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After The Big Book, The Big Race


Marketing

AFTER THE BIG BOOK, THE BIG RACE

Nandini Kumaran hates shopping malls. So the New Jersey real estate agent spends an ever-increasing chunk of her annual budget on goods ordered from catalogs. In recent months, she has bought everything from computer software to household gadgets to clothes from catalogers such as L.L. Bean, Lands' End, and J.C. Penney. "After being on my feet all day, it feels great to let my fingers do all the work," says the 38-year-old mother of three.

Thanks to millions of such shoppers, the catalog business has posted steady growth for the last five years (chart). Lately, though, sales have really heated up. This year, catalog sales will rise 6%, to $50.5 billion estimates Arnold Fishman, president of Marketing Logistics Inc. That's double the 3% growth rate for traditional retailers. For catalog companies, the boom is already showing up in earnings: Spiegel Inc.'s second-quarter net income rose to $4 million from $122,000 a year ago, on sales of $516 million. Lands' End Inc.'s profits were up 42%, to $3.6 million, while sales jumped 9.4%, to $151 million.

What's behind the pickup? New marketing strategies from catalogers, including a move into TV, are one factor. Sears, Roebuck & Co.'s decision last January to close its fabled Big Book is also giving the business a boost. Former rivals have been rushing to pick off ex-Sears customers. "The demise of the Big Book created an opportunity and an opening for us," says Theodore Deikel, CEO of Fingerhut Cos.

Sears is also cashing in on its exit from the mass-market catalog business by selling its 14 million-name mailing list to other catalogers, including Hanover Direct and Athletic Supply, in exchange for a share of their catalogs' revenues. Sears is nego- tiating a deal with Spiegel, which in late August acquired New Hampton Inc., a women's apparel cataloger with prices comparable to Sears'. "It makes sense for us to team up with Sears," says Spiegel CEO John J. Shea. Neither company would elaborate on the talks.

Erstwhile rivals have various strategies for lopping off Sears' former catalog customers. This fall, Fingerhut and Montgomery Ward & Co., through a joint venture set up in 1991, will release their own big books: a larger-than-usual, 200-page Montgomery Ward Direct catalog and a separate, 440-page Fingerhut offering. Both will offer a wide array of products. For Ward's, that's quite a comeback: It shut down its own original big-book catalog in 1985.

Meanwhile, Spiegel is targeting ex-Sears shoppers by increasing its catalog's home-furnishings section. Spiegel says it has seen "a strong increase" in such sales during the past two months--perhaps, says Shea, because of former Sears customers. J.C. Penney Co. is wooing such buyers by accepting the Sears Discover Card for purchases from both its catalog and its retail stores. Boosted by an infusion of Sears customers, Penney's July catalog sales were up 22%, to $226 million.

Other catalogers are successfully scaling back their books. In the past few months, Dodgeville (Wis.)-based Lands' End, which has a 15.6 million customer list, has reduced mailings of its full-size catalogs and increased mailings of specialty catalogs featuring products such as kids' clothing and bath and bedroom accessories. "We found that specialty catalogs fetch a better response," says Charlotte LaComb, a Lands' End spokes- woman. "The bigger the book, the less productive it is." Sharper Image Corp. has cut down on stereos and other low-margin electronics.

DRAMATIC STEP. The boom in TV home shopping hasn't gone unnoticed, either. Many catalogers are pressing into electronic retailing. "TV shopping is too big a medium for the companies to ignore," says consultant Richard Grunsten, president of GSP Marketing Services. Starting in November, Sharper Image will sell items from its catalog on QVC Network. Lands' End and Spiegel are also mulling moves into TV.

J.C. Penney may take an even more dramatic step. This month, it will begin testing a satellite video service from which customers can shop at home by pressing buttons on their TV remote controls. Says William E. McCarthy, president of Penney's catalog division: "We want to be ready to go in whatever direction the consumer goes." So even without the Big Book, catalog-shopping fans should have plenty to keep them busy.Sunita Wadekar Bhargava in New York, with Stephanie Anderson Forest in Dallas and Lois Therrien in Chicago


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