U.S. business 2000: catalog & internet purchasing trends

PART I: Print catalog purchasing trends

The numbers prove it: Most American businesses are mail order catalog shoppers. Catalog Age’s U.S. Business 2000 survey of purchasing trends (conducted in March) shows that an astounding 93% of the total 1,000 business respondents made purchases from print catalogs during the past year. And these companies purchase more often than once or twice a year. More than 31% of all respondents say they buy from catalogs once a month; 46% say they purchase from catalogs more than once a month. Indeed, the mean frequency of businesses ordering from catalogs is nearly 14 times annually.

As the chart (top right) shows, certain types of businesses seem more drawn to catalog shopping. Office supply companies – with nearly 97% of respondents in this category buying from catalogs – top the list in terms of the segment with the highest percentage of catalog shoppers. On the other end of the spectrum (of the categories whose response is large enough to be statistically viable), those with the least percentage of respondents buying from catalogs include the construction industry (only 87%), educational products firms (90%), and industrial/agricultural supply companies (91%).

In terms of the size of businesses and their catalog purchasing tendencies, the small companies (under $10 million in sales) are slightly more active: Nearly 95% of the survey respondents under $10 million are catalog buyers, compared with about 91% of those between $10 million and $49.9 million, and 92% of those larger than $50 million in annual sales (see chart, above). It is important to note, however, that the majority (77% of the 441 companies that supplied annual sales information) of our survey respondents are catalog mailers with less than $10 million in sales annually.

When it comes to correlating catalog shopping and a business’s size measured by number of employees (see table, page B4), those with fewer employees (25 or fewer) seem to be more active, with nearly 95% reporting that they are catalog buyers. Worth noting, all of our respondents were willing to provide employee size information (in contrast to their willingness to provide annual sales data), making this a more robust survey result, and reflecting a more even split among the study’s total respondents in terms of size: 23% of respondents employ 25 people or fewer; 44% have 26-100 workers; and 33% employ more than 200 people.

The West reports the highest percentage of business catalog purchasing (nearly 95% of businesses surveyed there purchase from catalogs). Next in line is the Midwest (94% buy from catalogs), and then the Northeast (just over 93%). The companies in the South are somewhat less active, with about 92% of these respondents saying they buy merchandise for their businesses from catalogs. (See map, left.)

In terms of annual expenditures, overall, our survey sample spends a mean of $8,739 annually on purchases from print catalogs. When spending is looked at by region (see map, page B10), the Northeast takes the number-one spot, with a mean of $10,402 spent in 1999 on catalog purchases. This is about 3% more than in the West, where respondents spent a mean of $10,082. The South makes up somewhat for its lower overall participation in catalog purchasing by coming in 16% ahead of the Midwest in regard to mean annual catalog expenditures – $8,185 vs the Midwest’s $7,072.

Viewed by type of business, the big spenders on catalog merchandise are the nursing home respondents, with a mean annual expenditure of $12,596; the industrial/agricultural supply segment, which spent a mean of $10,900; and the office supply category, which reported spending a mean of $9,781 for catalog products last year. (See chart, below).

What they’re buying

Overall, paper/office products tops the list of types of catalog products that businesses buy (see chart, left). And this product category dominates the number-one spot, with more than three-quarters of all business respondents saying they purchase these items via catalogs. The other categories in the top five don’t even come close, with only 48% of respondents saying they buy office equipment and furniture, 46% reporting purchases of safety materials, around 33% reporting purchases of personalized items, and a mere 30% buying computer hardware by catalog.

The least popular product categories (of those where the number of responses deems them statistically viable) include food supplies/corporate food gifts (only 21% say they buy these goods from catalogs); industrial and building materials (26%); and clothing and uniforms (27%).

As for what kinds of catalog products are purchased by each business type, a list of types of products and the top buyers (the business types with the highest percentage of catalog purchases in that product category) follows:

– paper/general office products: 84% of the industrial/agricultural respondents;

– computer hardware: 38% of educational products firms;

– computer software: 52% of the printing/advertising respondents;

– office equipment or furniture: 55% of the hotel and resort firms surveyed;

– clothing or uniforms: 49% of hotel and resort respondents;

– industrial/building materials: 31% of product manufacturers;

– safety materials: 59% of the industrial/agricultural supply firms;

– food supplies or corporate food gifts: 29% of nursing home respondents;

– personalized items: 44% of the industrial/agricultural firms.

