According to the National Retail Federation (NRF), 2006 holiday sales were up 4.4% from 2005. Whether that’s good news or bad depends on what you’d been expecting.
The NRF had projected a 5% rise in holiday sales, so for many of its members the slower growth was no doubt disappointing — especially as 2005′s holiday sales had increased 6.1% over the prior year’s.
But according to the Direct Marketing Association, online holiday sales rose 11.3% from the previous year, while catalog sales increased 2.2%. Among the merchants surveyed, 60% told the DMA that their combined catalog and Web sales for the holiday season were up from the previous year. Sounds good — until you learn that 64% of respondents in 2005 had posted a year-over-year rise in direct holiday sales.
Then again, fewer than 13% of the marketers surveyed during holiday 2006 reported a year-over-year decline in catalog and Web sales for the season, compared with nearly 24% of those surveyed in 2005.
So to say that holiday 2006 was a “good” one or a “bad” one for consumer merchants is simplistic to the point of irrelevance. And when you factor in that companies that suffered a disappointing season are less likely to make their numbers public than are those that enjoyed gangbuster growth, it means you need to proceed with caution in trying to divine trends from anecdotal data.
Being overly cautious, however, can be as perilous as throwing all caution to the wind. Which is why we’re going to proceed with several generalizations from the holiday season.
Online prospecting paid off.
Direct Marketing Services Inc. (DMSI), the Chicago-based parent of gifts title Charles Keath, decor catalog HomeVisions, and general merchant Montgomery Ward, made search engine optimization, paid search, and e-mail marketing the focus of its marketing plan this past holiday season, says president David Milgrom.
With e-mail, though, the company did not simply send more messages during the fourth quarter; it made lead generation a priority and had tested both offers and creative throughout the year to maximize its efforts. At the same time, it reduced its spending on shopping portals and comparison engines.
To help drive traffic to the core Montgomery Ward Website, www.Wards.com, and companion site www.Wardkids.com, the company ran a contest through mid-October to Dec. 1 in which it invited shoppers to submit their favorite Montgomery Ward memories in exchange for the chance to win a gift card. These strategies contributed to a more than 25% leap in online holiday sales for Montgomery Ward. DMSI also saw an increase in traffic for its HomeVisions brand from its design blog, DesignTalk, which launched in early 2006.
Jewelry and decor merchant Ross-Simons won’t provide holiday sales figures other than to say that they were “right on plan,” according to vice president of marketing Larry Davis, with a single-digit rise in jewelry sales. Also, “we saw a greater shift to the Web, more than anticipated.”
Contributing to that shift was the fact that while the Cranston, RI-based company kept catalog circulation flat, “we increased prospecting on the Internet considerably and our search marketing,” Davis says. Its paid search was strong thanks to improved ads and a focus on metrics and balancing position with cost.
Geerlings & Wade reduced its catalog prospecting by about 30%, in order to shift more money to paid search marketing and search engine optimization, says Jake Hall, director of consumer marketing for the Canton, MA-based wine merchant. The company’s overall holiday sales were up 14% from the previous year, with Web sales up about 40%. About 35% of sales came via the Web, Hall says.
Bucking the trend, however, was Fairfield, OH-based Carson Wrapped Hershey’s Chocolates. The marketer of chocolates in customized wrappers and other personalized food gifts saw its holiday sales rise more than 55% from the previous year’s. Yet during the holiday months the company’s spending on paid search was nearly half what it had been earlier in the year.
This wasn’t a conscientious decision on Carson’s part, however: The marketer had fewer clicks on keywords it had purchased to pick up customers searching for wedding favors and birth announcements, so its pay-per-click expenses were reduced.
If in doubt, add more holiday product.
So how did Carson manage such substantial holiday growth, especially given that it kept catalog circulation flat at 50,000? It added more items at the $7.95 and under price points, such as a $3.95 St. Nick Pail of chocolate coins, says Scott Frederick, president of business operations.
Along the same lines, Montgomery Ward added more holiday decor to its merchandise mix, Milgrom says, as well as more electronics, jewelry, home items, and toys.
To attract the attention of overwhelmed shoppers, J.C. Penney Co. ran its Redbox Gifts for a second holiday season. The program offered 30 items ranging in price from $9.99 (iPod ear buds adorned with crystals) to $379.99 (a Midway Classic Arcade game). Penney spokesperson Tim Lyons could not provide numbers for the program, but he says the Redbox Gifts promotion was enhanced this year to be truly multichannel. It was promoted on a subsite (www.JCPgifts.com), in the print catalogs with a Redbox Gifts logo, and in stores with displays in high-traffic areas.
Overall holiday sales for Plano, TX-based Penney rose more than 3%, to $5.27 billion, despite a 1% dip in combined catalog and Web sales. Internet sales rose 15%, but that wasn’t enough to make up for weak sales of home goods, which make up a sizable portion of its catalog sales.
PajamaGram, one of the brands owned by Shelburne, VT-based gifts merchant Vermont Teddy Bear Co., added children’s pajamas to its product line in time for the holidays, as well as expanded its selection of men’s pajamas, says spokesperson Meg Terrien. Offerings included pajamas and bath products with a holiday theme. The kid’s pajamas were a big hit, with most styles selling out before the last week of the advertising campaign.
In fact, Vermont Teddy Bear’s strongest growth came from PajamaGram, which saw 43% year-over-year growth in sales for the holiday quarter. This was mostly due to a 56% rise in catalog circulation and a “significant” increase in advertising, Terrien says.
Promotions work, but…
After an abundance of promotions such as free shipping bit into merchants’ net income last year, many marketers vowed to cut back on such offers this year. But the fact is, such offers can work.
