MICKEY MOUSE'S next big role: e-commerce renegade.
The Walt Disney Company, an icon of mainstream America, will move against the grain of conventional business strategy this spring when it stops distributing a catalog that has filled the mailboxes of tens of millions of households for the last decade, and instead embarks on a Web-only initiative.
"Customers almost dictated this to us," said Paul Gainer, vice president of Disney Shopping, a division of Disney Consumer Products. "Once they go online we just don't see them going back to the phone."
The move bucks a trend that has practically become gospel in online commerce in the past several years — namely, that retailers who sell through the combined channels of catalogs, Web sites and physical stores engender more customer loyalty and bigger profits than those that do not.
Many online retailers lack the means to open traditional stores, so this so-called multichannel approach has been beyond their reach. But they still have the photos, call centers and warehouses needed to put together a decent catalog operation.
Why catalogs? Simple, executives say: they're pretty. Unlike most other advertising media, catalogs are something customers want to cozy up with on the couch and browse, sans mouse. Partly on the strength of that idea, companies like RedEnvelope, Ice.com, Amazon and eBay, among many others, have gotten behind the concept and distributed catalogs in recent years.
But useful as they may be, Mr. Gainer said, catalogs were simply not ringing the registers as loudly. Disney spent $18 million to mail 30 million catalogs last year — half of them sent in the holiday season. The holiday mailing went to similar groups as the previous year's did, yet Disney had a 45 percent drop in phone orders. The number of customers who responded to e-mail and other online marketing messages, meanwhile, skyrocketed.
"I think it's time to focus just on e-commerce, and see how great we can be," Mr. Gainer said.
Jim Coogan, president of Catalog Marketing Economics, a consultancy based in Santa Fe, was critical of Disney's decision, calling it "something I see a lot from the e-commerce world."
"What almost inevitably happens," Mr. Coogan said, "is that the business has lower costs, as expected, but a much greater-than-expected drop in sales. Typically companies expect to hold onto almost all the Web sales and are surprised when that doesn't happen."
Disney isn't the first cataloger to cut back radically on its mailings in an effort to shift more business to the Internet. In 1999, Lands' End cut its catalog circulation by 9 percent; its revenue soon fell by nearly twice that percentage, in an experiment that many online executives still point to as evidence that catalogs are more critical to driving Internet sales than they may appear.
But Mr. Gainer says 2006 is a much different selling environment online. Not only have high-speed Internet connections led to more aggressive online buying by mainstream customers, but search engines are considerably more effective in helping attract those customers than they were in 1999.
Mr. Gainer said the unit, which sold $160 million of products last year, did not make the decision lightly. His team tested various catalog mailing approaches in the last six months to analyze if it should keep the catalog operation running. But no matter the approach, online orders grew much faster than telephone sales, to the point that more than 80 percent of Disney Shopping's sales now come online. In fiscal 2005, Disney's consumer products division, which includes stores, product licensing, catalog and the Internet, sold nearly $21 billion globally.
By eliminating the catalog, Disney will save a substantial amount of money. In addition to closing a call center in Kansas earlier this month, Mr. Gainer said he had eliminated an undisclosed number of other staff positions. "We had some people with expertise in print, production and photography," he said. "Some have been restructured, some will be replaced with online-specific positions."
The $18 million that went into the catalog division will instead be used to buy search-engine advertisements, improve the company's e-mail marketing campaigns and develop a more extensive roster of third-party sites, known in industry parlance as affiliates, to help refer buyers to Disney.com.
Disney.com will see "consistent double-digit sales growth" as a result of this switch, Mr. Gainer predicted, compared with just 5 percent sales growth in 2005. "Our marketing will be much more efficient online than with print."
While that may be true, Disney is not getting much slack from the analyst community. "I think this is really short-sighted," said Donna L. Hoffman, professor of marketing at Vanderbilt University.
Ms. Hoffman said that customers who shopped using a particular retailer's stores, catalogs and Web site spent 15 percent more with that company than those who shopped through just one of those three components. "Disney's just leaving all of that on the table," she said.
