Report shows Internet sales may have peaked for catalog/Internet retailers

For the first time in a decade, Internet sales, as a percentage of total direct sales, took a dip for catalog/Internet retailers in 2007, according to the recently released 2008 State of the Catalog Industry Report, from the Direct Marketing Association.

Internet sales were 36% of total direct sales in 2007, slightly lower than the 38% posted in 2004. Respondents said that 26% of their Internet sales in 2007 were incremental.

However, survey respondents may not count sales driven by their search marketing and social networking activity with their Internet sales, accounting for the drop, said Anna Chernis, senior research manager at the DMA.

When asked 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. 

The report is based on an online survey of catalog, retail and Internet merchants that was conducted during April and May. There were 106 respondents, primarily from catalog-based businesses that operate in more than one channel.

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

The findings indicate a continuing move toward the integration of channels. Fifty percent of respondents saying they have fully integrated marketing functions and between 60% and 70% said they have fully integrated operational functions such as product selection, pricing and fulfillment standards.

In terms of tracking response rates for online buyers and offline buyers separately, 88% of respondents said they did this in 2007, compared to 62% in 2006.

Cross-selling online buyers offline appeared to be a popular multichannel strategy. Fifty-nine percent of respondents said they send direct mail to these customers, 37% use retail promotions and 81% send a catalog.

While only 33% of respondents said they changed distribution among channels for their advertising budgets in 2007, 61% said they would take this action in 2008.

The mean annual house file circulation base was 15.5 million in 2007, up from 5.7 million in 2005. The prospect base dropped from 6.5 million in 2006 to 5.5 million in 2007. “Catalogers are investing more in mailing to their house file versus prospects because they know the return on investment will be better,” Chernis said.

Catalog/Internet retailers are mailing bigger books, with mean number of pages for catalogs going to the house file reaching 104, up from 78 in 2006. Books to prospects are slightly bigger, coming in at 71 pages, compared to 69 in 2006. “Catalogers are mailing less frequently or using other media to deliver their message,” Chernis said, as a result of postage increases, but use bigger books when they do mail,

The average order size per catalog grew to $151 from $123 in 2006, while the cost per book was flat.


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