What is the nature of the relationship between catalogs and websites in direct-to-consumer operations? Is Bloomingdale’s making the right decision by dropping its catalog and focusing entirely on its website operations?

Catalogs’ share of multi-channel spending is declining, but they are still playing a crucial, if changing role: driving traffic to web sites and to physical stores.That’s why such multi-channel leaders as Victoria’s Secret, Smith & Hawken, Talbot’s, L.L.Bean, Saks Fifth Avenue, Williams-Sonoma and Neiman Marcus are increasing the number of catalogs they send out in the mail. According to the Direct Marketing Associ­ation, there were over 20 billion catalogs mailed last year, the second consecutive year-over-year increase of more than 5%.

Victoria’s Secret ships 400 million catalogs a year, or 1.33 for every American. Last year its catalog and online orders accounted for nearly 28% of its overall revenues of $4.4 billion. That represented growth of 10%, more than double the 4% increase from its stores.

Now that catalogs have a new mission as brand-building devices, companies are making fundamental changes in their design. Because catalogs are meant to give consumers ideas instead of listing every item in the product line, marketers can make them smaller, more interesting, more enticing, and more personal. Indeed, by sending out different versions of catalogs to different consumers, savvy retailers can test which ones work best for which market segments.

And of course, inducements to visit the retailers’ web site are sprinkled everywhere in today’s (and tomorrow’s) catalogs.

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How widespread do you believe the skepticism over reviews on websites and posts about companies and products in online forums has become? Do you have any recommendations for e-tailers?

Consumer reviews will only grow in importance as more and more people shop and pre-shop on the Web. There is far less skepticism of consumer-generated content than of advertising, marketing or PR. Any serious abuse by providers will become evident. My message to retailers: Join the conversation.

What is “click-to-call”?

Click-to-call is a customer service that allows visitors to a retailer’s web site to enter their telephone number in a field and request to be called immediately (or in 5, 10 or 15 minutes). The service is not that widespread yet, but those retailers that do feature the service say that it enhances customer satisfaction and increases sales. Among companies offering the ser­vice are Amazon, Sears, Continental, Hermes, J. Crew and Esurance.com.

 

Retailers that feature a well-designed click-to-call option direct callers to “one-stop” agents who have all of the caller’s information in front of them on their computer screen. They are able to tell from which section of the web site the customer is calling, and are able to answer ques­tions about completed or contemplated purchases.

 

Because of the rapid growth of Internet-based phone services offered by companies such as Vonage and Skype, shoppers will soon be able to connect with a retailer directly from their computer. This will save money and time, provide convenience, and enhance customer satisfaction. The click-to-call trend is sure to accelerate.

How are retailers using customer reviews?

Customer reviews have long been part of e-commerce sites, but now the practice is being adopted by multi-channel retailers as well. Savvy integrated retailers are opening up their web sites to customers, letting them post product reviews and ratings. As a result, customer feedback is changing the way retailers market, merchandise, advertise and communicate.

 

The results have taken many retailers by surprise, reports BusinessWeek. Petco, which operates 800 pet-supply stores nationally, launched customer reviews in October 2005. It soon found that shoppers who clicked on the highest customer-rated products were 49% more likely to buy something, and they spent 63% more than shoppers who clicked on options like “top-sellers” or “lowest-priced.” Petco also noticed that customers are drawn to top customer-rated pet toys and items, even if they weren’t necessarily planning to buy them, and so made the customer-rated feature the default search button at the site.

 

Petco’s experience isn’t unique. According to a study conducted by eVoc Insights, a customer experience consulting firm, 47% of consumers need to consult reviews before making an online purchase. And 63% of shoppers are more likely to purchase from a site if it has ratings and reviews.

 

Online reviews are even having an effect in-store. Canadian supermarket chain Loblaw, which started gathering online reviews a year ago, is using the Internet customer ratings and reviews for in-store signs.

 

Petco says that its physical stores will also soon show the online customer ratings. After seeing a 500% increase in click-throughs from e-mail that promoted the ratings, the chain now plans to add them to the circulars it sends out with Sunday newspapers. Consumer-generated content is going mainstream.

Wasn’t Home Depot a latecomer to the Web?

Yes; it didn’t open is site for business until 2001, but it’s making up for lost time: homedepot.com gets up to 5 million hits a week. The company won’t say how much of its $81 billion in revenue comes from its Web site, but online sales grew 100% last year, and a lot of that came from high-end spending on large items (appliances, riding lawn mowers, refrigerators, etc.).

 

To promote its Web site, Home Depot has joined a stampede of advertisers who pay to have their Web sites appear among the top results when consumers search for products on the Internet. So far it has been a cost-effective way of getting the word out: return on advertising dollars spent on search words is running about 2-to-1 compared with its catalog. In addition the company is boosting awareness with new mini-showrooms for some of its catalog furnishings at selected Home Depot stores, where customers can order items using in-store kiosks connected to the Web site.

 

With no stores to operate or inventory to store, Home Depot’s upscale bid this time around should work out better than its Expo Design stores, which are in a holding pattern. The company is also looking for rapid growth in its wholesale unit and for international growth in China. Its biggest challenge, according to Harvey Seegers, president of Home Deport Direct, is calling consumer trends correctly: with several months of lead-time required for merchandise from Greater Asia, it is necessary to correctly anticipate consumer buying plans.

