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Breeze Shifts for Gadget Catalogs

In yet another sign that the market is floundering for high-tech gadgets, a group of investors that agreed to acquire Brookstone has lowered what it's willing to pay for the company.

OSIM International, a Singapore-based healthy lifestyle products marketer, and its partners now will pay $445 million for Brookstone instead of the $456 million they offered in April. Financing for the transaction also will be provided subject to certain conditions.

Sales at Brookstone and at that other gizmo emporium Sharper Image have been in the doldrums of late. For the eight weeks ended June 25, Brookstone reported that total sales fell 10.8 percent compared with last year. Sharper Image has had several months of poor sales results, including a 9 percent decrease in June.

Not too long ago these brands were darlings of direct marketing, and with good reason. Coming off an increase in sales volume in 2002, each followed with another strong performance in 2003.

Sharper Image's change in fortune started soon after it began receiving bad press about its Ionic Breeze air purifier. Consumer Reports magazine has said that the Ionic Breeze fails to significantly clean air and also may expose users to potentially harmful ozone levels. Brookstone, which offers its own ionic air purifier, may be losing sales merely by association.

To try to rectify their situations, Sharper Image has recommitted itself to offering unique and proprietary products while Brookstone is placing its bets on international expansion and possibly on being able to offer a greater selection of exclusive products from OSIM such as massage chairs.

“There hasn't been the same focus on buying from unique sources or developing proprietary product” that there once was in the catalog industry, said Lilliane LeBel, vice president of Millard Group's research division, which follows direct marketing companies and conducts surveys with hundreds of thousands of consumers.

According to the division's online surveys of consumers, satisfaction levels toward the unique products offered by catalogers and online merchants have decreased from 48 percent in December 2002/January 2003 to 32 percent in May 2005.

This isn't good news, because merchandise — not convenience — is the No. 1 sales driver for consumers when it comes to catalogs, according to Millard.

However, when DMers add proprietary products, the results are often worth it.

“Catalogers have found when they put proprietary product in their catalog, they differentiate themselves and people become more loyal because they can't get the product elsewhere,” said catalog consultant Glenda Shasho Jones, president of Shasho Jones Direct.

Sharper Image sees proprietary product as a strategic objective and intends to continue increasing its proprietary product offerings, the company said in its 2004 annual report. The proportion of its total revenue attributable to proprietary product was 73 percent in fiscal 2003 and 74 percent in fiscal 2004.

The fruits of its efforts are already apparent. The 96-page New Year 2004 Sharper Image catalog featured only 26 items that were tagged as “invented here” while the 88-page August 2005 issue has 36 proprietary items.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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