Going into the holiday 2006 season, it’s not the most optimistic of times. Consumers are weary of the Iraq war, leery of another rise in energy costs, and fearful of a housing bust. Nonetheless, most of the merchants contacted about early fall sales and holiday projections are feeling bullish. Catalog circulations are up, and for the most part, hopes are high.
The Guild, a Madison, WI-based purveyor of artworks and artisan decor and jewelry, is doubling its catalog circulation this holiday season, although president Michael Baum will not provide specific figures. Baum says that online orders have “slowly but steadily increased over the past years, and we expect that trend to continue.”
Kansas City, MO-based food gifts mailer Fiorella’s Jack Stack Barbeque plans to mail about 40% more catalogs this holiday season than it did for holiday 2005. “We’ve developed list models that are working well for us, and we’re going to use them more aggressively this year,” says marketing director Bob Kilgore, who declines to discuss which specific modeling tactics he’s had success with.
Vermont Teddy Bear Co. is bumping up the combined circulation for all brands almost 30%, says spokesperson Sarah Badger. The Shelburne, VT-based gifts merchant attributes part of its optimism to positive sales from its four-year-old PajamaGram division, which Badger says has allowed the company to be a little more aggressive with its mailings this year. The company’s other brands include fresh-flowers merchant Calyx & Corolla.
Not that everyone is planning such large jumps in circulation. “We haven’t seen anything that big, but we’re seeing very steady business gains, with a build-up coming before the season,” says Martin Stein, president of Danbury, CT-based list firm RMI Direct Marketing. If anything, Stein sees his clients doing more testing of more-targeted buyer segments as they gear up for the holiday season.
An early read on fall
Although at press time it was too early to get a solid read on fall sales, most merchant are satisfied with the way the season is trending. At apparel, sporting goods, and home products marketer Orvis Co., early fall/holiday sales are tracking up 20% over last year, and “that’s well over plan,” says John Rogers, director of marketing for the Manchester, VT-based cataloger/retailer. E-commerce sales are up 35% over last year, and every indication is that the trend should hold for the fourth quarter, he says. Circulation is up more than 10% over last year, thanks to strong response to house and prospect files starting back in the fall of 2005, combined with successful conversion strategies to reactivate older Orvis customers.
Based on a strong fall season during which sales increased 10%, Portland, OR-based children’s apparel marketer Hanna Andersson is boosting catalog circulation 15% this holiday season, says director of marketing Alison Polenz. “Our fall season was significantly over our plan based on strong back-to-school sales. We have continued to increase our investment in prospecting this year, which contributes to the increase.”
But the usually optimistic National Retail Federation (NRF) isn’t predicting a blockbuster season. The Washington-based trade organization expects total holiday retail sales to grow 5% over last year’s to $457.4 billion. Though a 5% rise doesn’t sound bad, it’s lower than last year’s 6.1% increase in holiday sales. NRF had actually predicted a 5.6% increase for last year, based on anticipated post-Hurricane Katrina fuel prices — which did not rise as much as expected. Though fuel prices, which rose throughout the first half of the year, began to fall in August, and a predicted retail slowdown during the first half of 2006 did not happen, as of mid-September the NRF was sticking with its 5% prediction, according to spokesperson Scott Krugman.
Columbus, OH-based marketing consultancy Retail Forward is forecasting a 5.5% year-over-year growth in the fourth quarter. Retail Forward also expects online retail sales to surpass $33 billion in the fourth quarter of 2006, compared with $27 billion last holiday season. That would be a year-over-year increase of nearly 23%.
Betting on the Web
The growth opportunity in the Web channel is why multichannel merchants are looking to better promote themselves online. Tom Schaul, owner of Elk Grove Village, IL-based gourmet foods mailer Schaul’s, says he will spend less money on circulation this holiday season and move those funds toward search engine marketing. “We will spend more money on the Website as far as organic [search] rankings and pay per click,” Schaul says. “We’ll measure how that performance is vs. the catalogs per se and see if direct mail is more conducive or if the Web is where we want to put our marketing and advertising dollars.”
Food marketer HoneyBaked Ham Co. of Georgia is also promoting its Website more, through search engines as well as personalized e-mails. Tim Kiss, the Atlanta-based company’s director of one-to-one marketing, says that these small changes should help lift its online conversion rate 6%-7%.
Orvis is also betting on search. “We have added natural-search optimization efforts on top of an already aggressive paid-search program,” says director of marketing Rogers. “We have worked to improve the relevancy and power of e-mails being delivered by segmenting and discreetly messaging our file.”
