With Black Friday – weekend – week- month just around the corner and the expected increases in Cyber Monday on November 26, I thought it would be interesting to see how the online shopping industry of today compares to the catalog shopping industry of 2001.
I wondered if the offline catalogue business had just shifted to online. It’s a bit tough to answer but here are some things to consider…
Forrester Research is predicting that online shopping for 2012 will reach $210 billion. This is up from $192 billion in 2011 representing a 9% increase. They also report that online sales are approximately 7% of total retail sales in the US.
The Direct Marketing Association (DMA) reported in 2001 that total catalog sales of products to consumers was $120 billion for that year - 3.6% of total retail sales that year.
What are the similarities and differences and what can retailers learn from online shopping replacing catalog shopping over the last 10 years?
Model and Methods
The business model for online shopping today is almost identical to catalog retailing since the days of Sears and Montgomery Wards. The model consists of four points:
- Present product offers directly to consumers;
- Provide useful information to help consumers make their purchase decisions;
- Price the products high enough to make sufficient margin but low enough to entice consumers;
- Source quality and efficient producers and suppliers that can meet demand.
The method is where we find the differences. Online shopping has leveraged advances in technologies, business capabilities, and supply chain approaches since 2001.
Here are four retail trend differences between catalogues and online shopping
Product offers.
We’ve moved from push to pull. Mailing catalogs to consumers was a push method: push information into the hands of consumers and then letting them make their decisions. Online shopping however is more of a pull strategy; customers are actively looking for and pulling information about products. The consumer is already considering purchasing something at the time they are pulling the information towards them.
Providing information
Catalog retailers provided information that was current at the time the catalog was printed. There was no opportunity to change that information once it was printed. Online shopping retailers can change information anytime. Therefore, online retailers can test different sales copy and see which is most effective.
Pricing
Once prices were in the catalog, they could not be changed. So catalog retailers had to price their products while a great amount of uncertainty existed with respect to demand. Online shopping retailers can adjust prices based on demand and supply almost in real time. Major sites now change prices by hour rather than day or week.
Producers
Manufacturers are able to react to lower or higher demand by ramping up or down manufacturing more easily than they could in 2001. Producers have gone to great lengths in the last 10 years to streamline the overall supply chain and reduce inventory levels.
Could online shopping retailing go the way of catalog retailing?
We are already seeing methods change again. Let's consider those four areas again in the context of retail trends.
Present offers
The trend is emerging back to pushing information. Daily deal firms are pushing offers to consumers every day via email. Amazon is doing it at as well based on the customers’ previous searches. Their email list is as valuable to them as the catalog vendors' mailing lists were 10 years ago. Mobile advertising is a hot topic in retailers boardrooms as they look to grab the customer anywhere and everywhere via discounts and coupons.
Providing information
Data is not just provided in real-time for online shopping, but also provided based on location-based information. The offers you may receive are becoming more and more based on your location at the time the offer is made.
Pricing
Online shopping prices are becoming individual. The consumer has the ability to impact the price he or she pays if they can get others to sign up for the deal via your Facebook, email, tweet or other updates.
Producers
Greater speed and quicker cycle times. SAP, the predominant software provider to large manufacturers, offers software http://scn.sap.com/docs/DOC-1838 that reduces the time from hours to seconds so manufacturers can react even more quickly to online shopping trends.
Some niche players like Restoration Hardware are using catalogues to stand out from their online competitors.
All that said, products are now finding us in subway tunnels, in magazines, you can even scan a picture of an item while it is on a bystander and purchase from your smartphone.
What do you say? Have you shopped from a catalogue lately? Could online shopping retailing go the way of catalog retailing?
By
Bob Phibbs
