Forecasts and forethoughts

Jun 01, 1998 9:30 PM  By

We will be moving toward customization and personalization in our catalog offerings. People will be able to pick and choose from the items in the catalog to custom-create a package. Customers will tell us what they want as opposed to our telling them what they can buy. We’ll incorporate the drive toward personalization in our customer service too. If a customer wants to send something to a mother or a boyfriend, we’ll ask what she or he likes and then help the customer create something special.

The Internet will help us achieve this level of customization. People will be able to assemble a gift package from options on the Website. We think business on the Internet will dramatically increase. Between 35%-40% of our sales will be from the Internet by 2001, whereas now it’s about 10%. Customization and the Internet go hand-in-hand.

I think we will be doing more of our sales over the Internet. It will make our catalog much more international than it has ever been. Plus the larger companies we deal with will be buying in that fashion because they have the resources, whereas the smaller companies with five employees or fewer may not have the resources to shop online. I think those customers will be more inclined to stick with the print catalog. There will still be a tremendous value in the print catalog, because people will want to sit and browse through it.

Our Website has been up since last year. Right now maybe 1% of our sales come in over the Internet. But I wouldn’t be surprised if 10%-15% of sales come in over the Internet by 2001, with 20%-30% within the next five to seven years.

Between now and 2001 we will be improving our infrastructure so that we can become a more established player in the industry. Although we’ve been in retail for more than 60 years, we’ve been in the catalog business for only three years.

We will have to make large investments in both computer hardware and software. We currently use a system that was developed for us by a consultant. This system was fine to get us started, but we need something more sophisticated.

Right now we don’t have sufficient capability to project and model our inventory levels so that we’re able to minimize out-of-stock situations. We can’t give a customer the availability of an item; we can’t say, “Yes, we have it, and it will be going out on this day.” We have to physically check whether the item is in.

A new computer system won’t solve this situation itself, but I hope to be able to update and customize software that will allow us at any point to take into consideration the demand in our stores and the demand of our mail order customers and then instantly give us inventory information.

Technological developments will create more and more opportunities for direct contact with the consumer. Consumers will seek more ways to shop at home. So although the Internet right now is less than 5% of our business, I’m hopeful that in the next three years, 25% of our business will come in over the Internet.

It’s not the technology itself but the ways we will learn to market through the technology that will be important. Online bookseller Amazon.com has certainly taught us all a lesson on how to make the Internet work. I think the Internet is by far the best vehicle for the development of international business, for name acquisition, and for selling.

By the millennium I’m hopeful that the financial health of the Pacific Rim and the coming together of European currencies will create worldwide opportunities for the catalog industry. Right now, some of our most active hits on our Website are from the Pacific Rim. I hope this increases.

The only significant change I see is a greater portion of our business being done over the Internet. In 2001 the ‘Net will account for about 5% of our sales. I don’t expect it to be a big percentage of our sales for five to 10 years.

We’ll spend more time working on the look and feel of our Website and start thinking about how to get more hits, maybe by advertising on the Internet. In our packages, advertising, and catalog, we’re already bringing customers’ attention to our Website.

Some of our customers will be more comfortable with the Internet than others. For example, corporations that give our products to employees or customers at Christmastime will be very comfortable shopping from the Internet. Older customers may never get around to adopting that way of ordering, but I think in time a good percentage of individuals will have become comfortable using it. It will be as easy for people as using the telephone.

By 2001 we will have added another warehouse and bought, hopefully, an improved computer system. In terms of the warehouse, we’re staying in the same place, but we’re renting more space next door and cutting through walls. We’ve been maxed out on our current space for the past two Christmases. We’ll have a warehouse on one side for incoming and receiving, and a warehouse on the other side for shipping orders. Manufacturing will be in the center.

The software changes will improve the tracking of our catalogs. Every catalog has a code that indicates how a customer heard of the catalog-for example, whether it was a TV spot. We use these codes to see how successful we were in that advertising arena. We’re not happy with the coding our current computer is able to handle.

The other important part of software is tracking the types of customers we have, how frequently they buy, and what their buying patterns are, so that we can build models for prospecting. We have a model right now, but we want a computer that will allow us to better track buying habits and to market more effectively. For example, we’d like to have a field where we could put customers’ birth dates so that we could contact them around their birthday.

One of our biggest hurdles is people not being able to hear the music before ordering it. Hopefully, by 2001 we’ll be able to offer our customers a preview of our recordings before ordering, maybe by a microprocessor in the catalog. It would be like a children’s book where you can push a picture of a fire engine to hear a siren sound. For every offering we have, you could push the picture and hear the sound of the album.

At this point, to put music on a Website is a very expensive proposition for us. Our last catalog had 100 musical titles. For each title there are seven to 15 songs. We probably couldn’t put two or three 15-second samples for each title, so it may be a thing where we select which ones we think would be worth listening to.

The other way of previewing the music is to send a cassette tape where we’ve put on 15 seconds of three songs off each album so that someone can look at the catalog and say, “This is interesting” and then find that sample. This would increase the production and mailing costs. But we think that’s the biggest hurdle right now in terms of response rate-people are leery because they don’t know what they’re getting. N