April 26, 2015

How Does The Catalog Influence Sales? 2015 vs. 1995 ... A Cataloger Must Read

Ok, folks, this is becoming a really big deal. In nearly every project I work on, the way customers, channels, and merchandise all interact has changed, and the changes are not well understood. So let's explain the changes.

Let's pretend you have three product lines ... WIDGETS ... WUDGETS ... and WEDGETS.

Let's pretend you mail one catalog a month ... a 96 page catalog.

In 1995, your catalog merchandise assortment was as follows:
  • 64 pages of WIDGETS.
  • 32 pages of WUDGETS.
  •   0 pages of WEDGETS.
In 1995, based on your advertising / merchandising strategy, here's what you sold:
  • $5,000,000 of WIDGETS.
  • $2,500,000 of WUDGETS.
  • $0 of WEDGETS.
  • $7,500,000 total.
Do you see what happened there? Your sales were roughly similar to the page distribution offered. You didn't offer any WEDGETS in your catalog, and you didn't sell any WEDGETS. 

A generation of catalog marketers grew up with these rules. The rules became hard-coded. If you are in a meeting, and you are dealing with a catalog professional older than sixty years old, the hard-coding becomes problematic, doesn't it?

In 2015, the world is fundamentally different. Let's review what I see across all of my projects.
  • 64 pages of WIDGETS.
  • 32 pages of WUDGETS.
  •   0 pages of WEDGETS.
But in 2015, sales happen two ways (assuming you don't have a retail store ... if you do, then the story gets even more interesting). First, we have sales attributed to the catalog.
  • $2,300,000 of WIDGETS.
  • $1,300,000 of WUDGETS.
  • $300,000 of WEDGETS.
  • $3,900,000 total.
What do you see in that summary? What is different? Discuss!

And then, second, we have sales that happen online, without the aid of a catalog. Yes, a ton of sales happen even if catalogs are not mailed. Your mail/holdout tests prove that this happens.
  • $1,500,000 of WIDGETS.
  • $1,500,000 of WUDGETS.
  • $600,000 of WEDGETS.
  • $3,600,000 total.
What do you see in that summary? How did sales vary?

So we add catalog-driven sales to pure online marketing and organic sales, and we get the following story for 2015:
  • $3,800,000 of WIDGETS.
  • $2,800,000 of WUDGETS.
  • $900,000 of WEDGETS.
  • $7,500,000 total.
And to repeat, here is the story that's been hard-wired into the minds of many catalog professionals:
  • $5,000,000 of WIDGETS.
  • $2,500,000 of WUDGETS.
  • $0 of WEDGETS.
  • $7,500,000 total.
Do you understand what happened there? Several things happened ... several moving parts, right?

In 1995, if you didn't feature an item, you didn't sell the item. In 2015, if you don't feature an item, you will still sell the item online ... and I know, I know, there's going to be an outcry of anger from many catalogers ... "Kevin, you're wrong and I'm going to tell you why, we have internet-only items and they don't sell at all, so you're an idiot." Might I posit that you aren't featuring internet-only items properly? How often are they featured on the home page? How often are they featured on key landing pages? How often do they appear in email campaigns? Do you feature those items in magazine ads? Television? Pop-up stores? Amazon? When you bury items on the website, of course the items won't sell ... but they aren't selling because they aren't in the catalog ... they aren't selling because you aren't even trying to sell them!!!!

In 1995, 100% of the sales happened because you mailed catalogs. In 2015, 50% of the sales happen because you mail catalogs (20% of those catering to a 40 year old customer, up to 70% for those catering to a 70 year old customer).

In 1995, you had one audience ... a catalog audience ... and that audience had a consistent merchandise preference. In 2015, you have multiple audiences, different audiences by channel (be very skeptical of the omnichannel crowd's suggestion that you have one audience ... look at sales by channel ... sales are fundamentally different by merchandise category ... strongly suggesting different audiences). Why not serve multiple audiences with different merchandise assortments?

In 1995, WIDGETS dominated, capturing 67% of sales. This was because there was one audience and one advertising strategy. In 2015, WIDGETS capture less than 50% of sales. This happens because you have multiple advertising strategies, varied customers across channels, and featured WIDGET items in the catalog drive WEDGET sales online. When I worked at Nordstrom, we learned that you didn't have to feature MENS merchandise in a catalog ... ever ... mail/holdout tests by product category showed that featuring WOMENS items in the catalog caused customers to shop MENS online and in the store. Have you performed a comparable analysis for your business?

In 1995, the catalog merchandise assortment determined everything. In 2015, the catalog merchandise assortment may well be holding back the growth of your business, especially if your merchandising and marketing teams ignore the true merchandise assortment sold online without the aid of a catalog.

I see these trends in nearly every project I perform. The longer we hold on to our catalog heritage, the longer we stunt growth of merchandise categories that appeal to online buyers. We hurt the future by holding on to the past.

Does this make sense to you?

Do you have reporting to help you understand this dynamic?

Contact me (kevinh@minethatdata.com) if you want to better understand what is happening in your business.