When asked to provide the reasons they choose to shop by catalog, businesses answer very much the way consumers do, citing convenience (56% say this is their “primary motive”); better pricing (34%); and an existing relationship with a company (about 30%) as the motivations for using catalog vehicles. (To see motivation by business type, see chart, page B11.)

Viewing the survey results for this question by respondents’ annual sales volume, however, reveals that the bigger companies are more price-conscious – or perhaps are benefiting more from volume discounts. Nearly 56% of the firms over $100 million in annual sales list better pricing as a primary motivation for catalog shopping, compared with only one-quarter of firms between $50 million and $100 million, 22% of those $10 million to $49 million, and 30% of those under $10 million saying the same.

And perhaps because of their location, companies in the Midwest have the highest percentage of respondents that list convenience in the top spot. Nearly 67% of these businesses say convenience is the primary motivation for their catalog purchasing, versus 54% in the South, 52% in the West, and 48% in the Northeast saying the same.

The how, and the how many

When asked how businesses order from print catalogs (see chart, below), as you would expect, most say they order by phone and fax. Of note, however, is the fact that firms in the Northeast in particular show little inclination for mailed-in catalog orders. Only 9% of firms in the Northeast use the mail to order from catalogs compared with 11% in the South, 17% in the West, and 18% in the Midwest saying they use the mail to send orders for merchandise.

The Northeast’s proclivity for phone ordering (80% of this region’s respondents use this ordering method) could be a direct result of these organizations’ familiarity with catalogs. The respondents in that region report that they receive a mean of 16.8 catalogs per week – that’s almost 24% higher than in the West, where respondents receive the next-highest mean number of print books weekly (13.6). It’s also worth noting that the Northeast’s mailbox tally is a whopping 40% higher than in the South, where businesses receive the fewest catalogs weekly (12).

Viewing the mean number of catalogs received weekly by type of business, at the top of the list are hotels and resorts (17.1); medical/veterinary supply firms (16.7); industrial/agricultural supply companies (16.1); and product manufacturers (15.7). Those receiving the fewest print catalogs per week include the office supply companies (9.9); food service firms (9.8); and service providers (10.1). But these numbers could also reflect the varying number of business catalogs serving these specific segments, rather than the business segments’ attractiveness as catalog customers.

What of buying in 2000?

When asked whether they would spend more or less in catalogs this year, most respondents – 68% – say they will spend about the same this year as last year. But nearly 19% say they will spend more with catalogs in 2000 – likely an indication that the convenience factor and the breadth of merchandise offered by mail order business catalogs are attracting more users in general. In fact, less than 9% of all respondents say they plan to spend less with catalogs this year compared to what they spent in 1999.

The biggest opportunity for catalogers may be in the larger companies, those with annual sales of more than $100 million (this survey group is considered a small sample, however, and the results must be viewed with that in mind). A third of these respondents say they will spend more with catalogs in 2000. By contrast, 21% of the companies between $1 million and $9.9 million in sales will spend more on catalogs; and 22% of those between $10 million and $49.9 million in sales say they will increase their catalog buying this year.

Looked at by business type, the hotel/resort category may represent a growth area for cataloging in the future, with 27% of these respondents saying they will spend more with catalogs in 2000. This is followed by 22% of the industrial/agricultural supply respondents, and 21% of both the product manufacturers and medical/veterinary supply respondents saying the same.

Why they don’t buy

Of the few respondents that say they do not buy products from catalogs, the top reason given is that they prefer ordering from salespeople (19% give this as the reason they do not purchase from catalogs). About 18% say they like to see the product before buying, and 10% note that catalogs do not offer anything their businesses need.

Looked at by number of employees (see table on page B11), the larger (more than 200 employees) firms that do not buy from catalogs clearly indicate it’s because they prefer ordering from salespeople – which makes sense, in that many large businesses receive individualized treatment and have account reps assigned to them by product vendors.

Part II: Internet purchasing trends

Despite all the hoopla to the contrary, the businesses surveyed by Catalog Age aren’t all that high on buying over the Internet yet. When surveyed in March, only 36% of respondents indicated they had purchased any items for their businesses from the ‘Net in the past year (see chart, opposite page). Moreover, total respondents’ mean percentage of all business purchases that come from the Internet is only 10%. By contrast, the mean percentage of all survey respondents’ purchases that come from print catalogs is nearly 64% – further illustration that businesses are yet to be sold on the online medium as a purchasing source.

