Strategic Growth For Catalogs: Getting to the Next Level of Business

Strategic Growth For Catalogs:
Getting to the Next Level of
Business
VT/ NH Marketing Group Conference
February 13, 2012
Presented by Bill LaPierre
VP - Business Intelligence
1. Datamann & VT/NH MG
2. Datamann clients
3. First time attendees
4. More than 10 years, 20 years?
5. This is a small friendly group
2
Brookstone
Dakin Farm
Danforth Pewter
Duncraft
Gardener’s Supply
Garnet Hill
Harrington’s
Herrington
Keepsake Quilting
Lake Champlain Chocolates
Littleton Coin
Nova Toys
Orvis
PC Connection
Supreme Audio
VT Country Store
Wooden Soldier
3
4
Reasons for this Seminar
The majority of
catalogs are obsessed
with their catalog, and
fail to think online…
5
You have become addicted
to the success of your
catalog. But, you have to
have the vision and the
guts to let go of the
catalog.
6
Reasons for this Seminar
1. Lighthouse Depot
2. One Step Ahead
3. General lack of growth
4. Struggle with the concept of multichannel
5. Focus on the wrong things –
everything still ties back to the
catalog
7
Reasons for this Seminar
1. Struggling with where to spend
marketing dollars
2. How to allocate sales by channel
3. How to measure merchandise
performance
4. How to change creative to address
channels
8
Reasons for this Seminar
1. Struggling with how to find new
customers via iPads, via emails
2. Co-ops databases are stale/declining
3. Lack of new product – that sells!
4. Changing consumer – accelerating
change
5. Changing how and when they buy
9
“It amazes me how many business don’t bother to
ask their customers what their needs are (including
CT). Building a thorough understanding of your
customers and their needs, and then meeting those
needs better than your competitors, is
fundamentally, a company’s only source of
competitive advantage. All profits come from
customers, but few businesses invest enough to
understand them. Instead of developing superior
benefits, most companies (again CT included) opt
for the other growth strategy – discounting, which
moves us into commodity territory.”
10
A word about today
1. All examples are current (Fall /
Holiday 2012 or Spring 2013)
2. May get conflicting viewpoints from
speakers
3. Not a commercial for any company
(but I might sneak in a few plugs for
Datamann! – and my blog!)
11
A word about today
1. Not going to talk about PPC/SEO,
emails, affiliates
2. Not going to discuss social media
engagement
3. Not going to do any website critiques
4. These are all things that could take
their own day long seminar
12
A word about today
You need to recognize that not all
things work for all catalogs.
Don’t focus too much on what
others are doing – focus on what
is best for you.
But don’t be a lone wolf either.
13
A word about Frank
1. I really love new product, but only if it
sells.
2. There are no bad products, only bad
prices.
3. Once a dog, always a dog, and dog is only
good for selling fleas.
4. Only a customer can make a new product
famous, and picking the right ones is a
14
thank-less job.
A word about Jean
1. Jean “gets it”.
2. She understands that creative does
not stand alone.
3. She brought together creative,
merchandise and marketing better
than anyone with whom I have
worked.
15
Catalog Trends
Response rates have
fallen in the past decade,
despite all the promise of
multichannel sales, and
the number of catalog
shoppers is shrinking.
16
Catalog Trends
New channels rarely add
incremental sales. They just
shift customers. Eventually,
all companies make the shift,
and add the new technology,
but it gains no extra sales.
17
“We have had a ton of new
channels, but sales have not
fundamentally gone up, as the
result of new channels.
New channels changed
customer behavior, but not
annual purchase behavior.”
– Kevin Hillstrom
18
Catalog Trends
• On average, catalogs driving 70%
80% of total demand on web
• There are exceptions – Online
activities driving 25% to 50% of new
customer acquisitions for some
catalog companies
19
Catalog Trends
• Smaller page counts to certain
customers
• Reduce costs per book by 25% – plow
saving back into expanded circulation
or more PPC.
• More testing of different formats, not
just changes to page counts.
20
Online Trends
• 13% of Cyber Monday sales were on
mobile, mostly tablets.