Catalogers have struggled to maintain costs amid rising postage and printing costs in the past year, Ms. Hoffman said. "And people are definitely cutting back. They're printing fewer catalogs, with less pages and they're reducing their call center staff. But no one's saying 'Let's get rid of catalogs because they cost too much.' "
Ms. Hoffman also suggested that reversing course could be difficult. "It's really hard to get back the cataloging expertise they're throwing out. What if they decide it was a mistake, and need to get those back, which at some point if they're flush with cash they might do?"
Not a chance, said Mr. Gainer. The company plans two final catalog drops of a million pieces each, in March and April.
"You may see print materials in the future, a postcard or something, but it will only be to drive traffic online," he said. "There won't be another 80-page catalog." _________________ *~deb~*
onecutemoose Bouncing Between Wonderland & Neverland
Joined: Nov 09, 2005 Posts: 6730
Posted: Thu Feb 23, 2006 7:45 pm Post subject:
Hmmm...not bad. I wonder how manypeople get onlie becasue they see their catalog lying around though...or does everyone check the online site at least three times a week to see what bargain may be available??
Like the above 2 posts, I check the site almost daily as well as getting emails. And because Donna is still on the mailing list too, we get 2 catalogs at the house as well as whatever catalog comes with the order.
We glance through the catalogs but have never ordered from them. I think the deals are more up to date on-line. Maybe they will lose some catalog sales from people who don't have internet access, but I think more people will just order on-line. _________________ [
Joined: Nov 09, 2005 Posts: 10426 Location: Swansea Mass.
Posted: Fri Feb 24, 2006 4:02 am Post subject:
They are not losing too many sales. My DW seems to have a
Disney.com box delivered to our house two or three times
a week. The only use we ever got out of the catologs were
that DW would let DD pick out what see likes, which is everything,
then she would wait for an on-line sale.
Well, as one of the folks that is always "shopping" online at www.disneyshopping.com, let me say that it will hurt sales. There are many, many times I see something in the catalog that I missed online, or didn't have time to scroll through every last page of their site, but I had a chance to look through the catalog in the evening and went looking for something on the website later. Just because the final order was online does not mean we aren't using the catalog to shop - just that we like to put the items in our online shopping cart ourselves - not through an operator that takes too long.
Besides, many times you can find out the details or see the pictures more clearly in the catalog than you can online. The online pictures are too flat and the items are not pictured in a "setting". That doesn't always sell to well. Not that I won't still buy, but maybe not the same things. _________________ Kathy
"There's a great big beautiful tomorrow, shining at the end of every day..."
I think what they're going to find is that there are a lot more people than they're considering who like to browse the catalog while catching up on recorded TV Shows, or even in the bathroom than want to sit down at the PC, choose to shop, and go to the site to order. They're assuming that by only having the online ordering available, that everyone goes with the intent of ordering. There have been many times I've seen something in the catalog and then gone online to order it. Not to mention the kids who won't be badgering Mommy to order them something because they saw it in the catalog - if they aren't allowed online alone, they won't have any idea there's stuff there for Mommy and Daddy to buy.
However, I will admit that they have a crappy filtering process for addresses - at one time, we were getting 4 copies of each catalog, sometimes around christmas 12 a month. If they woluld spend the time and money on a filter to cut excess catalogs to exactly same addresses, it would cut the cost tremendously.
I would be all in favor of a big Wish Book for the whole year in November, and a seasonal update of just collectible seasonal stuff. All of the beach towels, pajamas, toys, clothes and the other stuff they sell year round could be in the one big catalog, and Holiday could be in supplements. Again, a MAJOR cost savings.
I work for the catalog/.com division of my company. We rely upon our catalogs to sell the product and use the internet to place the orders. There are things that the internet can do a catalog can't...track previous orders, determine a buying pattern, up-sell/cross-sell items based upon what you're ordering, etc. But the catalog is what grabs you to begin with. Artdude is COMPLETELY correct (yeah, there's always a first time! ) that they are not looking at the market properly. You'll see catalogs back within a few months.
As for address cleaning; there are software packages and even companies that can clean their database and remove ALL the duplicates and then implement measures to prevent the duplicates from happening again. Small investment now could save them MILLIONS in the long run. _________________ When you're curious, you find lots of interesting things to do.
--Walt Disney
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