Report: Industry shows strength, agility

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The multichannel retail industry not only showed strength last year but also displayed its willingness to try new strategies and adapt when the tried and true no longer works.

The Direct Marketing Association's 14th annual Multichannel Marketing in the Catalog Industry report was released last week, and the news was good. Overall sales increases in 2005 were reported by 74 percent of respondents, 66 percent said they raised catalog circulation and 41 percent said they expanded catalog page counts.

"The year was very strong," DMA senior research manager Anna Chernis said. Contrary to reports from several years ago that the Internet would be bad for catalogers, "it looks like people are using catalogs and the Internet together."

The 132-page report was compiled via an e-mail survey of 3,800 individuals from Internet, retail, wholesale or catalog firms from June to September 2006. The companies' annual sales ranged from less than $1 million to more than $5 billion. Catalogs were reported as the biggest sales channel by 74 percent of respondents.

Results for Internet sales were mixed. For the first time, 100 percent of respondents said they used their Web site as a sales channel. Yet Internet sales as a percentage of direct sales grew only 1 percentage point to 39 percent between 2004 and 2005. By 2010, respondents predict, 49 percent of sales will come from catalogs and 51 percent from the Internet.

Ms. Chernis offered a few reasons why the Internet sales percentage grew so little last year. First, because consumers go to the Internet to research products and then place their order from the catalog, the sale is being attributed to the catalog channel and not the online channel. Secondly, the sample of companies in the survey skews toward catalogers, and many "are not using the Internet fully yet as a sales channel," she said.

Also for the first time, e-mail promotions were the most widely used marketing tactic, cited by 89 percent of respondents. E-mail promotions displaced discounts/special sales, which topped 2004's list but drew only 57 percent for 2005. Sales sections on Web sites came in second with 66 percent, followed by free shipping and handling at 63 percent.

"It's more cost-effective to do an e-mail promotion than to give someone 20 percent to 30 percent off," Ms. Chernis said.

As for online marketing strategies in general, 83 percent reported using search engine advertising in 2005 compared with 65 percent in 2004. For organic search engine optimization, 74 percent had come onboard in 2005, up from 65 percent. More marketers used Web display ads and rich media as well, at 40 percent in 2005 versus 29 percent in 2004.

Several strategies appear to have fallen out of favor. Pay-per-performance marketing was used by 41 percent of respondents in 2004 but only 31 percent in 2005. The use of shopping aggregators declined from 25 percent in 2004 to 14 percent last year.

The telephone still has its place among multichannel merchants, as it was the method of choice for contacting merchants when it comes to placing an order (57 percent), order inquiries (71 percent) and complaints (75 percent). However, 55 percent of catalog requests take place online.

When it comes to cross-channel integration, respondents reported a high level of consistency for many of their operations. A full 91 percent conduct shipping and handling the same across channels, 89 percent do the same for fulfillment standards, 86 percent for inventory operations and 83 percent for pricing. But product selection and customer profiles both came in at 63 percent.

Multichannel retailers appear to be tracking ROI across channels more aggressively. In 2004, 23 percent said they tracked ROI across multiple channels while 31 percent said the same in 2005.

Catalogers appear to have responded to industry talk about too much sameness in the merchandise mix. In previous years about one-third of all products were new, but respondents said that 49 percent of their merchandise in 2005 paper catalogs were new products.

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