What’s with Home Depot’s new catalog?

Home Depot’s new catalog and Web site are filled with products (like high-price furniture, electronics, digital products and stemware) not usually associated with a place that sells construction materials. The new merchandise, not stocked in Home Depot stores, marks a new direction that management calls the “endless aisle” strategy, an attempt to sell stuff not just for the house, but also for the home.

 

A subsidiary called Home Depot Direct has been estab­lished to handle the company’s e-commerce and catalog operations. It makes sense: same-store sales growth is slowing, and as we highlighted in November’s Integrated Retailing, traditional retailers cannot grow just by opening new stores; they need new channels, and new strategies. In this case, the new approach is a share-of-wallet strategy.

 

For example, if customers are building gyms and media rooms in their homes, Home Depot wants to sell the building materials at the store, and the fitness equipment and electronics at homedepot.com. They also want to sell the furniture, the lighting, the fans, the appliances, even the saunas. Last year Americans spent $7 billion online for home décor and furnishings (Forrester Research); Home Depot estimates the market for home décor sales via the Internet and catalogs is worth about $18 billion and could grow about 20% a year.

 

In tackling this market Home Depot is taking on such formidable competitors as Williams-Sonoma (parent of Pottery Barn), and Cornerstone Brands (which owns Frontgate). As reported by Patti Bond in The Atlanta Journal-Constitution, Home Depot created two of its own Pottery Barn-like brands last year, 10 Crescent Lane and Paces Trading Company. Initially each brand had its own glossy catalog, but they now have been folded into the main Home Deport Direct catalog, which will be mailed to 1 million households monthly this year.

 

Home Depot will also continue to mail a separate catalog for the newly acquired Home Decorators Collection, the largest direct marketer of ready-to-assemble quality furniture and the largest direct marketer of area rugs in the

United States. With 3.3 million names, Home Decorators has the third largest customer file in the catalog business, behind only Williams-Sonoma and Cornerstone Brands.

What’s your take on the role of catalogs?

Catalogs’ share of multi-channel spending is declining, but they are still playing a crucial, if changing role: driving traffic to web sites and to physical stores.

 

That’s why such multi-channel leaders as  Victoria’s Secret, Smith & Hawken, Talbot’s, L.L. Bean,  Saks Fifth Avenue, Williams-Sonoma and Neiman Marcus are increasing the number of catalogs they send out in the mail. According to the Direct Marketing Associ­ation, there were 19.2 billion catalogs mailed in 2005, the second consecutive year-over-year increase of more than 5%.

 

  Victoria’s Secret ships 400 million catalogs a year, or 1.33 for every American. Last year its catalog and online orders accounted for nearly 28% of its overall revenues of $4.4 billion. That represented growth of 10%, more than double the 4% increase from its stores.  

Now that catalogs have a new mission as brand-building devices, reports BusinessWeek, companies are making fundamental changes in their design. Because catalogs are meant to give consumers ideas instead of listing every item in the product line, marketers can make them smaller, more interesting, more enticing, and more personal. Indeed, by sending out different versions of catalogs to different consumers, savvy retailers can test which ones work best for which market segments.

 

And of course inducements to visit the retailers’ web site are sprinkled everywhere in today’s (and tomorrow’s) catalogs.

How should search engine marketing be used?

Search engine marketing (SEM) is the art and science of making a retailer’s Web site a destination of shoppers who are searching the Internet for what the retailer is selling. For example, by paying to be listed first in search results, a retailer can increase exposure of, traffic to, and commerce conducted through its Web site. But search engine marketing can also be used to generate in-store transactions.

 

How so? Performics, the Chicago-based marketing division of DoubleClick, has developed a method to produce a hard number that retailers can work with to factor channel demand and performance into campaign metrics. It’s an “offline multiplier” that mathematically attributes online and offline value to SEM investments by quantifying the amount of offline sales influenced by search for each $1 in online sales generated by SEM.

 

Quantifying the scope of “search-influenced demand” isn’t simple. To figure out where a search-to-store strategy can be leveraged, retailers need to factor in such variables as market attributes, customer behavior, product categories and prices, online presence, and offline footprints. But it’s worth the effort: in some retail verticals, marketers can expect to find offline multipliers as high as $5-$7 (that is, for every dollar in online sales generated by search, an additional $5-$7 is generated offline). Once this dynamic is understood, search program data take on new light, accounting for more actual sales and becoming more actionable.

 

But even those retailers that have yet to develop their offline multipliers should still consider ways to cater to search-to-store shoppers, counsels Performics:

n      Consciously seek out high-value cross-channel customers.

n      Simply thinking of the search-to-store customer as a target can make a major impact on your keyword selection and SEM strategies.

n      Buy affinity or behaviorally targeted keywords.

n      Invest more on terms that reach consumers interested in lucrative product categories or categories presenting great cross-sell potential. Place emphasis on the keywords most likely to create significant in-store activity.

n      Localize national campaigns.

n      Implement geo-targeting to greet customers with landing pages touting local stores, especially with products highly likely to transact offline, such as furniture or major appliances. Be sure that these landing pages make the offline channel readily available and appealing.

n      Implement complementary merchandising tactics. For instance, whenever possible, encourage “buy online, pick up in a store” customers to purchase additional items in the store before they leave.