February 11, 2009

A Look Ahead

The most important component of the Multichannel Forensics project is the five year, forward-looking sales forecast.

For many of us, we've experienced three or four or even ten consecutive years of customer acquisition response degradation. After adjusting for the sometimes epic collapse of Q4-2008, there's been a consistent drop in performance of maybe ten percent per year, for each of the past several years.

With the economy fundamentally changing e-commerce growth rates, we can no longer count on easy online sales growth. Without easy online sales growth, catalog customer acquisition activities are about to be exposed in a big way.

Here's an example. Let's assume that catalog customer acquisition continued to decline at ten percent a year, for each of the next five years. And let's assume that online customer acquisition (customers not driven by catalog mailings) only increases by five percent per year, for the next five years. What do we observe?

2008 Results HHs Rebuy Spend Value Demand
Existing Buyers 49,182 55.0% $300.00 $165.00 $8,115,030
LY New Catalog 15,000 40.0% $250.00 $100.00 $1,500,000
LY New Online 10,000 30.0% $225.00 $67.50 $675,000
Lapsed Buyers 125,000 8.0% $200.00 $16.00 $2,000,000
TY New Catalog 13,500 100.0% $160.00
$2,160,000
TY New Online 10,500 100.0% $140.00
$1,470,000
Total Volume



$15,920,030












2009 Forecast HHs Rebuy Spend Value Demand
Existing Buyers 46,050 55.0% $300.00 $165.00 $7,598,267
LY New Catalog 13,500 40.0% $250.00 $100.00 $1,350,000
LY New Online 10,500 30.0% $225.00 $67.50 $708,750
Lapsed Buyers 153,132 7.2% $200.00 $14.40 $2,205,099
TY New Catalog 12,150 100.0% $160.00
$1,944,000
TY New Online 11,025 100.0% $140.00
$1,543,500
Total Volume



$15,349,616












2010 Forecast HHs Rebuy Spend Value Demand
Existing Buyers 44,903 55.0% $300.00 $165.00 $7,409,004
LY New Catalog 12,150 40.0% $250.00 $100.00 $1,215,000
LY New Online 11,025 30.0% $225.00 $67.50 $744,188
Lapsed Buyers 178,279 6.5% $200.00 $12.96 $2,310,495
TY New Catalog 10,935 100.0% $160.00
$1,749,600
TY New Online 11,576 100.0% $140.00
$1,620,675
Total Volume



$15,048,961












2011 Forecast HHs Rebuy Spend Value Demand
Existing Buyers 44,417 55.0% $300.00 $165.00 $7,328,748
LY New Catalog 10,935 40.0% $250.00 $100.00 $1,093,500
LY New Online 11,576 30.0% $225.00 $67.50 $781,397
Lapsed Buyers 201,940 5.8% $200.00 $11.66 $2,355,432
TY New Catalog 9,842 100.0% $160.00
$1,574,640
TY New Online 12,155 100.0% $140.00
$1,701,709
Total Volume



$14,835,426












2012 Forecast HHs Rebuy Spend Value Demand
Existing Buyers 44,053 55.0% $300.00 $165.00 $7,268,777
LY New Catalog 9,842 40.0% $250.00 $100.00 $984,150
LY New Online 12,155 30.0% $225.00 $67.50 $820,467
Lapsed Buyers 224,815 5.2% $200.00 $10.50 $2,360,019
TY New Catalog 8,857 100.0% $160.00
$1,417,176
TY New Online 12,763 100.0% $140.00
$1,786,794
Total Volume



$14,637,383












2013 Forecast HHs Rebuy Spend Value Demand
Existing Buyers 43,612 55.0% $300.00 $165.00 $7,196,057
LY New Catalog 8,857 40.0% $250.00 $100.00 $885,735
LY New Online 12,763 30.0% $225.00 $67.50 $861,490
Lapsed Buyers 247,252 4.7% $200.00 $9.45 $2,336,001
TY New Catalog 7,972 100.0% $160.00
$1,275,458
TY New Online 13,401 100.0% $140.00
$1,876,134
Total Volume



$14,430,875

Without the dynamic, organic growth of the e-commerce channel, sales begin a slow tumble, as catalog customer acquisition fails to provide the opportunities once enjoyed by catalog brands.

This is what we need to adjust to. We're not going to see a rapid return to the economic conditions of the bubble period --- but we will see a continued flattening of organic e-commerce growth, and we will continue to see the death of catalog customer acquisition.

Strategically, we need to work on a plan for replacing what have now become expensive catalog customer acquisition names from co-ops. This should be one of the top three objectives we have for 2009 --- customer acquisition experimentation.

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