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ATLANTA — The triple threat of catalogues, e-commerce Web sites and stores — once considered an uneasy combination that could prompt cannibalization — is proving to be a brand-building business model.

This story first appeared in the November 5, 2003 issue of WWD. Subscribe Today.

“A few years back, these channels were separate businesses within companies, with speculation that each channel could take business away from another,” said Amy Blakenship, director of the Shop at Home Information Center division of the Direct Marketing Association in New York.

“Today, channels are connected and cross-referenced to build a total business, with no either/or competition. Customers expect and demand the convenience of shopping when, where and how they want. Internet sales have actually made customers more comfortable with remote shopping.”

Multichannel customers are proving to be highly loyal, spending more and making more trips to stores than single-channel shoppers, she added. Since 1998, catalogue sales have grown 9.2 percent annually, faster than brick-and-mortar retail sales, which increased at a rate of 5.3 percent. Internet sales are projected to rise 25 percent this year to $40 billion.

Analysts said retailers with strong catalogue operations are taking market share away from big department stores, as that sector has waned and struggled to reinvent itself.

Bob Gibbs, president of Gibbs Planning Group, a Birmingham, Mich., retail consulting firm, noted that catalogue customers shop stores armed with information, resulting in bigger transactions and less browsing.

In turn, catalogueue and Internet businesses give retailers more sophisticated customer research data than point-of-sale information alone can. Catalogue retailers pinpoint successful store locations based on detailed sales information in specific zip codes.

“We know if we have $150,000 in annual catalogue sales from a zip code cluster, we can open a store there and do $1.5 million in annual sales, and that the store will be profitable within a year,” said Margery Myers, vice president of corporate communication and public relations for Talbots.

After a store’s opening, that area’s catalogue sales initially dip as much as 20 percent, but that business always bounces back within the first year, she said.

Talbots, an early proponent of multichannel retailing, derived up to 70 percent of its total sales from catalogues before going public in 1987. That percentage has flip-flopped, though, with retail sales now making up 85 percent of Talbots $1.6 billion total sales and catalogue and Internet carrying the balance. By January, the firm plans to have a total of 977 doors. Talbots’ catalogues have a circulation of 48 million, with 26 separate books a year.

“Just having catalogues alone is limiting, as customers want to touch and feel merchandise, and they still like the social experience of shopping,” said Myers. “Catalogues and Internet are a smaller, but critical component.”

Catalogues clearly drive store traffic, with 70 percent of store customers who also get the book reporting that catalogues motivated their trip to the store, said Myers.

Well-established catalogue businesses, such as Coldwater Creek and J. Jill, are rapidly expanding retail operations, with a built-in customer base that helps make for successful openings.

“Our store openings have long lines of women who show up carrying catalogues,” said David Gunter, director, corporate communications at Coldwater Creek, a Sandpoint, Idaho, gift-apparel retailer founded in 1984.

The company will have 66 units by holiday and plans to open 500 nationally in the next 10 years. With mostly 5,550-square-foot stores, the company is testing smaller, 3,500-square-foot units, in centers with similar co-tenants, including Chico’s and Talbots.

Catalogue, Internet and retail sales each represented about one-third of the firm’s $501 million in sales last year, but within the next two years, retail sales will grow to more than half of the business.

“With roots in catalogues, we can build brand awareness and get customer data that pure brick-and-mortar retailers can’t get,” said Gunter.

Along with data for potential store locations, catalogues help stores’ merchandising strategies, with data on sizing, color or styling preferences.

J. Jill, a catalogue company launched 17 years ago in Quincy, Mass., began an aggressive retail campaign in 1999. With 123 stores, J. Jill has since opened between 25 and 35 units a year, and is shooting for around 300 stores within the next decade. Half of the $350 million total sales now comes from stores, with catalogues at 35 percent and 15 percent from the Web. Stores should continue to grow, while catalogue sales, with a circulation of around 80 million, are expected to be flat, and Internet sales will settle at around 20 percent, said officials.

“The most profitable customers are those that shop multiple channels,” said Alex Viteri, marketing director.

J. Jill integrates businesses by offering in-store returns for catalogue purchases, e-mail promotions that can be redeemed in stores and credit card promotions for 5 percent off, valid in all channels.

“The experience customers get in the stores, with special events such as ‘girls’ night out’, is helping build the brand in a way catalogues can’t,” he said.

Chico’s FAS Inc., a Fort Myers, Fla., retailer, meticulously tracks sales data from catalogues, Internet and store sales. The retailer, founded in 1983, launched a catalogue in 1999 that by 2000 grew to 3 million mailings a month. Catalogue and Internet sales are still 3 to 4 percent of sales, but the numbers understate their value as marketing and advertising tools.

As Chico’s number one advertising vehicle, catalogues account for 60 percent of the total marketing budget.

“Catalogues are a 50-plus page advertisement going right into our prime customers’ homes,” said Jim Frain, senior vice president, marketing. “From our database, we target customers with a rifle, not a shotgun, approach. It’s better than spending $100 million on a generalized advertising campaign where you don’t know the customer or the results.”

The day that monthly catalogues land in homes, Chico’s changes its print and TV ads and Web site content to coordinate with catalogue product offerings and visuals. Ads always include Chico’s 800 telephone number and Web site address, as does each page of the catalogue. Chico’s found that at least 25 percent of store sales are generated by a $10-off catalogue, that customers redeem in stores.

“Our number one priority if to drive store traffic, but across all channels, we always have the same product, price, image and presentation,” said Frain.

As catalogues have become advertising tools, the company now spends 50 percent more on creative than in 1999, on photographers, models and exotic shoot locations, for increasingly dramatic visuals. With a more editorial approach, catalogues have fewer items on a page, with looks presented as wardrobes. Videos shot on catalogue shoots are used in TV ad campaigns for consistent presentation.

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