One of the most common questions we hear from both investors and retailers alike is whether the print catalog channel is becoming obsolete.
Indeed, according to the Direct Marketing Association, the number of catalogs mailed in the United States fell again last year, to 11.8 billion, the lowest level since the DMA began collecting annual data in 2001 and down from a peak of 19.6 billion in 2007.
As digital channels have grown increasingly important, retailers have gone through three distinct phases in managing their catalog businesses:
- Reducing catalog mailings broadly and indiscriminately
- Using data to test new catalog formats and targeted catalog mailing reductions and redirections
- Facilitating consumers’ use of catalogs in combination with other channels
Phase 1: Cost-cutting mentality
Lands’ End tried the cost-cutting approach in 2000 and saw a $100 million decline in sales. Why? Consumers spend more money when they’re shopping with a catalog in hand—even when they’re shopping online.
Thus, the oft-overlooked catalog has become a key component in a robust omnichannel strategy.
The power of the printed page
A full 44% of consumers say they want to receive fewer catalogs in the mail, while just 13% want more of them.
Yet in practice, catalogs are a potent source of inspiration: Some 58% of online shoppers say they browse catalogs for ideas, and 31% have a retailer’s catalog with them when they make a purchase online.
Women ages 18 to 30 are especially motivated by catalogs, claiming that they enhance their impression of a retailer. More importantly, 45% say catalogs stimulate their interest in a retailer’s products, and a whopping 86% have bought an item after first seeing it in a catalog.
Case in point: After its early catalog misstep, Lands’ End eventually presented a pop-up survey to customers placing orders on its site asking if they had first looked at the catalog, and 75% of them said, “Yes.”
Phase 2: Testing the way to more- effective catalogs
Williams-Sonoma is a devoted catalog marketer in large part due to the data it’s uncovered proving how effective its catalogs are at generating sales: Some 55% of purchases made on the specialty retailer’s various web-sites are catalog-driven. When looking at the purchases made by its customers across all channels, that figure jumps to 70%.
Williams-Sonoma began looking for ways to maximize the return on its catalogs long before the proliferation of online shopping, however. It first focused on the physical format, testing modifications that included trimming the weight and size of its paper and reducing the number of pages. In doing so, it discovered that shaving a mere 1/16 of an inch off the width of its catalog pages was the most effective way to cut costs and had zero impact on sales. In the meantime, it reduced the number of pages in catalogs aimed at specific audiences, namely those deemed to be of lower value.
But the number of Williams-Sonoma’s catalog pages overall has risen 11% year over year as it’s showcased fewer products but expanded their descriptions. It’s also added related, supplemental content, such as recipes. This “more compelling story,” as one of the company’s former direct marketing managers described it, lifted direct-to-consumer sales by 12% in four years, to 42% of total revenue.
Toy retailer FAO Schwarz took a different approach, reducing the total number of catalogs it mailed out each year. Most notably, it ceased distribution of its spring catalog after extensively testing and modeling the effects, instead mailing out a smaller, “teaser” version that highlights the products available on its website. The only full-version catalog it continues to mail each year is for the holiday season. FAO Schwarz says the cost savings have been extensive, with no subsequent loss in revenue.
Phase 3: Embracing and encouraging use of the catalog
Catalogs are effective not only at getting people to spend money. Compared with customers who use only the Web to shop, those who use catalogs spend more money and return more often.
But it is the customers who utilize both channels who are the most valuable of all.
Our research has found that the average order size made by customers online is approximately 6% lower than orders placed directly through call centers using catalogs. For example, during one calendar-year period, we observed that Internet-only customers of one specialty retailer placed orders of $80 on average, whereas call center/catalog customers’ average orders totaled approximately $90. Customers who utilized both channels saw their average orders climb even further, to more than $92.
Retention rates showed a similar pattern, with Internet-only customers coming in 13% to 32% lower than their call center/catalog counterparts. Meanwhile, the retention rates of customers who combined the two channels outpaced them both.
As for those customers who place their first order through a call center using a catalog and later migrate online, from a retailer’s perspective, their attractiveness decreases. The number of orders placed through call centers using catalogs worked out to 1.4 per customer during a recent calendar-year period, for a total of $148 each, but came in at just 1.2 orders per customer for a total of $120 each for those who moved to buying on the Internet. It’s a trend that appears to continue over time. Our data shows that for the call center/catalog-only customer, total spending rose more than 11% to $148 from $133 in a recent year-over-year period, while for those customers who migrated to the Internet, spending edged up to roughly $120 from $118, not even a 2% rise.
Despite the ease and ubiquitous availability of online shopping, it turns out that a significant number of people prefer the experience they get through a call center, whether it’s because they believe the service is more helpful or personalized or simply because they would rather interact with another human being. Broadly speaking, a full 24% of shoppers who had recently bought items by way of a catalog said they prefer to make purchases over the phone as opposed to using a website.
When viewed through the lens of age, however, we see a strikingly different picture. Of women ages 18 to 30 who bought an item they first saw in a catalog, 64% went to the brick-and-mortar location to make their purchase, while 32% bought the item online and just 4% purchased the item over the phone.
The behavior of such a critical group of shop- pers is a powerful leading indicator. It signals that on one hand, the use of phone-based call centers will likely fade over time, but on the other, use of the catalog will not.
It is also a testament to the power of omnichannel, of which the catalog is a critical component.
One retailer that has long sought to leverage that power is Nordstrom. The high-end provider of fashion apparel and accessories revamped its catalog operations, with circulation of 60 million, after spending $1 million annually on testing and analysis. It took half of the resulting $36 million in savings and used it to drive online sales, which boosted total net revenue the following year by 23%. As the company noted in its subsequent annual report, “We’ve learned already that customers who have a multichannel rela- tionship with Nordstrom spend four times as much with us as those who do not.”
Restoration Hardware has learned a similar lesson. To that end, the luxury home furnishings retailer’s most recent spring catalogs totaled some 1,600 pages, compared with approximately 1,000 pages in total during the same period the year before.
J. Crew has moved to marry its catalog with the ultimate online inspiration hub for shoppers: Pinterest. The retailer posted its entire September catalog on the pinboard-style site, allowing Pinners to pre-order items from the fall line a day before the printed version was released.
Online-only men’s clothing retailer Bonobos, meanwhile, whose handful of brick-and-mortar locations function only as showrooms, started offering print versions of its catalog this summer.
The future of retailing is omnichannel and it includes catalogs
For consumers, omnichannel means having a seamless brand experience, regardless of how they’re accessing that brand. And as the data makes clear, consumers still want to access their favorite brands with a catalog in hand.
For retailers, analytics and data mining are core competencies that are not only necessary for managing catalogs, but also, in a world increasingly powered by big data, for managing their businesses overall.
5 November 2013