Where We Are...Where We're Going - Multichannel Merchant

Talking Points Part I of this CATALOG AGE Special Report, titled Where We Are, Where We’re Going, looks at recent changes in the catalog industry and how they are likely to influence business in the years ahead.

Challenges and Solutions

There’s no need for us to tell you how cataloging has changed in recent year. In addition to the Internet and other technological advances, the Postal Service is flailing, response rates are flattening, and the overall economy is flagging. That said, what did the Power Forum participants feel were the greatest challenges facing catalogers today?

Challenge #1: Jules Silbert, executive vice president of multititle apparel and home goods mailer Brylane, tagged rising delivery costs as the greatest challenge:

“The Postal Service effectively controls these costs, regardless of who performs the delivery for us, so here’s a challenge that leaves all of us with a feeling of helplessness.”

Solution: Unfortunately, given the nature of the Postal Service and the parcel delivery industry, mailers’ options here are limited. Said Silbert: “The way most of us respond to this challenge is to charge as much for shipping and handling fees as the customer and competition will allow. That’s becoming a lttle more difficult today because of the tight competition-particularly price competition. Raising product prices, on the other hand, is seldom a viable option, especially today, when virtually every retailer in America [has goods] on sale.”

Challenge #2: Silbert also cited rising service expectations on the part of customers as a key challenge.

Solution: Happily, Silbert was able to outline how to meet-if not exceed-customer service expectations. Brylane has worked to improve its merchandise forecasting and buying techniques-the “when and how much” to order, Silbert said. Still, at least occasional backorders are inevitable-which is why, Silbert said,

“Communicating more effectively with our customer when we can’t meet her expectations [is key]. We’re doing this by offering choices aimed at maintaining her satisfaction, at least as best as we can. … I believe what makes a company succeed is the ability to appeal to a large number of customers with products they want. The old-economy basics of the right merchandise offered in an environment of a unique merchandising character and positioning are just as valid today as they ever were-probably even more so in the Internet age, as we’ve seen by the myriad corpses lining the New Economy highway.”

Challenge #3: Several panelists mentioned “mailbox clutter” and the need to stay in touch with customers while not overmailing them. According to George Ittner, CEO of apparel and home goods mailer Newport News, “Everybody’s going to the top of the file over and over and over, upping the [mailing] frequency. … So those customers who are productive catalog customers in the industry at large are getting pounded over and over again, and that’s why the cost of acquisition has risen. It’s not only postal costs; it’s oversaturation in the marketplace.”

Solution: For Fred Young, CEO of network connectivity products and services provider Black Box Corp., avoiding burnout among customers is easy: Stop overmailing:

“We used to mail out our catalog four times a year; we cut it back to one. … We found that our customers will retain [the catalog] if it’s a good service offering. So I challenge my consumer [catalog] colleagues up here: Don’t be afraid if you’ve got a good service offering that you have to send something every fifth day. Because actually in our view, you chintz up the offer and confuse the reader a little bit: ‘Tell me what’s new. I’m a busy person, you’re busy people. I don’t have time to read something, whether it’s 20 pages or a 1,500-page catalog, every fifth day. Just tell me the new stuff.'”

Newport News also had success “being much more effective in identifying people who don’t buy and cutting back circulation to nonproductive elements, even within the 12-month file,”

Ittner said. But the best way for a cataloger to rise above the other books in the mail, Ittner added,

“comes back to a distinctive offer. I think that is the most important [factor]: You can’t be out there with a ‘me too’ offer.”

Opportunities Ahoy

Lately catalogers have been more focused on holding their own than on growing their businesses. But according to the Power Forum panelists, opportunities for growth do exist. Said Brylane’s Jules Silbert,

“One of the ways to grow is to spin off new products. We’ve learned that even [though we have] a recognized, unique merchandising character, our customer is changing-both the individual customer and the constituency itself. New people coming into our target market segments are different from their mothers; we’ve got to adapt to those changes. As a consequence, we’re looking at some depth at two of our well-established brands and asking the hard questions: Are we keeping up with our customer’s changing lifestyle? Are our merchandise and our service continuing to fill the promise that she expects of us? Does the look of the merchandise, its quality, and our customer service enhance the reputation of the brand as a leader in that market niche?”

Another opportunity for growth, said Michael Sherman, president of multititle general merchant Fingerhut, is the synergy among multiple channels:

“We’re finding that purchasers who purchase across channels purchase with a higher monetary value and with more frequency. When we measure them against people who are calling in [orders] or people who are [only] on the Web, we find that those who are going back and forth [between channels] are really our most loyal customers. … Assuming you can hook everything together, it’s very, very exciting. If you can’t, it’s going to hurt you.”

Implementing a private-label credit card, if your catalog doesn’t already offer one, is another growth opportunity, said Newport News’s George Ittner:

“The use of private-label credit, house credit is extremely important in generating loyalty and increasing retention. Customers who buy with house credit buy more, and they buy more frequently; it’s a tremendous boost to retention.”

The same goes for e-mail marketing, Ittner added:

“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. Not yet are we at the point where we are doing that to cut circulation; that will probably come. But it is a way to have a very low-cost contact, a very productive contact, and it’s a way to convert a single-channel customer 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 along time.”

Looking into the Crystal Ball

When asked how catalogers can best position themselves for the future, the Power Forum panelists gave some unexpected responses:

Jules Silbert, Brylane: “Three words are on everybody’s mind now: ‘Cash is scarce.’ … We all have stakeholders, but we all still have to invest even during these periods. And in order to come out of this [slowing economy] stronger than we went into it and really to attack the new world out there when this is over, you have to be very discriminating about where you invest. And that’s very easy to say, I realize, but you just have to invest where you think the opportunity is with [the little money that] is available.”

Michael Sherman, Fingerhut: “Your customer list is the lifeblood of your business. So you always have to have it growing, and you have to figure out how to continue to grow it. Once you get into the spiral of a shrinking list, it really becomes heavy lifting. The list is key, and rather than spending your money on fancy capital projects that you can’t figure out how you’re going to pay back, you always have to have that list going in the right direction.

Lee Lorenzen, Catalog City/Altura: “The piece that I think most people are missing is you’re looking at your businesses as a tiny little silo, not as a collective industry with the collective strength of all the brands and all the infrastructure that you have. Collectively, [the catalog industry is] much bigger than Amazon.com. You should dominate in a way that you’re not dominating now. And I think the key to allowing that domination to occur, and sort of my prediction for where the Internet will be three years, five years from now, [is this]: Consumers are going to be shopping through a multivendor shopping cart. They may come to your site, they’re going to put something in there, they may go to another site. They’re not going to reregister. They’re not going to fill out your forms with a wallet. They’re going to be recognized with a cookie as they transfer from site to site to site or if they do their shopping on the sites that they’re already on. It’s going to be a multivendor single shopping cart with a single address book, a single location for order history. That’s the future of the Internet. It’s a future that the catalogers should own, by rights.”

George Ittner, Newport News: “There is a fair amount of doom and gloom about because of the postal increases … but this has always been a cyclical industry. It is still very strong, vibrant. And the thought I have about the next two to three years is that we’re all going to be around and we’re all going to be contributing to this great industry.”