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How Will the Internet Affect Catalogers?

The most burning issue at the recent Annual Catalog Conference in Chicago was the effect that the Internet will have on catalog sales. Many catalogers are afraid of losing business to the Internet, and some even predict the demise of the printed catalog. Based on my own observations, however, catalogers have little to fear, and much to gain, from the Internet.

The catalog industry in the United States, having enjoyed sustained growth throughout most of the 1990s, is expected to continue growing at a faster pace than retail sales for the next five years. While this growth has not been, and is not expected to be, at the extremely high levels enjoyed in the 1980s, catalog industry growth will average in the 6 percent range annually over the next five years. This is roughly double that expected for retail sales.

The Internet industry, experiencing exponential growth is of course expected to continue this trend well into the next century. For the next few years, sales are expected to triple and quadruple each year. Clearly some portion of this growth will come at the expense of catalog sales. However, the bulk of customers converted to Internet sales will almost certainly come not from catalog but from retail, if for no other reason than because there are many more retail buyers than catalog buyers.

Huge opportunity for catalogers. The Internet, however, does present a huge opportunity for catalogers, and will profoundly affect how catalog companies do business. Everything from order taking to customer service to customer sales promotion can be made simpler, less expensive and more targeted by effectively using Web-based technology. And the success with which the Internet has been converting retail shoppers will afford catalogers a huge opportunity to increase their sales to a segment of the population that has been resistant to the catalog medium.

The catalog industry is uniquely positioned to take advantage of the Internet, since on selling is essentially based on a catalog model. Overall, when the possible benefits of the Internet are factored in, the next five years could well be among the strongest for those catalog companies who actively pursue the sales opportunities of the Internet.

Here are some ways in which catalogers are already taking advantage of the many opportunities afforded by the Internet:

* Online order taking. Imagine the cost savings possible if consumers are able to place their catalog orders over the Internet. In effect, by encouraging consumers to place their orders this way, the customer is doing our order entry for us. In addition, the catalog saves the cost of the telephone call.

In order for this option to work, the Web site has to allow the consumer to enter the key code from the catalog they receive, and the order processing software must be able to allocate the sale to the catalog mailing and list segment involved. Make sure you plan for this as you enable your site for e-commerce.

* Online customer service. The most immediate benefit to catalogers and consumers can often be from instantaneous answers to their questions and problems. Online queries are perfect for this type of transaction and can often solve the problem in a more pleasing and efficient manner for the consumer. Many questions can be answered by the consumer merely entering their order number and checking order status without the intervention of a telephone representative. This can result in significant cost savings to the catalog company from the more efficient allocation of staff, and it can actually improve customer service. What could be better?

* Promoting to your customers. The Internet also can improve the targeting and efficiency of your customer communications. If your company saves your customers' e-mail addresses, you can send out an Internet promotion announcing the coming arrival of a catalog, and even highlighting new items or items the consumer may be particularly interested in. This will improve the response to the catalog, and it will also make sure that you are communicating with your customers. And the cost is minimal compared with the cost of mailing an announcement.

* Growing your business. The most profound impact of the Internet, for those catalogers who are prepared for it, will be attracting new customers to your business. In many cases, these will be consumers who have not been responsive to the catalog medium. Think of the possibilities if our industry were to convert only an additional 5 percent of current retail, noncatalog shoppers? The impact on sales would be phenomenal.

Of course, the road to effective Internet sales is not as easy, or as inexpensive, as some people believe. The most important thing to remember is that we need to do the same things on the Web that we do in our catalog — have the right merchandise, at the right price, displayed in the most effective way. We need to have a wide product assortment, keep the line fresh, and have a good in-stock position. And we need to provide our customers with the same pleasant, satisfying and convenient shopping experience we've been providing in our catalogs.

Overall U.S. economic trends continue positive, with consumer confidence, new and existing home sales and household income near record highs and unemployment and inflation low. Assuming no surprises from Washington and Wall Street, a healthy Fall and Holiday season is expected for catalogers. If you're ready with a well-designed Web site, there's no better time to experience the huge sales and profit growth that the Internet is poised to provide. Go for it!

Steve Tamke is vice president of list brokerage at Mokrynski & Associates Inc., Hackensack, NJ.

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