Once the holiday season has ended and the receipts have been tallied, the big question is, Was it good for you too?
As of mid-January, the National Retail Federation was standing by its earlier prediction that consumer holiday sales for 2003 would be up 5.7% from 2002. But given that holiday 2002 was, according to most analysts, the weakest in roughly three decades, that increase is less impressive than it might have originally seemed.
And not all marketers were buoyed by the rising tide of an apparent economic recovery. The factors separating the winners from the losers vary, and some are as ethereal as the tinsel fluttering from a discarded Christmas tree.
The right stuff
One trend was apparent: Holiday 2003 was “all about new and unique product,” says Franz Weiglein, president of New York-based Bloomingdale’s Direct. “Styles that were either exclusive to Bloomingdale’s or with limited distribution did exceptionally well for us.” Overall, holiday sales at the apparel and home goods cataloger were up in the high single digits from last year per plan, with an especially strong December.
Private-label cashmere sweaters, colorful Italian leather gloves, and sleep/loungewear styles were Bloomingdale’s Direct’s strongest-selling apparel items, just as private-label tabletop items performed best among its home products. Bloomingdale’s also increased its percentage of new vs. repeat items “significantly” in 2003 and will increase it another 20% this year, Weiglein says.
J. Marco, a $17 million cataloger of women’s apparel and jewelry, credits some of its 30% rise in holiday sales to its selection of unique products. Most of the company’s merchandise is designed inhouse or modified by staff designers, says president Cory Smith. “Our inhouse design department uses slight nuances in fabric design, textures, and patterns to produce garments that have a wide appeal but stand apart” from what other retailers offer.
Two cataloger/retailers that have made offering proprietary products a priority excelled this past season. Nashua, NH-based Brookstone, which sells high-tech gadgets and tools, reported a nearly 30% jump in direct sales and a total revenue boost of 19% compared with holiday 2002, thanks largely to its exclusive products.
At San Francisco-based competitor Sharper Image Corp., catalog sales rose 20% on a 15% increase in circulation, while Internet sales increased 36% and retail revenue rose 24%. Sharper Image president/chief operating officer Tracy Wan also attributes much of the increase to proprietary merchandise, such as its Ionic Breeze air purifiers. About 75% of Sharper Image’s revenue comes from its own products.
At the same time, a lack of unique merchandise contributed to a drop in sales at the Swiss Colony food catalog, says John Baumann, president of the multititle mailer of the same name. The company’s lone food catalog, Swiss Colony suffered a 5% decline in holiday sales on flat circulation. Although the Monroe, WI-based mailer’s six home decor, gifts, and apparel catalogs, including Seventh Avenue, Country Door, and Midnight Velvet, performed well enough to put the company up 5% overall for holiday sales, Swiss Colony on Jan. 6 announced that it would close a call center and a production facility servicing the namesake catalog, laying off 69 employees.
Baumann blames Swiss Colony’s shortfall on increased competition from niche food mailers: “We need to reach new prospects and develop new types of food gifts in keeping with today’s tastes.” Swiss Colony hopes to develop proprietary pastry and candy products for next holiday. “There is a lot of clutter in the marketplace,” he notes. “We have to design products to break through that clutter.”
In addition to unique products, consumers also seemed to be happy to spend their money on upscale and luxury items.
Holiday sales at Madison, WI-based Guild.com, which specializes in high-ticket glassworks, ceramics, and fine art, enjoyed a 25% jump in holiday sales — despite a 12% decline in circulation, says Bridgett Tubb, director of direct marketing. Tubb says that improved list selection and modeling enabled Guild.com to mail fewer books.
Another high-end direct marketer of gifts, New York-based Vivre, slashed its holiday circulation 26%, to 460,000 books. But sales nonetheless increased 20%, says founder/CEO Eva Jeanbart-Lorenzotti. Typical Vivre products include a set of two Christofle Champaign flutes for $190, suede Ferragamo boots for $750, and a $200 cigar cutter.
More-affordable luxuries sold well too. Sharper Image’s best-sellers, for instance, included its $49.95 Automatic Eyeglass Cleaner. And the “casual luxe” that owner John Clark says is the hallmark of men’s apparel catalog Clark’s Register resonated with shoppers. The San Francisco-based mailer had suspended its catalog in 2002 following the dissolution of a partnership, Clark says, but it reentered the mail in spring 2003. Its 2003 fall/holiday sales met plan and were more than 20% ahead of sales for fall/holiday 2001.
Swell season for corporate sales
Like luxury, corporate giving appeared to have made a comeback — good news for catalogers of promotional products and gifts that have suffered through two lackluster years.
New York-based Epromos Promotional Products, for one, enjoyed a 48% jump in December sales. That’s on top of a 59% increase in November sales, says president/CEO Jason Robbins.
“Last year many of our clients were holding back some,” Robbins says. In the wake of 9/11, for instance, some companies opted to give donations to victim-relief funds rather than spend on gifts such as desk clocks and fruit baskets. “This year, though, businesses are realizing that even in a down market they still need to give at least something,” he says.
