Penney, Spiegel refine their core book strategies
The Montgomery Ward and Sears “big books” may be long gone, but the all-inclusive consumer catalog isn’t a dinosaur. The concept is still alive and kicking for at least two mass merchants: J.C. Penney and Spiegel.
But while Penney and Spiegel still view their big books as the focal point of their catalog businesses, the companies no longer see them as the driving force of their growth. In fact, in response to flat sales from the books over the past few years, both mailers have tightened their circulation plans, mailing the big books predominately to their best customers, while developing a steady flow of specialty titles as their primary prospecting vehicles.
For both companies, the big books “offer an extended range of products and sizes not necessarily sold in stores – probably their single biggest advantage” over other catalogers and retailers, says Jeffrey Edelman, a retail analyst for New York-based investment banking firm Paine Webber.
A `reference book’
Randy Ronning, J.C. Penney’s president of catalog and logistics, describes the company’s big book as “the only [advertising] medium customers really retain in their homes. It’s like a reference book on customers’ shelves for six months.”
With editions mailed in fall/winter, Christmas, and spring/summer, Plano, TX-based J.C. Penney’s annual big-book circulation of 10 million-11 million has been “constant” over the past two years, Ronning says. The most recent fall edition was a hearty 1,446 pages and cost $4-$5 each to produce and mail.
Sixty-five percent of Penney’s catalog sales come from the big book; Ronning won’t disclose whether that percentage has changed over the past few years. He does say, however, that Penney’s 18 specialty catalogs “have driven sales and will continue to drive our business.” The specialty catalog titles sell merchandise that’s rarely featured in the big book – everything from maternity wear to bridal wear to big-and-tall apparel.
Despite the variety of niche titles, Penney’s catalog business has been stagnant of late: While total catalog sales hit $3.92 billion last year, that’s an increase of less than 1% from ’97. (Then again, the company’s retail sales fell 3.9% last year, from $16 billion in ’97 to $15.4 billion.)
To goose sales, Penney has made a number of cosmetic changes over the past year and a half to its big book. Most notably, it has color-coded product sections and included information on catalog service policies, gift registries, gift cards, and online purchasing in the opening pages.
Focus on `lifestyle retailing’
While Penney has focused on creative, the $587 million Spiegel catalog division of the $1.39 billion Spiegel parent – which includes women’s apparel book Newport News and casual apparel cataloger/retailer Eddie Bauer – has focused on marketing and merchandising for its big book.
Two years ago, an annual companywide sales increase of only 1.7%, to $3.06 billion, and an annual loss of $13.4 million made Downers Grove, IL-based Spiegel consider putting the big book out to pasture in favor of a series of smaller, niche catalogs. But then Spiegel redefined itself as a “lifestyle retailer” rather than a purveyor of trends. “We gained greater profitability by adding sections [in the big book] for travel-related products, kitchen storage and organization, home office, and versatile packable clothing,” says Spiegel catalog president John Irvin.
At the same time, Spiegel – which has seen a variety of smaller specialty books come and go over the years, including For You (women’s plus sizes) and E-Style (which targeted African-American women) – has homed in on two specialty concepts: Spiegel On/ View and Elements Exclusively Spiegel. Launched in late 1997, On/View has consistently performed “very well,” Irvin says, and is profitable. The title, whose different editions focus on home and apparel, targets working women in their 40s.
On the other hand, the 1998 launch, Elements, which sells similar merchandise targeted at customers in their 30s and up, “hasn’t performed up to plan,” Irvin admits, “but it has gotten stronger. When combined with On/View, however, the specialty tier of our business has helped us with margins and making monthly contact with customers” in between big-book mailings, he says.
These changes have helped Spiegel post seven consecutive quarters of bottom-line gains. Although the company doesn’t break out individual catalog earnings, companywide net earnings rose to $16.5 million for the second quarter ended July 3, compared with a net loss of $10.9 million for the second quarter of 1998.
Today, with annual sales of about $200 million, the big book makes up a little more than one-third of Spiegel’s catalog sales; a decade ago, it had accounted for 40% of sales. The big book has also gotten a little less big over the years. The fall catalog, which cost $3-$4 per book to produce and mail, was 556 pages – down from its peak of 686 pages in 1984.
Even as they look to their specialty catalogs – not to mention the Internet – for growth, both Ronning and Irvin say their companies remain committed to the big books. In fact, the books could come to be redefined as “a printed index to their Websites,” observes Bill Nicolai, vice president of marketing for Portland, OR-based multititle gifts and home goods cataloger The Good Catalog Co.
At Penney, “we’re looking at the Internet as a complement to our big book, by getting its entire 250,000 SKUs online by the end of this year,” Ronning says. “Then we’ll let the customer make the decision on how she wants to buy.” Sales placed online will exceed $60 million this year, he says, compared to $15 million last year.
Spiegel, too, has “started to concentrate more on e-commerce,” Irvin says. “Some resources that were devoted to noncore efforts [such as mailing into Canada until last year] have been recommitted to e-commerce.”