Vermont Teddy Bear’s e-commerce manager, Tom Funk, says that his company is increasing its search engine advertising substantially compared with holiday 2005 and that the namesake and PajamaGram Websites are also seeing a lot of traffic generated by the company’s search optimization efforts. The company is expecting about 68% of its orders to be placed online this year, Funk adds.
Overall online sales for Richmond, VA-based cataloger/retailer Children’s Wear Digest (CWD) rose 25% last year, says president Jim Klaus, and he expects to see the same increase this year. Year-over-year online fall sales are expected to increase 10%-20%, Klaus adds.
So despite cutting fall circulation 5%-10%, to about 15 million catalogs annually, and reducing prospecting, Klaus expects an increase of at least 5% for fall catalog sales, due to increased search engine and e-mail marketing. “We don’t feel people are responding to prospecting catalogs like they used to, but they are responding to Internet marketing,” he says.
Psyched up for Cyber Monday
Merchants are beginning to understand the phenomenon of Cyber Monday, the online equivalent of Black Friday. The unofficial start of the holiday shopping season, Black Friday occurs the day after Thanksgiving and is one of the busiest retail shopping days of the year.
Cyber Monday occurs the Monday after Thanksgiving, as consumers who spent the weekend researching products offline and online place their orders from their offices, which may have faster connections than their home computers. Some e-commerce professionals refer to all five Mondays between Thanksgiving and Christmas as Cyber Mondays, since Web traffic and sales peak at the beginning of each work week.
Cam Balzer, director of search strategy for Performics, the Chicago-based performance marketing division of DoubleClick, predicts that his clients’ search engine sales for the season’s five Cyber Mondays will grow as much as 53% over last year, generating a “steady” return on investment.
“I wouldn’t anticipate that being the average for all retailers, but more merchants are looking at buying keywords, buying into affiliate marketing, and making other search engine investments,” Balzer says. “And if they see the growth we are predicting, it will help them justify increased spending in online marketing.”
“There is no doubt a phenomenon there,” Orvis’s Rogers says. “We have put promotions in place that we hope anticipate the consumers’ willingness to shop around that period, and we have staffing plans for chat and e-mail to handle the spikes.” Orvis’s Cyber Monday focus extends beyond chat and e-mail to inbound calls and getting orders picked, packed, and shipped. “We strive to get 85% of the orders in the mail stream [the day they're ordered], so anticipating this spike accurately is critical,” Rogers says.
But CWD’s Klaus isn’t concerned with the Monday after Thanksgiving. “It’s a busy day to be on the Internet, but most consumers wait longer to do their actually shopping,” he says. His Website’s busiest sales day during the 2005 holiday season was Tuesday, Dec. 6, rather than the first Cyber Monday, Nov. 28.
“Cyber Monday is all about those eager early-bird shoppers, but we seem to specialize in guaranteed holiday delivery even at the very last minute,” Vermont Teddy Bear’s Funk says. “So [the Monday after Thanksgiving] one of our sites might see a 50% increase in revenue, say, over the previous days. But over the next few weeks, sales climb steadily until they peak about a week before Christmas at about five times the level they were before [the first] Cyber Monday.” Besides, Vermont Teddy Bear’s Badger adds, “none of the Cyber Mondays nor the week before Christmas equals the pace and total order volume we experience at Valentine’s Day and Mother’s Day.”
The right way to woo Web shoppers
Portland, OR-based online solutions provider WebTrends in August released a report that indicates a shift among marketers away from price-based promotions. Instead merchants are favoring relationship marketing initiatives such as e-mail campaigns and search engine marketing (SEM), which allow them to leverage behavior-based insights so that they can target customers with relevant messages that will help generate consumer loyalty.
The 300 merchants surveyed ranked e-mail marketing as the most important demand-generation activity for holiday success, with SEM and search engine optimization (SEO) ranking second and third. The biggest increases in marketing spending for the holidays will be in e-mail marketing (with 52% planning to increase spending), SEM (46%), and SEO (38%); the biggest decreases will be in online banner ads (17%), print ads (16%), and broadcast ads (14%).
What’s more, 23% of respondents said they would not be using price-based promotions to generate online revenue from customers during the holidays, up from 11% last year. Even free shipping has dropped in popularity, from 62% of retailers using it in 2005 to only 45% this holiday season. n Vermont Teddy Bear is increasing search engine advertising for the holiday season.