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.