Using Catalogs to Coax

Hard to believe, but the best tactic for generating on-line sales dates all

the way back to 1888. That’s when Richard Warren Sears and Alvah Curtis

Roebuck began the modern era of catalog retailing by mailing out lists of their

wares to potential consumers. Sure, the original Sears catalog went under years

ago. But increasingly, those wanting to succeed in on-line retailing are using

the direct marketing tactics pioneered by Sears and Roebuck and honed by the

likes of LL Bean and Victoria’s Secret.

Just ask Bill Miller. The CEO of exotic goods e-tailer eZiba.com tested a

slim paper catalog last year. This year, he’s back with 10 of them. "The

customer reaction was pretty remarkable," Miller says of the effort. The

catalog helped eZiba expand its customer base from mostly young, Web-savvy

consumers to older shoppers he calls "the museum crowd." These people

"are more comfortable responding to a catalog," he says. He’s now

applying other direct marketing tools, such as postcards and targeted print ads.

Even e-tailing heavyweight Amazon.com is starting to see the light. After

mailing out brochures for Christmas and Father’s day, Amazon tested the waters

with a catalog of home and garden products that included a toll-free number for

orders. While Amazon won’t discuss the results of these efforts, Andy Jassy,

general manager of customer relationships, says the company will continue

experimenting with direct marketing.

Although the advantage seems clear today, some catalog retailers took a while

to discover how well their old methods work. Coldwater Creek, a catalog seller

of women’s clothing, tried tactics such as banner ads to drive shoppers to its

website. One year and $1 million later, Chairman Dennis Pence says he now relies

almost exclusively on his catalog and other direct marketing methods to get

shoppers on-line. That’s contrary to the advice he got at the start of his

e-tailing effort. "But none of the new stuff worked as well as what we’ve

had all along," he says.

Sure, mailing catalogs isn’t cheap. A good-looking, glossy book can cost

anywhere from 50 cents to $1 per customer–and that’s assuming you’re

mailing millions of them at volume discounts. E-mail campaigns, by comparison,

can cost just pennies per pair of eyeballs. And rates for banner ads, which have

been dropping for months, are also far less expensive than a direct mailing. A

program with a high cost up front can be hard for a cash-strapped Web site’s

marketing manager to justify.

Used wisely, though, catalogs can add up to profits. Industry researcher

Shop.org, in conjunction with the Boston Consulting Group, studied 156 on-line

shopping sites. Unlike Web-only stores and the sites of brick-and-mortar

retailers, those run by catalog companies were consistently profitable. Why? In

part because bringing customers in the virtual door costs them far less than it

does other Web stores. Catalog-based e-tailers using direct marketing techniques

spend an average of $14 to acquire a new on-line customer, according to the

Shop.org study. It costs traditional stores $34 to accomplish the same thing.

And Web-only e-tailers spend $55 to acquire a customer. "The direct

marketing mindset has proved invaluable on the Web," says Elaine Rubin,

chairman of Shop.org.

There’s no doubt that direct marketing is less sexy than Super Bowl ads,

bus wraps, or TV spots featuring sock-puppet mascots. As the emphasis shifts

away from eyeballs and page views toward the bottom line, though, a profitable

way of wooing customers can’t be dismissed. And that means e-tailers are now

looking for managers with experience in databases, mailing lists, and other

direct-marketing programs, Rubin says. "They’re the hottest guys

around," she says. Richard and Alvah would be proud.

By Ellen Neuborne

in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc