After sale, will SkyMall soar?

Jan 01, 2006 10:30 PM  By

Now that SkyMall has been sold to Spire Capital and ZelnickMedia Corp., look for the inflight co-op cataloger to ramp up its sales. Its new owners see SkyMall as a valuable direct response franchise, and they “believe in the value of capturing customer information while the customer is engaged,” says Christine Aguilera, who remains with SkyMall as president.

ZelnickMedia Corp., part owner of Direct Holdings Worldwide, the parent company of Lillian Vernon Corp. and the direct marketing business of Time Life, and Spire Capital bought SkyMall from GemStar for $52 million in December. GemStar, whose other properties include TV Guide magazine, acquired SkyMall in May 2001.

In particular, says Aguilera, the new owners are enthused about SkyMall’s new “buy in the sky” program. Tested in 2004 and rolled out this year on Northwest Airlines and the America West flights now handled by USAir, the program enables customers to order via forms that carry promotional offers, such as 10 frequent flier miles per $1 spent. At the conclusion of the flight, the flight attendants collect the self-sealing order cards and send them to SkyMall headquarters. Orders are then entered into an electronic order system that links to the order management system of each SkyMall participating cataloger. The attendants earn a commission of about $5 per SkyMall order, although Aguilera would not confirm exact commissions.

SkyMall research indicates that 60% of its orders are placed more than one week after the customer sees the seat-pocket catalog. The company hopes that the new program will shorten the book’s order curve and increase overall revenue.

Indeed, as a captive audience, airline passengers are an easy target, but that they couldn’t order from the catalog midflight was a problem, says David Solomon, managing director/partner for New York-based Goldsmith Agio Helms, which represented the sellers. SkyMall receives one order for every 17 flights, so for every 1,500 people who read the catalog, only one buys — a response rate of less than 0.07%.

But considering some 650 million passengers can potentially view the SkyMall catalog a year, and that the company now has sales in excess of $100 million, tweaking that response rate even slightly would result in a huge lift in sales. The company, which now has catalogs on 14 carriers, expects during the next five years to roll out the new program to more airlines. Between traditional and buy-in-the-sky flights it expects to double the response rate to one order for every 8.5 flights.

Of course, buy-in-the-sky-type programs are not the sole domain of SkyMall. Ted Airlines, the low-cost off-shoot of United, also offers merchandise on its flights. The in-flight “store” is on a cart that flight attendants wheel down the aisle after the beverage service. Ted flight attendants receive a 2% commission on all merchandise sales.

From the airline’s perspective, such a program is a good way to promote frequent-flyer programs. Used as an incentive, frequent-flyer miles can drive average order sizes. In fact, Aguilera says, the average order doubles when frequent-flyer miles are the promotional hook.