Multichannel Strategy Seen as Sales Jolt

Multichannel merchants are tapping the stores, catalogues and Internet to improve market share, strengthen fashion and boost profits.

DALLAS — Multichannel merchants are seeking to tap the power of the store, catalogue and Internet triumvirate to improve market share, strengthen fashion trend statements and bolster the bottom line.

Retailers such as J. Crew, J.C. Penney and Nordstrom are using a range of marketing and merchandising strategies, such as e-mail promotions, online catalogues, in-store catalogue kiosks, sales circulars, sales associate referrals and exclusive merchandise.

The strategies are helping to solidify proprietary store brands, underscore destination fashion offerings, drive traffic to fashion catalogues and Web sites and, more important, play up the synergies among the three channels.

While not abandoning catalogue businesses, some retailers have refocused direct mail in favor of building Web or physical store growth. In fact, retailers such as Neiman Marcus, Macy’s, Penney’s and J. Crew view multichannel integration as a top priority in their growth strategies, and they want to link stores, catalogues and the Web as symbiotic and unified destinations in consumers’ minds.

“Multichannel integration is a must for survival in today’s retail landscape,” said Nita Rollins, executive director of marketing at Resource Interactive in Columbus, Ohio, a marketing and technology firm that helps companies plan, build and assess Internet-related data.

Catalogue sales are projected to grow by about 6 percent annually and to reach $175 billion by 2008, according to the Direct Marketing Association, New York, which provides information and services to direct marketers and consumers.

E-commerce sales in 2004 were $117 billion, up 26 percent from $93.2 billion in 2003, according to The E-Tailing Group, Chicago, which provides strategic planning and consulting services for online merchants, noting that the Internet is moving up as the preferred channel for sales spurred by catalogue recipients — and that cross-channel shoppers actually constitute the majority of all online consumers, including 65 percent of shoppers in 2004.

Not surprisingly, pure-play merchants are becoming an anachronism. About 6 percent of store retailers operate in only one channel, according to the Aberdeen Group, Boston, a computer and communications market research and consulting firm. Aberdeen found that 44.7 percent of retailers have three channels of store, catalogue and Internet, with one-quarter having integrated systems across all channels.

This story first appeared in the May 25, 2005 issue of WWD.  Subscribe Today.

The company’s research also shows that 20 percent of retailers sell through catalogues and the Internet; 19.5 percent sell through stores and the Internet; 1 percent through stores and catalogues; 7 percent are only online; 2 percent are only catalogue or some other direct, non-Internet channel, and 4.1 percent sell only through a store.

“Over 60 percent of Internet spending in 2004 was done by women, and it’s never been more important for online merchants to gratify the digital needs of consumers,” Rollins said. “Women especially are responding to improved links between catalogues, stores and the Web. And it’s exceedingly important to understand the thought processes involved in women’s Internet purchasing decisions.

Despite the surge in popularity of Internet shopping, catalogues continue to grow in volume and as a marketing tool for three-channel retailers. Catalogue coupons are helping to drive traffic to stores, and catalogue mailing lists are often the first source for potential shoppers to be used in e-mail campaigns and to lure customers to in-store events. Some item-driven catalogues offer merchandise not offered online or in stores. Like the Internet, catalogues are also favored by those who prefer to shop at home anytime.

“We look at catalogues and the Internet as channels to meet our customers’ needs and how they’d like to interact with us,” said Roxanne Al-Farez, executive vice president, direct, at J.Crew. “We mail over 50 million catalogues a year and let customer feedback, much of which we gain on the Web through customer interaction, be a guide for much of the content of those catalogues. We recently added a wedding catalogue and Internet subsite and will make extensions this year for petites and other special sizes. Later this month we’ll be launching a new catalogue called J.Crew Untucked, which offers casual summer wear. We’re looking at technology now to have the catalogue on our Web site.”

Sears Roebuck & Co. stopped mailing its so-called Big Books several years ago, but the company continues to offer specialized catalogues, such as those geared to health and wellness, workwear, tools, children and the kitchen. In 2002, Sears, the $39 billion retailer, bought catalogue house Lands’ End for $1.9 billion in a bid to take its apparel offerings more upscale and also to capitalize on Lands’ End’s catalogue and Internet infrastructure. Lands’ End began selling online in 1994 and quickly struck gold: Internet sales last year were about $600 million.

