August 25, 2008

Internet Sales

We should know by now that nothing ever remains the same.

This DMNews article talks about the fact that catalog brands are experiencing a drop in the percentage of sales coming from the online channel. I was moving into a new home on Friday, so this is the only story I read that morning. The results flummox me.

In an era when the entire world is slowly moving their lives online, how do you explain something like this (assuming the study is accurate)? Let's explore a few hypotheses:


Possibility #1 = Mailing Strategy: Many of my clients ask me how to stop mailing pure online customers. Stop mailing those customers, and the percentage of sales from the online channel will come down.

Possibility #2 = Generational Changes: This possibility should frighten all catalogers. Over the past five years, the differences among those over the age of 45, and those under the age of 45 have increased --- from an e-commerce perspective. Interview a 55 year old female shopper, and she'll regale in the romance of shopping next to the fireplace, catalog in hand, laptop nearby to place the order. Interview a 55 year old female shopper in Central Nebraska, and she might only have dial-up internet access. Now go interview the 30 year old female shopper in Suburban San Jose. Ask her what she thinks about catalogs, and you'll get a blank expression. It is my belief that catalog brands are losing the most important half of the customer base --- the half that ensures their long-term success --- folks under the age of 40. Catalogers rode the shopping power of the Baby Boomer generation (the catalog generation, if you will). We struggle with Gen-X (the e-commerce generation), and are utterly invisible to Gen-Y (the social media generation).

Possibility #3 = List Sources: As you know, catalogers obtain new customers in a different way than do e-commerce brands. Catalogers pick and choose potential customers from lists (well, others would say catalogers force unwanted mailings into the mailboxes of unsuspecting customers, a topic for another post) . What happens when the lists become comprised of customers who are pre-disposed to shop over the telephone, using catalogs? I call this the "co-op effect" --- having your co-op pick and choose potential customers for you, using statistical algorithms you don't understand, resulting in co-ops having a disproportionate level of control over customer acquisition. In many of my projects, I see that co-op names perform well, but are fundamentally different than the average customer acquired by a catalog brand. It is possible that we are causing our own problems.

Possibility #4 = Terrible E-Commerce Sites: Have you recently shopped an e-commerce website? Shopping online can be a cold, unemotional, heartless experience. Who wants a cold, unemotional, heartless experience other than an individual looking for the lowest possible cost? I can have an infinite number of "twits" simultaneously with folks worldwide on Twitter, but I cannot talk to other shoppers in real time on the Saks website. I've spoken with a few companies in the Pacific Northwest that are looking to change this, but it will be five or ten years before the technology rolls through the websites of leading catalog brands. And by then, it will be too late.

Possibility #5 = Stolen Market Share: There's no doubt that Zappos is stealing market share --- they didn't create a market for shoes, they just made it easy for you to buy shoes customized to your tastes, receiving the shoes almost immediately (for all practical purposes) after your order. It is entirely possible that, long-term, a Zappos or Amazon gobble up market share from customers who would normally shop on your humble website --- the operations infrastructure of these brands give them an infinite head start over us as well --- they ship quickly, and don't charge the customer much for shipping --- the opposite of the best practices of our industry.

2 comments:

  1. Pete Segal3:12 PM

    Something is not right, either in the survey itself or some factor that was edited out of the DM News article.

    If marketers were not prospecting as much on the web, then were they prospecting more in print? Otherwise how did they account for the reported 17% sales increase? Fairy dust? Did profits increase or decrease?

    Nevertheless, the possibilities you present are real marketing concerns going forward. To which I would add: young adult shoppers, although online savvy, may also enjoy the retail shopping social experience more than their elders do. When you sit with your laptop/smart phone surfing the web, are you not in a coffee bar, in a retail shopping area?

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  2. The only thing that helps me feel 10% confident in the findings is that the percentage trend was flattening in the three years prior.

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