Geerlings & Wade actually offered more promotions this past holiday, including “early bird” discounts at the start of the season. The early-bird promos didn’t seem to help all that much: “We got off to a very slow start,” Hall says.
Late-season, limited-time offers, such as free shipping for one day only, were more successful, however. So while Geerlings & Wade’s “traditional holiday catalogs were about 9% below plan, our last-minute offer was about 25% above plan.”
Madison, WI-based The Guild, whose Artful Home catalog sells artisanal decor and gifts, offered free upgrades to air delivery for late orders, says president Michael Baum, “rather than free shipping as such, focusing on assuring people they could still order and get their gifts on time.” Holiday sales for The Guild rose about 45%.
One could argue that L.L. Bean is proof of the effectiveness of promotions. Last year it offered free shipping throughout the holiday season and enjoyed record sales. This year the Freeport, ME-based mailer didn’t, and not only did Bean not match last year’s numbers, but it also missed its sales goals.
The lack of a shipping promotion wasn’t the only reason, though, says Rich Donaldson, spokesperson for the apparel, home goods, and outdoor gear merchant. “We fell a few points shy of target due in large part to unseasonably warm weather in the East.” Bean did add a record number of first-time buyers to its customer file, however. And thanks to strong gift-card sales, “if the weather cooperates that could deliver some end-of-season redemption sales,” he says.
Potpourri Group did not offer free shipping this year — nor did it last year, says president Jack Rosenfeld. And apparently the Chelmsford, MA-based mailer didn’t need to: Holiday sales among the company’s 12 gifts, toys, and crafts titles rose about 10% on a single-digit circulation increase. Potpourri’s catalogs include Young Explorers, The Pyramid Collection, and Whatever Works.
“In general, we do not promote,” Rosenfeld says. “I think companies have been too promotional, and it is hurting their bottom line.”
Print still packs a punch.
The migration of sales from print catalogs to the Web continued this holiday season. But even companies such as Fiorella’s Jack Stack Barbecue, which does half of its sales via the Web, profited from mailing print catalogs. This was only the third year that the Kansas City, MO-based restaurant/food merchant mailed a holiday catalog, says general manager Wiley Fisher, and it increased circulation 20%, to 682,000, including 200,000 prospects. It also added a late-season remail that “drove a lot of sales that carried over from Christmas and into January,” Fisher says. All told, year-over-year holiday sales for Fiorella’s increased 27%.
Allen Abbott, executive vice president/chief operating officer of Paul Fredrick MenStyle, attributes much of his company’s 20% rise in year-over-year holiday sales to its print catalogs — even though the Fleetwood, PA-based menswear merchant increased circulation just 3%.
“I’d have to say I’m really proud of our catalog productivity,” Abbott says. “To get those kinds of numbers, that kind of gain, means that our customers responded to our assortment.”
— Additional reporting by Mark Del Franco, Tim Parry, and Jim Tierney
|Company||Holiday sales vs. last year||Notes|
|Carson Wrapped Hershey’s Chocolate (food)||sales up 55%||paid-search costs were down almost 50%|
|Charming Shoppes (women’s apparel, food)||direct sales down 6%, to $121.6 million; total sales up 3%, to $654.4 million||for nine weeks ended Dec. 30; direct sales are for Crosstown Traders brands, including Bedford Fair, Figi’s, and Old Pueblo Traders|
|Fairytale Brownies (food)||sales up 12% on a 20% rise in catalog circulation||for October through December|
|Fiorella’s Jack Stack Barbecue (food)||sales up 27% on 20% rise in catalog circulation||1.7% response from 200,000 prospects|
|Geerlings & Wade (wine)||sales up 14%||Web sales up about 40%|
|The Guild (artisan gifts and decor)||sales up roughly 45% on more than 100% rise in catalog circulation||increased spending on paid search fivefold|
|J.C. Penney Co. (general merch)||direct sales down 1%, to $701 million; total sales up 3%, to $5.27 billion||for nine weeks ended Dec. 30|
|J. Crew Group (apparel)||direct sales up 22%, to $81.2 million; total sales up 19%, to $291.1 million||for two months ended Dec. 30|
|Jos. A. Bank Clothiers (men’s apparel)||direct sales up 20%; total sales up 12%, to $102.1 million||for December|
|PajamaGram (sleepwear)||sales up 43% on 56% rise in catalog circulation||for the holiday quarter|
|Paul Fredrick MenStyle (men’s apparel)||sales up 20% on 3% rise in catalog circulation||exceeded plan by 15%|
|Potpourri Group (gifts, toys, crafts)||sales up 10% on single-digit rise in catalog circulation||12 titles include Northstyle, Stitchery, and Young Explorers|
|Restoration Hardware (furnishings, decor)||direct sales up 51%; total sales up 22%, to $173.2 million||for nine weeks ended Dec. 30|
|Sharper Image Corp. (electronic gifts)||direct sales down 42%, to $9.8 million; total sales down 22%, to $117.7 million||for December|
|Tiffany & Co. (jewelry)||direct sales up 10%, to $69.7 million; total sales up 15%, to $818.1 million||for two months ended Dec. 31|
|Urban Outfitters (apparel, decor)||direct sales up 21%; total sales up 13%, to $278 million||for two months ended Dec. 31; includes Anthropologie and Free People|
|Victoria’s Secret Direct (women’s apparel)||sales up 10%||for December: slightly below goal|
|Williams-Sonoma (decor, cookware)||direct sales up 4%, to $323.7 million; total sales up 5%, to $900.4 million||for eight weeks ended Dec. 25; includes Pottery Barn and West Elm; year-over-year comparison excludes last year’s sales from now-defunct Hold Everything|