Making It Online

Aug 20, 2001 9:30 PM  By

You could argue that the catalog industry has changed more dramatically during the past five years than it had during the previous 50, almost entirely because of the Internet. And while in the early days of e-commerce some catalogers feared that online-only marketers would make them obsolete, the Web has been a boon to such mailers as Fingerhut. Michael Sherman, president of the multititle general merchandise cataloger, credited much of the company’s online success to the round-the-clock convenience of the Internet-such as the ability of Fingerhut customers to check their order status online.

Said Sherman: “We’re finding that purchasers who purchase across channels purchase with a higher monetary value and with more frequency. We’re finding that when we measure… people who are [only] calling in [orders] or people who are [only] on the Web that those who are going back and forth are really our most loyal customers.”

Similarly, the multichannel customer has the greatest long-term value for women’s apparel and home goods cataloger Newport News. According to CEO George Ittner, among Internet buyers, print catalog customers, and multichannel buyers, “An Internet customer has … the weakest long-term value, lifetime value. The next is the catalog customer, and the best is … the combination customer. So obviously if you have somebody buying from you for the first time on the Internet, it is in your interest to convert them into a combination buyer as quickly as possible. If when they click ‘send’ with their order we could have a catalog in their hands at that very instant, we would.”

One tool that Newport News uses to encourage customers to shop from multiple channels is e-mail marketing. Ittner noted that e-mail marketing was an effective retention tool as well:

“It’s very easy to capture an e-mail address on an incoming phone order and then turn around and e-mail that customer going forward. … It is a way to have a very low-cost contact, a very productive contact, and one that converts the customer … from a single-channel to a dual-channel customer, and that is extremely important to our business and one of the biggest aids that we’ve seen to retention to come along in a long time.”

The Optimum Structure

In terms of corporate organization, at Newport News, Ittner said,

“We never did [have the Internet division] set up as a separate business … it’s always been part of our marketing group, totally integrated. The offer is very, very similar. It appears slightly different, but it is the same products, it’s the same brand, we’re offering the same service. So it is totally integrated organizationally. And for the consumer, our attempt, whether they come in on the catalog first or the Internet first, is to have them working both channels because it’s proven that that is most productive.”

Multititle apparel and home goods cataloger Brylane also opted to keep its Internet efforts integrated with its core business, said executive vice president Jules Silbert:

“When we first set up our Internet group, we decided to go the ‘dot-corp’ route rather than the ‘dot-com’ route. … The difference is that a dot-com is a separate organization set up just to handle the Internet, separate from the rest of the organization, which was what Wal-Mart started and just recently rescinded. We decided to go the dot-corp route, which integrates the Internet effort into our regular business, and everybody participates. And as a matter of fact, we’re finding out that the old-line organization itself changes because of the Internet.”

Fred Young, CEO of computer networking products and services provider Black Box Corp., also favors integration among channels. Young said,

“We have our own dot-com strategy, but it’s part of an additional service to our customers. It’s not like a new thing; it’s just a different way we want to talk to our customers. To us in the very simplest terms it’s probably a glorified fax machine that happens to have a color monitor hooked to it. That’s not disrespect to anybody that’s a pure Internet play.”

Originally, Sherman said, Fingerhut’s Internet group was a separate division from the print division.:

“We stared having an e-com group with its own separate building and … a ping-pong table and a pool table and alfalfa sprouts and skateboards and a lot of fun and brand advertising. And ultimately it came back to one group now reporting to our marketing group to figure out what’s the best customer contact strategy.”

Money Matters

Could venture capitalists’ disenchantment with Internet-only companies be good news for catalogers? Lee Lorenzen, CEO of Catalog City/Altura International, seemed to think so:

“Investment in the dot-com space has pretty much closed down. And that’s actually quite a healthy thing for the catalog community, because the economics of these VC-based companies really for a while appeared to fundamentally change how the business rules worked. … It seems that [catalog] companies … have made profits in up markets and down markets. I heard Jules mention earlier about this being a time of marginal profitability; marginal profitability looks like a home run for most of the dot-com world.”