Partnerships Win on the Web

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This year, $100 billion in sales could be left on the table by the catalog industry.


The catalog industry's current $100 billion or so in annual sales is only 5 percent of retail sales. As e-commerce offers consumers greater convenience, broader selection and easier access to products, some of the remaining 95 percent will shift to the Web. We can quibble over a few billion dollars, but the bigger picture is this: Whether it is 5 percent or 25 percent or even 0.5 percent, it is a huge number, and someone will capture it.


The catalog industry is uniquely positioned to win its fair share. But, before you start celebrating, let's consider what is really necessary to win on the Web.


Catalogers have a great "push" strategy (rent lists, mail books, get orders, get revenue, mail more books) that has worked for years. Secure in their if-it-ain't-broke-don't-fix-it world, they probably will depend on this until the end of time. But is time running out?


As good as it is, the push strategy alone is not enough anymore. By definition, the strategy is limited to product offers pushed to consumers by the merchant. But what about a strategy where consumers "pull" the merchant's product to themselves? If catalogers do not have a pull strategy in their plans these days, someone else soon will pull their customers away. It's a new day.


To borrow a phrase from Bill Gates, we are now conducting "business at the speed of thought." While it took Wal-Mart 15 years to leave Kmart in the dust, 15 years in the online world is equivalent to several centuries in Sam Walton time, and the 15 years Sam enjoyed is more likely measured in months for catalogers planning their online strategy. Consider this: In less than five years, Amazon has amassed a database of 25 million online shoppers. Meanwhile, decades-old, well-trusted brands within the catalog industry have only a fraction of that. Should they be concerned? You bet.


Amazon's pull strategy is simple: Give consumers everything they want at one online location with one easy-to-use navigational system, then spend tons of dough coaxing remote shoppers (that sounds a lot like catalog customers, doesn't it?) to try it out. OK, it has been an expensive proposition. While some argue that Amazon's strategy may never make money and could even prove fatal, just about everyone agrees it is at least risky. But should catalogers bet their businesses that if they just wait it out, Amazon will go away? Talk about risky. In case you have not noticed, they are doing a pretty good job. They are even distributing print catalogs of their own. Push. Pull. Hmmm.


Catalogers that are not invited to join them better be prepared to fight them unless they are satisfied to live off the crumbs that fall through the mesh of Amazon's virtual shopping cart. Amazon has become merchant of record in certain categories and has aligned itself with presumed category killers for others. In all cases, Amazon is committed to keeping the consumer within its own virtual walls throughout the shopping and buying process. The result is something akin to Wal-Mart online. Amazon is aimed at becoming the remote shopping king and capturing a mega share of online (and offline) wallet, a share that will come at the expense of the catalog industry.


So how do individual catalogers compete? Acting as individuals, they probably cannot. But if you contemplate the strengths of Amazon, catalogers as an industry are better in just about every area - more products, more unique products, truly authoritative selection and exceptional customer service. The catalog industry's push strategy is superior - catalogers make money while attracting new buyers. Best of all, the extraordinary overhead that threatens Amazon is a sunk cost to the catalogers, and the Web is a more cost-effective way of taking orders. The apparent missing link is the pull strategy. Standing alone, catalogers cannot compete, but through collaborative partnerships on the Web, catalogers can dominate.


Rather than one company (Amazon) attempting to be the expert in all categories, consider the implications of a collaboration of hundreds of companies representing multiple experts in each category (the catalog industry):


• Catalogers already have the inventory, warehousing, personnel and back-end infrastructure to support an online business.


• Order entry is less expensive on the Web (vs. a toll-free number), making it financially desirable to transition volume to an online environment.


• Merchandising on the Web is much more timely, allowing catalogers to better promote special offers and control inventory.


• E-mail marketing is less expensive than traditional print and postage.


But:


• Catalogers are traditionally limited to push marketing.


• Individual catalogers' Web sites are excellent for serving existing customers but do little to attract new customers.


• The Web remains a vast, unknown space that encourages consumers to depend on portals, search engines and destination sites to find content of interest.


Amazon has set the standard as a content "aggregation" site, teaching millions of consumers the value of a consistent product and store navigational system.


Aggregation sites that "link off" help customers find catalogers, but the customer would have to learn to navigate hundreds of individual cataloger sites to realize the breadth of product mix and authoritative selection offered by Amazon.


The solution? Imagine an alliance where catalogers pool their content to create an Amazon-esque online consumer proposition. Envision consumers shopping across hundreds of catalogs with one sign-in, one set of privacy preferences, one password to remember, one date reminder, one gift registry, one shopping cart and one easy-to-use navigational process.


By aggregating its content this way, the catalog industry could create an Amazon-like consumer experience, winning millions of new customers and maximizing wallet share among existing customers. To catalogers worried about losing a customer to another cataloger, that is certainly possible. If they are too concerned, they always could go it alone. That is probably the solution Amazon would recommend.


• Lee Lorenzen is president/CEO of Altura International and CatalogCity.com, Pacific Grove, CA. His e-mail address is leel@catalogcity.com.
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