Kmart purchased Sears and its Lands’ End operations for $11 billion in 2004. The companies are poised to gain from the catalogue/Internet synergies of the deal, which go beyond having Web site links. Kmart is expected to exploit Lands’ End’s finely honed catalogue, distribution and fulfillment capabilities and Sears’ popular and praised Internet site, which is ranked as one of the Web’s top shopping destinations, as well as its vast real estate portfolio of prime shopping sites. The Lands’ End catalogue accounts for about two-thirds of overall annual sales of $2 billion.

L.L. Bean, the Freeport, Maine-based purveyor of outdoor clothing and supplies, is aiming for sales of about $1.3 billion this year. Over the past few years, L.L. Bean’s annual sales have averaged 5 percent growth. The company mails more than 200 million catalogues a year, including at least 10 specialty books for niches such as fly fishing, camping and hiking gear and housewares. The privately held company is building and cross-promoting its growing Internet business in its stores and myriad catalogues, and it sells online through English- and Japanese-language Web sites. L.L. Bean operates 19 stores across the U.S. and nine units in Japan.

Seattle-based Nordstrom posted sales of $7.1 billion last year, almost $400 million of it from direct sales. According to the chain’s most recent annual report, its direct-to-consumer sales grew by 28 percent in 2004, which Nordstrom attributes to a 58 percent gain in Web sales. Catalogue sales fell 3 percent, which Nordstrom said is in line with its strategy to shift some catalogue customers to the Internet. Nordstrom entered the catalogue business in 1993. In keeping with its three-channel strategy, Nordstrom mails catalogues and other direct mailers to drive traffic to its stores and Internet site.

Presenting a cohesive and consistent brand image and unified product offerings across multiple channels is a major part of the long-term strategy at J.C. Penney Co., which has a growing catalogue and Internet division.

“Multichannel is a competitive advantage for J.C. Penney Co., and we’re leveraging our preexisting catalogue infrastructure of distribution and fulfillment operations as we further grow stores, catalogue and the Internet,” said John Irvin, executive vice president and president of catalogue and Internet.

Penney’s catalogue and Internet division contributed to the $18 billion company’s improved results in 2004. Internet grew by 32 percent to more than $800 million in 2004 and represents almost 30 percent of total J.C. Penney catalogue/Internet sales.

“This approach allows us to offer products and solutions that are relevant for the lifestyle needs of our customers and a breadth of assortment not found at other department stores, such as more sizes, colors and categories,” Irvin said. “Internet continues to be our fastest-growing channel and should exceed $1 billion in 2005, an increase of about 25 percent. We will also have new POS in stores in 2005 and 2006 that offer jcpenney.com access. Customers are shifting from print to Internet and are less reliant on major catalogues such as Big Books; however, these catalogues remain an important part of the media mix.”

Boston Proper, a lifestyle fashion catalogue company based in Boca Raton, Fla., last month launched an e-commerce Web site with improved and faster navigation and more compelling fashion presentations, among other new features, said Mike Tiernan, chief executive officer.

This year, Boston Proper will mail almost 35 million catalogues throughout the U.S. to its affluent female target customers between the ages of 35 and 55. Last year, Web sales generated 31 percent of sales, but are now generating 41 percent of total sales.

“The increase in online sales is attributed to record online order counts, with full-price sales exceeding expectations and a strong trend of higher average order sizes,” Tiernan said. Boston Proper also is beefing up its catalogue offerings with increased page counts, expanded size ranges, higher circulations and brand extensions that include Sport and Travel catalogues.

“Our virtual catalogue goes online before it hits mailboxes, helping us to quickly pinpoint fashion winners and bestsellers and helping us immensely with the age-old challenge of inventory forecasting issues,” Tiernan said.

RedcatsUSA, the U.S. catalogue and e-commerce division of Redcats, the home shopping division of Paris-based luxury conglomerate PPR, mailed more than 500 million catalogues to American shoppers in 2004 and shipped 42 million items and 18 million packages during the year, according to Eric Faintreny, chairman and chief executive officer of RedcatsUSA.

RedcatsUSA, based in New York, owns 10 catalogues and 10 Web sites, including plus-size brands Lane Bryant Catalog, Roaman’s and Jessica London as well as misses’ brands Chadwick’s, Lerner Catalogue and La Redoute. Faintreny noted that the company’s Internet business grew 25 percent in 2004 while catalogue sales were up by at least 10 percent. Last month, RedcatsUSA’s Internet sites had 7.2 million visits.