained by providing long-term positive experiences to customers.
Through analysis, planning and a little luck, the company builds a profitable product mix based on the tastes and behaviors of the customer. Retailers know this concept, and applying it is an early step to multichannel success. A lesson that most channel-crossing retailers will learn, though, is that some categories or products in the retail merchandise mix may not sell direct, and vice versa. Customer segmentation and merchandise analysis help address these issues.
Building on a brand. While retailers generally flourish at building their brands, many catalogers still fail to see the importance of a brand identity, relying more on data analysis. Brand in a multichannel environment is more than a logo. It's the company's underlying personality. By incorporating branding elements throughout a catalog, Web site or e-mail campaigns, the retailer can build on the in-store experience, ultimately duplicating it in the direct channel. This cross-channel consistency builds credibility, enhances retention and creates more profitable customers.
The catalog and multichannel experience are similar in nature to that of retail. The catalog becomes the sales person. And the way it's designed and paginated, positioned with copy and photography, assorted in terms of merchandise categories and price point selection, and when and how it's mailed all go into the customer experience. It continues through the call center, the Web site and fulfillment. The customer experience and the customer's satisfaction will help sustain success, and retailers know this well.