• The movement of sales from phone to
website is over.
• Now, sales will move from website to
tablet.
• Shoppers from social media on
CyberMonday were 0.4% of sales
21
Online Trends
• eBay’s sales were up 19% in the 4th
quarter 2012 vs. 2011.
• 68% of eBay sales are now fixed price
• 112 million 12 month users
• Shop.org reported a 12 % increase in nonstore sales for Nov/Dec 2012
• NRF reported a 2.1% increase in Nov/Dec
2012 over 2011 for regular retail
(excluding cars, gas, food).
22
Online Trends
• Amazon grew 27% from $48 billion
to $61 billion in 2012.
• General and administrative spending
are 1.1% of net sales
• Marketing is 3.9% of net sales
• However, they lost $39 million,
compared to net profit of $631
million in 2011
23
Is this a problem for Amazon?
24
Catalogs may not
be dead, but the
future does not look
good…
25
Where are catalogs going?
26
Where are catalogs going?
27
Advantage = Catalogs
• Catalogs are proactive
• Catalogs can be better
targeted
• Show function better
(Not anymore!)
28
Advantage = Website
• Unlimited space / copy
• Multiple methods to
search (price, style, size)
• Customized
recommendations
29
Advantage = Website
• Biggest advantage = cost
(10% vs. 30%) marketing
expense
• Amazon’s marketing
expense as a percent of net
sales = 3.9% in 2012 !!!
30
Traditional Catalog vs. Ecommerce
Cost Structure
Cost
Gross Sales
Returns
Net Sales
Traditional
Catalog
105%
5%
100%
Difference Catalog to
Website
Website
105%
0%
5%
0%
100%
0%
Cost of Goods
Gross Margin
40%
60%
40%
60%
0%
0%
Marketing Expense
Selling Expense
Fulfillment Expense
Administration
30%
3%
10%
10%
10%
3%
20%
8%
20%
0%
-10%
2%
7%
19%
-12%
Contribution
31
Most catalogs recognize
they must change, but
are moving too slowly.
There is no sense of
urgency to be more web
based among catalogers.
32
Five examples
•
•
•
•
•
Online competitors
Catalog merchants
Web only products
Smaller books
Online customer acquisition
33
Your closest
competitors are web
only companies, not
other catalogs.
34
Online competitors
• Shopping engines
• Amazon
• eBay
• Diapers.com
• Walmart.com
35
Online competitors
And you drive
business their way
every time you mail
your catalog.
36
Merchants and the web
• They think a product can only
sell if it is in the book
• They don’t think in terms of
truly exclusive
• They don’t name products for
search
37
Web only products
– Why would I
want to have web
only products?
38
Web only products
– same amount
work, same cost to
carry as items in
the catalog
39
Web only products –
but are you supporting
those web only products
with emails, search and
prominence? Are they
dogs, or discontinued?
40
The most dangerous
number in the
catalog industry =
3.3
41
We have created a
mentality that 64
pages and 450
products is all the
customer needs.
42
What is the
advantage of going
smaller?
To acquire more
customers.
43
Online Customer Acquisition
You must be doing
everything to keep
up with the new
customer
44
The common refrain
of online customer
acquisition - “We
tested that (years ago)
and it didn’t work”
45
We tested that….
• Email prospecting
• Email append/correction
• Web only products
46
Online Customer Acquisition
Mobile – especially
tablets – today is where
the web was in 1995,
and still we ignore it.
47
The most important things
1. Merchandise performance
2. 12 month buyer rebuy rate
3. New customers
4. Profitability
5. Organic demand
6. Thinking differently
48
The least important things
1. Brand awareness
2. Customer engagement
3. Promotions to grab market share
4. Big data!
49
Where are catalogs going?
Some catalogs are extremely
profitable, and growing –
because they focus on
merchandise, and getting
customers to buy more.
50
Where are catalogs going?
Some catalogs are headed
toward oblivion, relying on
coupons, lowering prices,
using only the co-ops, and
racing to get more “likes” on
Facebook.
