Using Catalogs to Coax

The direct-marketing approach to e-tailing is winning converts--and customers

Hard to believe, but the best tactic for generating online sales dates all the way back to 1888. That's when Richard Warren Sears and Alvah Curtis Roebuck began the modern era of catalog retailing by mailing out lists of their wares to potential consumers. Sure, the original Sears catalog went under years ago. But increasingly, those wanting to succeed in online retailing are using the direct marketing tactics pioneered by Sears and Roebuck (S ) and honed by the likes of L.L. Bean and Victoria's Secret.

Just ask Bill Miller. The CEO of exotic goods e-tailer tested a slim paper catalog last year. This year, he's back with 10 of them. "The customer reaction was pretty remarkable," Miller says of the effort. The catalog helped eZiba expand its customer base from mostly young, Web-savvy consumers to older shoppers he calls "the museum crowd." These people "are more comfortable responding to a catalog," he says. He's now applying other direct marketing tools, such as postcards and targeted print ads.

Even e-tailing heavyweight Inc. (AMZN ) is starting to see the light. After mailing out brochures for Christmas and Father's day, Amazon tested the waters with a catalog of home and garden products that included a toll-free number for orders. While Amazon won't discuss the results of these efforts, Andy Jassy, general manager of customer relationships, says the company will continue experimenting with direct marketing.

Although the advantage seems clear today, some catalog retailers took a while to discover how well their old methods work. Coldwater Creek Inc. (CWTR ), a catalog seller of women's clothing, tried tactics such as banner ads to drive shoppers to its Web site. One year and $1 million later, Chairman Dennis Pence says he now relies almost exclusively on his catalog and other direct marketing methods to get shoppers online. That's contrary to the advice he got at the start of his e-tailing effort. "But none of the new stuff worked as well as what we've had all along," he says.

Sure, mailing catalogs isn't cheap. A good-looking, glossy book can cost anywhere from 50 cents to $1 per customer--and that's assuming you're mailing millions of them at volume discounts. E-mail campaigns, by comparison, can cost just pennies per pair of eyeballs. And rates for banner ads, which have been dropping for months, are also far less expensive than a direct mailing. A program with a high cost up front can be hard for a cash-strapped Web site's marketing manager to justify.

Used wisely, though, catalogs can add up to profits. Industry researcher, in conjunction with the Boston Consulting Group, studied 156 online shopping sites. Unlike Web-only stores and the sites of brick-and-mortar retailers, those run by catalog companies were consistently profitable. Why? In part because bringing customers in the virtual door costs them far less than it does other Web stores. Catalog-based e-tailers using direct marketing techniques spend an average of $14 to acquire a new online customer, according to the study. It costs traditional stores $34 to accomplish the same thing. And Web-only e-tailers spend $55 to acquire a customer. "The direct marketing mindset has proved invaluable on the Web," says Elaine Rubin, chairman of

There's no doubt that direct marketing is less sexy than Super Bowl ads, bus wraps, or TV spots featuring sock-puppet mascots. As the emphasis shifts away from eyeballs and page views toward the bottom line, though, a profitable way of wooing customers can't be dismissed. And that means e-tailers are now looking for managers with experience in databases, mailing lists, and other direct-marketing programs, Rubin says. "They're the hottest guys around," she says. Richard and Alvah would be proud.

By Ellen Neuborne

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