Customers Move From Catalog To Online To Retail

I've been telling you that Multichannel Forensics continually indicate that customers move from online to retail, glad to see others are also observing this relationship:

• IBM Research Suggests Customers Prefer To Move From Online To Retail, Not From Retail To Online, via Direct Magazine.

When you know that customers move from Catalog to Online, then from Online to Retail, then use Online to research future Retail activity, you view your multichannel marketing activities very differently than you view them through the multichannel marketing best practices we're currently being taught.

And long term, for those with a retail presence, the e-commerce channel is dwarfed by the "internet as a research channel" concept. The direct marketing community and web analytics community isn't ready for this reality.

If you are a retailer who has run simulations illustrating long-term customer migration, you've probably observed something like this (comparing an online/direct customer to a retail customer --- click on the image to enlarge it):



Again, you're likely to see this type of trend if you are Gap or J. Crew or Eddie Bauer or Best Buy or Ann Taylor or any brand with an online/direct and retail channel. Customers seem to migrate from online to retail. When that happens, they are much less likely to buy online, much more likely to research online. This changes how you view your website.

Restoration Hardware Sales Shift To Catalog? Is That A Good Thing?

Direct Magazine wrote a brief story about sales shifting from "retail to catalog" at Restoration Hardware (RSTO). Here is the story they shared with you, quoted word-for-word:

• Restoration Hardware Inc. has reported that a significant share of its revenues have shifted from retail to direct marketing sales.

  The company reported direct marketing sales for the third quarter that ended Nov. 3 were $97.2 million, an increase of $16.6 million compared to the same quarter last year.

  Restoration Hardware generated 56% of total revenues from its catalog in the third quarter this year, compared to 36% during third quarter of 2006.

  The Corte Madera, CA-based firm attributed the shift to greater direct sales to increased catalog circulation and adding more pages to catalogs.

  It reported $76.5 million in revenues for its stores in the third quarter.

Wow! They must really be doing great, huh?

Let's see what was omitted from this report from Direct Magazine. Compare with a statement written by PR Newswire, via Excite:

• EBIDTA was a loss of $15 million in Q3-2007, vs. a loss of $5 million in Q3-2006. In other words, Restoration Hardware lost 3x as much money in a quarter where "catalog" sales increased dramatically.

• Direct-to-Consumer (Catalog + Internet) sales were 56% of total ... Direct Magazine quoted that 56% of the sales were Catalog. Ugh.

• SG&A rose 4.1%, as the direct-to-consumer channel has a higher expense rate than the retail channel. In other words, sales shifted to the direct-to-consumer channel, where less sales flow-through to profit than in the retail channel. Also, pages circulated increased, adding to marketing expense.
  

If you're reading Direct Magazine, you learn that catalog results were great!

If you're reading the actual comments from management, you learn that direct-to-consumer (catalog + online) sales increased, but more marketing dollars were spent to cause this shift, and it required more operational expense to process the sales, in-part leading to a dramatic decrease in profit of $10,000,000 in the quarter.

Also, if all those multichannel pundits are "right", why didn't all this catalog marketing, all of this paper in the mail, cause retail sales to increase dramatically? I thought paper drove sales in retail stores? Isn't that what we're told, over and over and over?

Retail sales were down 24% vs. last year's third quarter.

What do you do to filter the content you read via trade journals and vendors, or do you filter the content?