Increased corporate spending helped Seabear Smokehouse, an Anacortes, WA-based marketer of salmon and other seafood, grow its holiday sales 12% on a circulation increase that was “a little bit less than our growth,” says president Michael Mondello. Likewise, Ed Scavuzzo, president of Kansas City Steak Co., says stronger sales from corporate clients contributed to a 30% increase in holiday catalog sales despite flat circ.
Chuck Goodman, president of Dallas-based Goodies from Goodman, found that not only were more businesses buying, but that they spent appreciably more on corporate gifts this year. Clients that might have spent $5,000 last year spent $15,000 this year. “One big buyer makes up for a lot of the ‘onesies’ and ‘twosies,’” says Goodman, whose food gifts catalog relies on corporate sales for two-thirds of its business.
Goodies from Goodman’s holiday sales were up 4% from 2002, despite an increase of about $1 in shipping-and-handling charges, on a 50% boost in circulation. Whereas in 2002 it had mailed 30,000 catalogs to customers and prospects, in 2003 it distributed an additional 15,000 by inserting them into copies of the Dallas Morning News delivered to subscribers in two upscale areas outside Dallas. Says Goodman: “You can’t keep doing what you’ve been doing, or else you’ll keep getting what you’ve been getting.”
Change is good
A number of other catalogers followed a philosophy similar to Goodman’s, judging by their holiday marketing strategies.
J. Marco, for instance, increased its holiday (and annual) circulation 50% as well as the page count of its holiday book from 56 to 84 pages. In 2002 it had mailed 1 million catalogs in one November drop; this past holiday season it mailed a total of 1.5 million books in two drops, in early and late November.
“We felt quite confident about the second mailing due to our mailing results for our fall [September 2003] and late fall [mid-October] catalogs,” J. Marco president Smith says. The cataloger tried to reactive older customers by having co-op database services provider Abacus optimize its 36-month buyer file. And working with Abacus, list firm D-J Associates, and service bureau ACG/Computech Direct, J. Marco tested new lists and used its top-performing rental lists. “D-J gathered data from the continuations of rentals from mailers in our similar product category,” Smith explains. Although response rates went virtually unchanged from the previous year, J. Marco’s average order size increased, from $122 in November 2002 and $106 in December 2002 to $140 in November 2003 and $125 in December 2003.
Surry, VA-based food cataloger Edwards of Surry increased circulation too, though by far less than J. Marco. “We were in a better position financially to do that and felt good about the economy going into the season,” says president Sam Edwards. In addition to the “slight” circ boost was a 14% increase in page count, from 32 pages for the 2002 holiday edition to 38 pages. The additional pages sold primarily hams, bacons, and sausages that the company manufactures itself. “This was a good year for meats, with the popularity of the Atkins Diet,” Edwards notes. The company’s catalog and Internet holiday sales rose 12% from the previous year.
Seabear Smokehouse increased its prospect mailings 35% while cutting back on house file mailings, says Mondello. The company tested more food-specific rental lists and tried a few new segments using Abacus models. Seabear also modified its creative to include more lifestyle photos and quotes, and added products to emphasize gift-giving and entertaining, such as the Exclusively Yours buffet-size salmon.
Kansas City Steak Co. “dug deeper into the lists that worked for us in the past,” says president Scavuzzo. The Kansas City, KS-based marketer mailed its most responsive customers multiple editions of the holiday catalog while lopping off the most unresponsive names from its file. It also ran several promotions, such as free shipping for orders of a certain size placed before a specified date.
Conversely, Bloomingdale’s Direct cut back on sales and promotions, says Weiglein, and will run even fewer this year. At the same time, it shifted pages and circulation closer to the holidays and added a remail in December to its best customers. “Although at first pass we are happy with the results,” Weiglein says, “we will carefully look at how this timing change affected our ability to fill demand.”
Zingerman’s, a food cataloger based in Ann Arbor, MI, implemented a major change by actively pursuing corporate buyers for the first time, says Kathi Dvorin, manager of corporate sales. After data analysis showed that existing corporate customers had a 13% higher average order value than consumer customers ($65.74 vs. $58.00), the company added a four-page cover wrap highlighting products in “a variety of price points for big-ticket clients and not-so-big-ticket clients.”
The edition with the cover wrap mailed to 18,000 businesses in November. “We took our current database of customers and had Abacus go through its lists of business customers and tell us which of our customers were on their business lists,” Dvorin says. The result: Year-to-date corporate sales increased 180%, with most of that business transacted in December.
