Where did Internet sales go?

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Where did Internet sales go?
Where did Internet sales go?

For the first time in a decade, catalog/Internet retailers are see­ing a slide in Internet sales as a percentage of total direct sales, according to the Direct Marketing Association's 2008 State of the Cata­log Industry report. It found that 2007 Internet sales were 36% of that year's total direct sales, lower than the 38% posted in 2004.

“I've been thinking about it all morning,” said Kevin Hillstrom, president of multichannel retail consultancy MineThatData. His opinion is that when the US Postal Service increased postage last year by as much as 40% for catalogers, some responded by not mailing to Internet custom­ers. “Apure Internet customer is generally not as responsive to catalogs as a multichannel or retail customer,” Hillstrom explained, so some sales were lost.

He believes, though, that the decline should be brief. “As cata­logers get smarter about how to mail to all customers, that percent­age should increase,” he said.

According to Anna Chernis, senior research manager at the DMA, survey respondents may not have counted sales driven by search marketing and social networking activity along with Internet sales, causing the drop.

When asked in the survey what channels they used to generate orders, 68% of respondents indi­cated they used search marketing and 16% used social marketing. “That so many are using social marketing is really interesting for catalogers,” Chernis said.

In terms of overall sales, 68% of catalog/Internet retailers cited an increase in 2007, vs. 69% in 2006. The mean increase was 17%. Catalogs generated 51% of total revenue and Web sites 31%.

“If catalogers' Web site sales are down, they're not investing in prospecting enough,” said Monica Smith, president and CEO at Marketsmith Inc., a direct and multichannel marketing firm. Search engine marketing and e-mail aren't enough to create a compelling online experience, she said, pointing out that “you've got to be in the viral game and you have to be where you're constituents are.” For younger users, this means engaging in blogs, online games and social networking. “You need to be in those places” she continued.

A catalog-based company with a strong online presence is REI, Smith said. “They do a good job connecting with buyers.”

The decline could also reflect the fact that catalog businesses' online sales have topped out. “I've always felt that at some point we would reach a critical mass where some people would prefer to pick up the phone and some to shop online,” said Lois Boyle, president and chief creative officer of catalog services company J. Schmid & Assoc. That point hasn't been reached yet because the online model is so new, she explained, but it could be that “we're getting closer to [it].”

Boyle also believes that, because of the economic crunch, some catalogers are pull­ing away from search engine optimization, affiliate marketing and other online pro­grams. “Very few traditional catalogers have really studied the back end of these programs” to gain an understanding of their profitability, he said. The result is, however, a loss of any new customers these programs may have been bringing in.

Some disagree with the DMA's numbers. “The percentage of online sales continues to increase, according to all the people that I speak to,” said Glenda Shasho-Jones, president of catalog consultancy Shasho-Jones Direct Inc. She agrees with the DMA's assessment that catalogers may not be tracking all of their online sales. “A lot of catalogers are not doing a sophisti­cated job of matching back [sales driven by search and e-mail],” she said.

Shasho-Jones doesn't think retailers have reached the ceiling in terms of online sales. “As all the young techies come into their buying power, you would think online sales would continue to increase. Where the ceiling is, we don't know,” she said.

The State of the Catalog Industry report is an online survey of catalog, retail and Internet merchants conducted during April and May. There were 106 respondents, primarily from catalog-based businesses operating in more than one channel.

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