E-tailers alter marketing plans, invest new dollars in old medium - Brief Article

DSN Retailing Today, Dec 11, 2000 by Molly Prior

NEW YORK -- A new breed of retailer is adding to the catalogs, toy books and circulars that spill out of overstuffed Sunday newspapers during the holiday rush. Led by e-tail giants Amazon and eToys, the list of newbees to the newspaper advertising circuit include 800.com, REI.com, Lucy.com and Cooking.com, among others--all of whom have adopted the marketing strategies of traditional retailers by pursuing holiday catalog drops nationwide.

After experimenting with expensive mass-market advertising campaigns that yielded little consumer recognition, many etailers see more targeted efforts, catalogs, as the most cost-effective marketing solution.

"Mass advertising has a considerable amount of wasted circulation," said Elaine Rubin, chairman and co-founder of Shop.org, a trade association for e-tailers. Rubin said that as more and more shoppers move on line, direct marketing will yield a bigger return on investment. One in five Americans, or about 55 million people, will shop on line this holiday, up from 41 million last year, according to on-line polling firm Nielsen/NetRatings.

"You cannot niche on a niche," said Rubin. "You can only begin to target when you have mass." A Shop.org survey showed average customer acquisition costs dropped dramatically from $40 in the second quarter to $20 in the third quarter as e-tailers move from mass advertising campaigns to direct marketing.

Even with the onslaught of on-line shoppers this year, e-tailers still struggle with broadening customer reach. Spokespersons from Amazon.com and eToys.com said their catalogs are aimed at attracting new customers to the site, as well as introducing e-commerce to late adopters. The eToys.com catalog was intended as an e-commerce primer. "When you look at the catalog and its design, you will see it serves as an on-line shopping primer with easy-to-read and informative content," said eToys.com communications manager Jonathan Cutler.

Amazon dubbed its catalog a Web-a-log. "It's not a catalog, but rather a marketing piece," said public relations manager Kristin Schaefer. It is intended to introduce present and potential customers to Amazon.com's diverse mix of product categories. Customers will have to log on to the site to buy. The Web-a-log does not contain an 800-number or an order form. It was a proactive step for Amazon.com. Previously dropped weekly circulars from the site's consumer electronics store and Toys "R" Us' age-old circular tradition hinted to the effectiveness of a catalog drop. Neither company would comment as to whether they would drop additional catalogs in the coming year.

Direct marketing consultant Gary Hennerberg, of Hennerberg Group, said the inherent limitations of e-commerce ought to convince e-tailers to drop multiple catalogs in the future. "If e-tailers want to have a target audience coming to their site, which they should, than it makes sense to have an integrated approach between catalog and e-commerce." He suggested start-up e-commerce companies drop four catalogs per year, giving e-tailers time to review the results and decide what merchandise works and what doesn't. The pricing, promotions, and creativity should be tested to ensure results.

In addition to broadening consumer reach, catalogs lend e-tailers credibility. Rick Timcke, ceo of the specialty toys and hobby store KidsToysPlus.com, began shipping a catalog to give the company legitimacy in consumers' eyes. Timcke also rcently opened a KidsToysPlus.com near the company's headquarters in British Columbia, Canada.

Rubin of Shop.org agreed that catalogs lend credibility to an existing business by letting the consumer know an ecommerce company is a longterm player. Catalogs and other direct marketing pieces also help reinforce the brand. Jupiter Communications analyst Heather Dougherty said "It's difficult to browse on line, catalogs allow consumers to browse at their leisure."

The catch phrase in retailing is "multiple channels." And just as traditional retailers are scrambling to create a presence on the Web, e-tailers are looking for other avenues to reach consumers.

"Last year there was a lot of marketing spent in a lot of different areas. It was a big testing year," said Rubin. There will always be niche retailers that ought to stick with one retail channel, but the leaders going forward will be multi-channel said Rubin.