Holiday Sales at a Glance
|SALES PLAN||ACTUAL VS. 2002|
|Bloomingdale’s Direct||high single-digit increase||high single-digit increase|
|Brookstone||N/A||total sales up 19%; direct sales up 30%|
|Chinaberry||N/A on 7% circ increase||down 14%|
|Clark’s Register||20%+ increase from 2001||20%+ increase from 2001|
|Cold Hollow Cider Mill||N/A on flat circ||direct sales down 3%|
|Edwards of Surry||N/A on “slight” circ increase||up 12%|
|Epromos||35%||48% (December only)|
|Fox Ridge Outfitters||5% increase on flat circ||flat|
|Goodies from Goodman||N/A on a 50% circ increase||up 4%|
|Guild.com||up 25% on a 12% circ drop||up 25%|
|J.C. Penney Co.||N/A||direct sales up 8%|
|J. Marco||25% on 50% circ increase||up 30%|
|Jos. A. Bank Clothiers||N/A||direct sales up 11%; total sales
up 33% (December only)
|Kansas City Steaks||N/A on flat circ||up 30%|
|Lizell||N/A on 12% circ increase||flat|
|Mark Group||11% increase on flat circ||up 17%|
|Neiman-Marcus Direct||N/A||up 27% (December only)|
|Omaha Steaks||low double-digit growth on flat circ||low double-digit growth above plan|
|Restoration Hardware||N/A||direct sales up 40%; total sales up 1%, below plan|
|Seabear Smokehouse||N/A||up 12%|
|Sensational Beginnings||up a few percentage points on undisclosed circ increase||up 13%|
|Sharper Image Corp.||N/A on 15% circ increase||catalog sales up 20%; Web sales up 36%; total sales up 24%;|
|Swiss Colony (catalog only)||N/A on flat circ||down 5%|
|Swiss Colony (all 7 titles)||N/A on flat circ||up 5%|
|Talbots||N/A||total sales down 1% (December only)|
|Tiffany & Co.||N/A||direct sales up 27%; total sales up 18%, above plan|
|Urban Outfitters (including Anthropologie)||N/A||direct sales up 122%; total sales up 48%|
|Victoria’s Secret Direct||N/A||up 10%|
|Vivre||N/A on a 26% circ decrease||up 20%|
|William-Sonoma (all titles)||N/A||direct sales up 29%; total sales up 17%|
Spotlight on Food Catalogers
Among the 91 small and midsize food catalogers surveyed by Catalog Solutions, a consultancy specializing in food companies, sales for September through December grew a median 15%, says president Tony Cox. Overall, 90% of the catalogers posted sales growth, with 20% reporting growth of more than 20%.
At the same time, the food catalogs received by the Richardson, TX-based company were less promotional than they’d been the year before. Thirty-seven percent featured some sort of special offer, down from 44% during fall/holiday 2002. Of those books with special offers, 52% promoted a free gift, up from 49% in holiday 2002; 22% offered free shipping (up from 17%); 12% offered percentage discounts (down from 17%); and 8% offered dollars off (down from 13%).
Many of the food catalogers that ended the holiday season happy with their performance had one thing in common, Cox says: upgraded Websites. “They invested in improved design, improved navigation, and search engine marketing, and it paid off nicely.”
But catalogers specializing in regional items, such as New England maple syrup, performed less strongly than other food mailers. Cox suspects that “a lot of their mail order business relies on the tourist business, and since tourism is down, they haven’t been able to grow their lists.”
Waterbury Centre, VT-based Cold Hollow Cider Mill is a case in point. Its holiday and annual sales were down 3% despite two holiday remails, says co-owner Gayle Brown. Retail sales were down 5% for the year. “We ship so much from orders taken through our retail,” Brown says, “so if we’re 3% down in mail order and 5% down in retail, it seems there is some sort of parallel there.”
A Winner for Web Marketers
The holiday season left online marketers and online consumers happy, according to a study from Shop.org and BizRate. Fifty-nine percent of the 86 i.merchants surveyed reported online holiday sales increases of at least 25% over the previous year. What’s more, 30% reported increases of at least 50%.
“As people get more broadband accessibility, Internet shopping is becoming easier,” says Tracy Wan, president/chief operating officer of Sharper Image Corp. The San Francisco-based marketer’s holiday Web sales rose 36%, with channel migration among Sharper Image catalog shoppers accounting for an estimated 2%-4% of that growth.
“We see people use the catalog to study their purchase, then they go online to order,” Wan says. “We can tell that by looking at what people were searching for. People were typing actual SKUs online — that gives us a clue that the catalog is driving people to the Internet.”
“A lot of people this year were ordering online because they’re more comfortable with it,” says Robert Gustafson, president of Rochester, NH-based Fox Ridge Outfitters, a roughly $2 million cataloger of outdoor sporting gear. “Last year they may have been leery, the year before terrified, the year before that they wouldn’t even think about it.”
Internet sales accounted for 18%-20% of Fox Ridge’s revenue in 2003, up from 15% in 2002 and 10% in 2001. In addition to the increasing comfort level, Gustafson says the company improved its site’s ordering efficiency last year.
Such improvements by other marketers as well no doubt contributed to greater consumer satisfaction. Among the 5,163 online shoppers surveyed, 89% said that they were somewhat or very satisfied with their Web shopping experience, up from 84% in holiday 2002.
The majority of online marketers — 59% — considered free shipping with provisions their most effective marketing promotion. Online-only sales were a distant second, with 27% citing them as the most effective promotional tool. Twenty-four percent said free shipping without conditions proved most effective.
As for which promotions drove the most business, 86% of marketers said it was e-mail. Despite concerns about spam filters, 38% of marketers said their e-mail open rates had increased from the previous holiday season, while 14% said they had decreased.