Catalogs feed off Internet growth
December 16, 2002-- Home Textiles Today,
Catalogs may be a small part of the $3 trillion consumers spend at retail, but their sales growth has been outpacing that of the overall industry since 1996, thanks in large part to the natural synergy between catalog and Internet operations.
Between 1996 and 2001, catalog sales grew 11 percent annually, twice the rate of the retail industry's 5.5 percent increase, according to the Direct Marketing Association (DMA). Helping to propel that growth has been the Internet, which has skyrocketed from 1 percent of catalogers' revenues in 1996 to an estimated 29 percent of revenues in 2002, or $34 million, the DMA reported.
"There's no question that there is crossover between the two channels. It's the richest customer to have," said Harvey Kanter, vp, managing director, Eddie Bauer Home. The catalog is not only a "significant vehicle to drive its own business, but also for customers to look at and shop online. It's used as a tool in that regard," he said.
"The Internet continues to grow as a percent of our direct business. We'll have over 50 percent penetration this year," Kanter added.
Brylane Home — which launched its Kitchen catalog earlier this year and plans to roll out another strategy next year and then another in 2004 — is increasing its penetration of the Web as well, said Steve Goldberg, president, Brylane Lifestyle Group. "We're very happy where we are, but we have even greater ambitions of where we can take it."
After boiling down its brand portfolio to five over the past two years, Hanover Direct is now turning its attention to the Internet, which churned a 24 percent increase in sales this year. "The future is in the Internet," president and ceo Tom Shull told HTT. The company recently upgraded all of its sites, improving layout and ease of navigation. "Catalog will always be an important and core business, but the majority of sales will eventually come from the Web." A significant number of customers shop online with the catalog on their laps, he added. "It's a very important brand-building effort."
Fingerhut, once a Top 15 retailer with $312 million in annual home textiles sales, also is looking to the Internet to help build a customer base as it re-enters the retail fray under new management. Sold off by Federated Department Stores to wholesaler Tom Petters and former ceo Ted Deikel, Fingerhut mailed its first catalog in a year in early November. The company's website went live shortly thereafter, spokeswoman Mary Pernula told HTT, and the company plans to drop a second book in January.
"We're still optimistic to continue to some mailings, though it's still too early to rate the results," she said.
At Crate & Barrel, which launched e-commerce in 1999, Internet sales have overtaken catalog sales, contributing 10 percent to annual revenues while the catalog kicks in 7 percent, said Bette Kahn, spokeswoman. Combined, the consumer direct operations totalled $744 million last year, ceo Gordon Segal told HTT, a significant jump.
To drive that momentum going forward, Crate & Barrel will extend its full catalog furniture offerings to the Internet by the late spring 2003, after it puts its logistical infrastructure in place. It's important that "people get their furniture in one piece," Segal told HTT. "If you outsource too much, that's where you get in trouble."
The Internet is showing itself capable of shoring up even troubled catalog operations. Case in point: JCPenney, which has lowered circulation and page counts this year as it revamps its book into a lifestyle-driven vehicle and reorganizes its buying and fulfillment operations. Although catalog sales for the third quarter ended Oct. 26 plummeted 21.2 percent, "we're seeing Internet sales increases of over 20 percent," said Vanessa Castagna, chairman and ceo of JCPenney store, catalog & Internet operations, speaking during a conference call to discuss the results. She predicted the Internet business alone would grow to $1 billion over the next five years.
Williams-Sonoma, which leverages its brands through catalogs, stores and the Internet, has said that customers who shop both the catalogs and Internet spend 15 percent to 20 percent more. Its West Elm catalog, which debuted last spring and targets a younger, middle-market customer, will boost circulation from 1 million to 4 million next year, the company said. The launch of e-commerce is planned for 2003, with stores to follow in 2004.
"The companies that have survived and thrived on the Web are the ones that predated the Internet," said Amy Blankenship, director of the Direct Marketing Association's Shop-At-Home Information Center. "The catalog industry is built on trust. If a customer has a bad experience with a site she will not go back. Catalogs understand that."
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