When viewed by region (see map on page B12), businesses located in the West are the most active Internet buyers, with nearly 45% saying they purchase online; businesses located in the Northeast are the second-highest ‘Net buyers, with 41% saying they make these purchases. The businesses in the South and Midwest are the least active, with only 33% and 30%, respectively, buying anything off the Web for their businesses during the past year.

The percentage of total business purchases made online, when looked at by regions of the country, show small variations. The businesses surveyed in the West come in with the highest mean number: 12%. Next are the respondents located in the South, with the online channel representing 11% of total purchases, then those in the Northeast, with slightly under 11%. Finally, the survey respondents in the Midwest show a mean of only 7% of total business purchases made online

What they are buying

Looking at what types of products U.S. businesses buy via the Internet (see table, page B13), it’s no surprise that computer equipment and software top the list. Today, many Websites allow customers to download software purchases, making this an easy product to buy electronically. Comparing businesses by region, those in the Northeast and West are the most active in terms of buying hardware from the Internet: almost 14% of respondents in the Northeast report such ‘Net purchases, and 12% of respondents in the West say the same. By contrast, only about 8% of Midwest respondents and a little less than 10% of the respondents from the South say they buy computer hardware this way.

Looking at computer software purchases, businesses in the Northeast show more Internet buying activity again, with 15% saying they have bought software via the Internet. But the business respondents in the Midwest ratchet up their activity here a bit, with just under 10% saying they buy computer software from the Web – slightly more than the percentage of respondents in the West saying the same, and 2 percentage points higher than respondents from the South indicating that they make such purchases.

Paper products and office supplies are third in popularity, with slightly more than 10% of respondents overall saying they buy these items from Internet sources. Looked at regionally, the survey respondents located in the South and West show somewhat more interest in Web-based purchases of paper and office supplies than firms located in other regions: A full 13% of respondents in the South say they purchase these products from the Internet, and just under 13% of those from the West say the same. This compares to about 12% of business respondents in the Northeast and only about 5% of Midwestern respondents saying the same.

As for which survey product categories businesses show the least interest in buying from the Internet, only about 2% of respondents say they have purchased personalized items, such as mugs or T-shirts, from the Web. Not much more show any interest in buying clothing or uniforms from an Internet site, either. And only about 3% of businesses surveyed say they buy industrial or building materials online.

Reasons to buy online

Of the 36% that do buy products from the Internet, more than one-half indicate their prime motivation is the convenience offered by the Web (see chart, page B14). By contrast, few (less than 5%) believe the Internet offers a better shopping experience than other channels.

Surprisingly, few businesses (only about 10% of the Internet purchasers) are motivated to shop online because of incentives such as volume discounts, loyalty rewards, or free shipping. Either sites are not offering these incentives, or our respondents aren’t swayed much by them if they do exist.

Looking at the motivations by type of business (see table, page B15), of the four Internet buying groups considered statistically viable, most indicate they like the convenience of Internet buying. Product manufacturers, in particular, cite convenience as an important motivator (nearly 60% of these businesses list it as a prime reason to buy online).

Curiously, of the four survey business segments shown in the table on the previous page, nursing homes are least inclined to buy from the Internet because of better pricing. Only 6% of these respondents cite better pricing as a primary motive for Web buying, versus a third or more of the other three categories shown.

And apparently the product manufacturers we surveyed are not swayed particularly by brand names or company loyalty: Only 9% of these respondents say that an existing relationship with a company prompts them to buy from that firm online. By contrast, 13% of service providers, 12% of nursing homes, and 14% of hotel and resort respondents cite this as a prime motivator for buying online.

Why they don’t buy online

Surprisingly, the majority of our survey respondents are not equipped to do anything online, let alone purchase merchandise. Almost 52% of the total respondents say they do not have access to theInternet – citing this as the primary reason they do not buy products for their businesses online.

This number could be skewed, however, by the large percentage of businesses of less than $50 million in annual revenue in the survey sample. Still, a full 45% of the study’s respondents that are over $50 million in annual revenue are not yet wired for the Internet.

As for those that do have ‘Net access and do not buy online, 35% do not buy because they prefer ordering from salespeople (see table, above); 19% never see anything their business needs; 16% do not trust online ordering methods; 13% like to see the product before purchasing it; 4% don’t want to wait for delivery; and 3% believe products sold on the Internet are too expensive.

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