51
Where are catalogs going?
If customer engagement is so
important, where are all the
companies that have posted
15% increases in sales over a
“pre-engagement” era?
52
Where are catalogs going?
How much more profitable
are you today than you were
19 years ago, despite an
unlimited number of
marketing channels?
53
Where are catalogs going?
Some specific examples –
that show the range of where
catalogs are going.
54
Where are catalogs going?
55
Where are catalogs going?
2 CDs = $43.90
Shipping = $10.99
Total = $54.89
56
Where are catalogs going?
2 CDs = $30.90
Shipping = FREE
Total = $30.90
57
Where are catalogs going?
This is, in
theory, a totally
online company.
Why send a
catalog?
58
Where are catalogs going?
59
Where are catalogs going?
1. Slim jim format
2. 24 pages
3. Purely meant to drive
traffic to the web
60
Where are catalogs going?
61
Where are catalogs going?
2008 to 2011 Web
drivers
62
Where are catalogs going?
Received Nov. 5, 2012, 92 pages
63
Where are catalogs going?
Received Nov. 24, 2012, 148 pages64
Where are catalogs going?
65
Where are catalogs going?
The focus is on
product, and more
product. But, the
focus is also on not
wasting time building
brand with fancy
paper, letters from
the owners, or
Facebook. They grew
66
the old fashion way.
Where are catalogs going?
67
Where are catalogs going?
68
Where are catalogs going?
Prospecting
on
December 8
69
Where are catalogs going?
52 pages of the
best of the best
products to the
house file
December 8
70
Where are catalogs going?
A 6” x 10” slim
jim, with only
16 pages,
prospecting
piece.
71
Where are catalogs going?
How many
pages do you
need to convey
the general idea
of this catalog?
72
Where are catalogs going?
Both slim jims, both arrived December 4, MK
73
was 8 pages, Oneida was 16.
Both prospect books – one is 80 pages, one is
74
120, with an additional 32 page men’s insert.
Where are catalogs going?
75
Where are catalogs going?
But, you have to
make certain you
understand the
local customs…
76
Where are catalogs going?
Don’t think in terms
of free postage.
Postcards work.
77
Where are catalogs going?
Quarterly 200 page
catalog – supported by
monthly postcards.
78
Where are catalogs going?
79
Where are catalogs going?
Don’t you think
there is a more
effective way of
selling paint than
showing the can?
80
Where are catalogs going?
Victims of conglomerate management
81
When companies in
this industry merge, it
rarely means growth.
It usually results in
contraction.
82
Both received Oct. 9, to prospect lists.
Creative testing is fine if it leads to something
83
important, and is acted upon.
Where are catalogs going?
1. 44 unique catalogs on Cyber Monday
(November 26). 24 to me, 20 to
prospecting decoys, 18 received for
the first time this season
2. 35 catalogs on Tuesday November 13
3. Multiple mid-weeks with 1 or 2
catalogs daily, followed by 20 on
Saturday
84
Where are catalogs going?
We follow a predictable mailing
pattern, and allow a few dollars in
savings in co-mingling to dictate our
catalog’s success.
85
All Received October 15, 2012
86
Where are catalogs going?
Warren Buffet
bought OTC in Nov.
2012. They
manufacture 50% of
their own products.
Can now afford to
go higher, and
further set back
competition. 87
Where are catalogs going?
Tiny amount of
sales can be
attributed to
catalog.
88
Where are catalogs going?
Brookstone – 25%
of the products in
2012 catalog were
in 1993 catalog.
Laid off 25% of
headquarters staff
on Jan. 15th.
89
Four emails a day after Thanksgiving
90
Where are catalogs going?
91
Where are catalogs going?
1. No phone number
2. Does not accept credit
cards except online
3. Website mentioned once in
catalog
4. Website charges more
5. Catalog has bound in order
form with envelope
6. Assortment is not
comprehensive, just cheap
92
Where are catalogs going?
The previous examples
illustrate there are multiple
avenues to take for your
catalog. The question is which
ones are right for you.
