June 13, 2007

Multichannel Marketing And Merchants

Our merchandising organizations provide passion and excitement. Heck, if these folks didn't believe in their product, why would the customer believe in the product?

Back in the day (i.e. pre-internet, 1995), catalog marketing was "the store". Say you mailed 1,000,000 catalogs, and put a dress on a quarter page of the catalog. If you didn't feature the dress, you sold $0. If you did feature the dress, maybe you sold $25,000 of merchandise.

Today, the internet is "the store". The catalog, while still very important, "influences" sales.

Today, you will probably sell $33,333 of merchandise instead of $25,000. However, the distribution of sales will be very different, assuming you run the dress in a catalog to a million folks on a quarter page:
  • Telephone Demand = $10,000.
  • Online Demand Driven By The Catalog = $5,000.
  • Online Demand Driven By E-Mail = $3,000.
  • Online Demand Driven By Search = $3,000.
  • Online Demand Driven By Affiliates = $1,500.
  • Online Demand Driven By Portal Advertising = $1,500.
  • Online Demand --- Organic = $9,333.
Notice the difference between 1995 and 2007. Back in the day, a merchant got product in the catalog --- where product appeared, how it was presented, and who saw the catalog made a big difference. The merchant fought for her product.

Today, there are at least a half-dozen different avenues for the same item. There are numerous folks that the merchant has to work with, in order to maximize the sales of the dress she is trying to sell.

Most important, the merchant literally has a "portfolio" of investment options. The merchant doesn't have to feel terrified if the dress is not featured in a module in the e-mail campaign, for example. The e-mail campaign only drives a small fraction of total volume of this item.

Now that I'm running my own sole proprietorship, I get to talk to a lot of people across the catalog/online industry. I'm not convinced that we have done an excellent job of teaching our merchandising friends how different the marketing world is in 2007, compared with 1995. Maybe in some ways, we have yet to figure out how different the world is.


  1. Anonymous2:59 PM

    Excellent post. 2007 is very different from 2005. But to tie into an earlier post, why is Dell moving to Walmart/retailers? What is your opinion of Epicenter opening in Delaware in 2008? Despite all the success at online, why do you think online and catalogs push still to have a physical presence despite the overhead and risks involved? Is it simply the impulse buying at a mall has more of an effect, something online hasn't been able to generate? Or do you believe other factors are at play?

  2. Catalogers and online businesses inevitably move offline because there are at least eight offline customers for every online customer.

    Even though we constantly hear about the success of online retailing, it is just a tiny fraction of total retail business.

    Look at my old company, Nordstrom. You're talking about a business that does 7.0 billion dollars in stores and 0.5 billion online.

    At some point, a catalog/online business saturates the market of potential catalog/online buyers. Dell has accomplished that. The only way they're going to grow in a meaningful way is to speak to a new audience, a retail audience.


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