What do Macy’s, Banana Republic, Toys ‘R’ Us, Wet Seal, Nine West, Claire’s Stores, and Abercrombie & Fitch have in common? They’re just a few of the national retailers that have recently launched catalogs. They’re also the latest manifestations of a growing trend: retailers taking on traditional catalogers in the mailbox. And some industry observers fear that as this trend continues to escalate, it will become much harder for traditional catalog marketers to compete.
Retail’s increasing interest in cataloging is understandable. “It reflects the strength of the catalog industry,” says Derek Leckow, investment analyst for Chicago-based investment banking firm Barrington Research Associates. He estimates that the catalog business has grown as much as 10% a year over the past five years, compared to retail’s growth rate of about 5% during that same period.
But retailers are entering cataloging with a powerful arsenal of competitive weapons. “Retailers come in with a lot of advantages, such as their big databases, not having to start their mail order businesses from the kitchen table, and huge consumer awareness of their franchises,” says John Hayes, executive vice president of marketing for $135 million-plus women’s apparel cataloger DM Management.
Moreover, today’s storekeepers are well versed in high-level database manipulation. As Gary Ostrager, Macy’s By Mail’s vice president of direct marketing, says, “Imagine being told you have 58 million names to select from. We have the intelligence of when and how people shop and what they buy….We can access these names, overlay our data, and get a snapshot of their mail order shopping behavior.”
Ringside reaction So far, opinions are split when it comes to the ramifications of retail’s rush into cataloging. Ken Gassman, senior vice president/retail analyst for Richmond, VA, investment firm Davenport & Co., asserts that the addition of retail catalogs in mailboxes will definitely “make it harder for [nonretail] catalogers to maintain their share of consumers’ time and eyes.”
But others believe retailers could help build up the well of customer names from which to rent. “Maybe retailers will bring in new shoppers to the world of catalog shopping, and perhaps we’ll be able to convert some of their customers to us,” Hayes says.
And still others contend that the addition of venerable retail names to the catalog industry roster could enhance the mail order business’s reputation among financiers. Even a small mailer, $2 million-plus New York-based teen apparel cataloger Airshop, is seeing the bright side. “Not only does [this trend of retailers entering cataloging] reaffirm our belief in what we’re doing,” says Bonnie Gringer, vice president of marketing and new media, “but since we’re looking for additional capital, their presence-in our case that of rivals Claire’s and Wet Seal-in our market helps validate our concept” to prospective backers.
Overall, Barrington Research Associates’ Leckow believes the advantage clearly remains with catalogers. “The expertise in this business comes from what the catalogers have developed over the years,” he says. “Who’s going to do it any better? Besides, because cataloging is growing faster than retail, there’s probably room for traditional retailers to grow in mail order.”