93
Seven Key Catalog Trends
•
•
•
•
•
•
•
On page web drivers
Product videos
Being aggressive
The Merchandise Quest
Free shipping/promotions
Page reduction
Social media
Web Drivers
95
96
97
98
Inside back cover
99
These use to appear on
almost every page. Don’t
leave out important
elements.
100
101
102
103
52 page Pantry
guide – arrived
in-home
Feb. 02, 2013
104
You’ve got to
sell a lot of
bags of chips
at $4.50 each
to pay for this
space.
105
Wouldn’t it make more sense to have half the
pages, and drive people to the web? 106
Web drivers
can be product
focused as
well…
107
Five consecutive spreads like this. You could not
show this diversity, this quickly, on the web. 108
How much copy and space do you need for some of
these?
109
Product Videos
110
111
Where are catalogs going?
112
Being
Aggressive at
Getting Emails
113
Aggressive email sign-up
114
Where are catalogs going?
If you are going to be aggressive at
retaining customers, you must be
aggressive at capturing emails.
115
Being Aggressive at Getting
Emails
•
•
•
•
•
Initial pop-up
On catalog requests
On every web page – at top
First element of checkout
Everywhere
116
The
Merchandise
Quest
117
Once circulation is
maxed out, the only way
to grow sales is with
merchandise
– not channels.
118
The plethora of web
merchants, and the
recession has made
merchandising even
more important to
survival
119
1.) 47% growth
since 2008.
2.) only 24,700
fans on Facebook
(4% of 12 month
file)
Frontgate
120
Frontgate learned to adapt to a changed market with
more affordable prices, but still showing luxury. 121
As of June 1, 2012 – 3.0% of their 12 month buyers
122
As of January 25, 2013 – 4.1% of their 12 month buyers
123
Frontgate
124
Growth of Frontgate Buyer File
Year
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Frongate 12Month Buyer Growth from Growth since
Count
prior year
2008
627,011
600,691
597,823
573,860
463,821
424,122
533,752
455,596
541,474
572,305
501,134
390,847
368,476
4.4%
0.5%
4.2%
23.7%
9.4%
-20.5%
-
47.8%
41.6%
41.0%
35.3%
9.4%
0.0%
125
Where is the quest?
126
The quest…
127
What Has Changed?
The “Quest” has
moved from
merchandise to
marketing – this is so
wrong!
128
Today, in the online world,
marketing is omnipotent,
and merchandise has taken
a back seat. Will that build
loyalty, and customer
retention?
129
What Has Changed?
There is less passion for
products today. Merchants
are taking the safe route on
new products and new
vendors.
130
$85 for the retro stool, plus $ 5shipping = $90
131
Or $56 and free shipping…
132
Bill’s Mail Order Rule #1
Sell the dream.
Not your dream –
their dream.
133
134
Bonus Tip: Merchandise
Survival is not about SEO, or
mobile, or Facebook.
It is about getting
repeat purchases
and repeat purchases are driven
by merchandise.
135
Bonus Tip: Merchandise Analytics
Avoid products that lead
to a one time purchase
and you all have them.
136
One Time Products
137
132 of 199
products (66%)
were labeled
“Exclusive”
138
You want
customers to
know it is
exclusive to
you with out
having to tell
them.
139
You want
people to say
“I find stuff
in here I
don’t see
anywhere
else”.
140
The Importance of Product
Density is So Underrated
141
The Importance of Product
Density is So Underrated
142
The Importance of Product
Density is So Underrated
143
The Importance of Product
Density is So Underrated
Opening
Spread!
144
The Importance of Product
Density is So Underrated
Opening
Spread!
145
The Importance of Product
Density is So Underrated
Different
density
depending
on product
146
The Importance of Product
Density is So Underrated
Different
density
depending
on product
147
Cool, inspiring new
products are what get
customers excited
about your catalog
148
What is more
important – show use
or alternate color?
149
Wow! A
color other
than white
or beige!
150
151
152
153
MPB – Merchant Product Blindness
154
Where are catalogs going?
Customer Acquisition
and Retention
(later this afternoon)
155
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157