Oprah, Pottery Barn, And The Curse Of Multiple Channels

Two different meetings yesterday, two different topics, same basic issue.

Oprah: In a meeting yesterday, a woman mentioned that there's "too much Oprah" these days. She used to watch Oprah's daily show, and used to subscribe to her magazine. Then new channels were offered --- Oprah's XM channel, Oprah's "Big Give" on ABC, and Oprah's weekly book discussion of Eckhart Tolle's "A New Earth". This individual mentioned that she is "migrating" toward the spiritual content on XM and the weekly webcast, finding the old content less relevant, too "Hollywoodish".

Pottery Barn: In a separate meeting, a young lady mentioned that she recently purchased from Pottery Barn's website, only to receive a catalog a few weeks later. She asked me this question ... "Why do they do this? I sure don't want the catalog, that's why I ordered online."

Both issues highlight the curse of multiple channels.

Oprah starts a channel on XM, and between subscribers and DirecTV listeners, she maybe has a million listeners. That sounds good! Oprah creates an online television channel to discuss spiritual issues, and another two million folks leap to the new channel. Good! ABC broadcasts a new show from Oprah, and another fifteen million viewers give it a try. Good!

Underneath the rampant success of multiple channels is the issue of "channel shift". Individual customers, best customers, for a period of time consume all channels. Eventually, the customer identifies the channels most relevant to her, and drops her patronage of channels she identifies as "less relevant".

That's the challenge retailers like Pottery Barn face. Back in the stone ages of e-commerce (aka 2001), e-commerce customers were catalog customers. The best thing you could do was mail a catalog to the e-commerce customer! We knew this, because we measured the effectiveness of this strategy, and it worked! This strategy was still reasonable in 2005. And then, all of a sudden, the world changed. Customers believe they now have control. The catalog, a welcome addition in 2005, is viewed by some as an intrusion.

The retailer (or media mogul) gets this information "after the fact". In other words, it is really hard (ahead of time) to identify the point where Oprah's fan base is frustrated with so many channels.

In retail, we have tools that help us understand when audiences are embracing multiple channels, or are sick and tired of incessant marketing of multiple channels. Most of the time, our customers are secretly telling us when they no longer find various channels to be relevant. We just need to measure it better.

Williams Sonoma / Pottery Barn And Multichannel Growth

The DMA is selling a research report suggesting that "Retailers Have Multichannel Skills But Need Help Integrating Channels". The conclusions are based on questions brands answered in a recent survey.

Is there any place we can verify the claims outlined in the report?

Let's look at long-term sales trends from a respected and profitable multi-brand retailer, Williams Sonoma (WSM), owner of the flagship Williams Sonoma brand and the popular Pottery Barn brand.

One can go back to at least 1991 to understand how Williams Sonoma grew sales in the direct-to-consumer (catalog + website) channel and in the retail channel (here are results from the past five fiscal years).

Williams Sonoma introduced the e-commerce channel in 1999. In the table below, annual results are listed, as well as pre-internet and post-internet results:

Williams Sonoma: Comp Store And Direct Channel Growth
Year	Direct Growth	Retail Comps
2007 (Nine Months)	2.9%	0.5%
2006	4.5%	0.3%
2005	13.6%	4.9%
2004	17.1%	3.5%
2003	20.8%	4.0%
2002	10.2%	2.7%
2001	8.4%	1.7%
2000	33.1%	5.5%
1999	34.2%	6.4%
1998	15.7%	5.0%
1997	11.2%	2.8%
1996	11.9%	4.6%
1995	16.2%	3.4%
1994	55.0%	16.5%
1993	23.9%	13.8%
1992	-0.2%	2.1%
1991	-3.8%	0.5%
Results: 2000 - 2007	13.5%	2.9%
Results: 1991 - 1999	17.1%	6.0%

It isn't a stretch to suggest that Williams Sonoma and Pottery Barn do an above-average job of integrating channels, per the recommendations offered in the DMA research report.

And yet, during this era of multichannel goodness, direct-to-consumer sales are growing slower post-internet than pre-internet. Retail comp store sales are growing slower post-internet than pre-internet.

Some of this is due to scale --- as a business grows, it becomes harder to grow sales as a percentage of prior year sales.

Could some of this be due to a failure of perceived multichannel best practices? Adding an e-commerce channel to an established catalog channel should result in new customers, a new audience, and much improved growth, right?

Instead, we see slower growth rates.

We're also told that catalogs and e-commerce drive comp store sales increases. Pages circulated increased a total of 36% in the past four years, but comp store sales increases are, at best, tepid.

Williams Sonoma is a respected brand with increasing sales and robust profit, profit levels that any company would be proud of. Williams Sonoma exhibits most of the multichannel marketing behaviors and cross-channel integration that we're told we must employ to be successful.

To date, multichannel best practices at Williams Sonoma have not translated to incremental increases in direct-to-consumer sales or retail comps.

Why do you think this is the case? Are the multichannel experts missing something? Is Williams Sonoma an anomaly? Is there a multichannel brand that executes multichannel marketing well, demonstrated via publicly reported sales and profit increases?

Ann Curry And The Today Show Feature The Cute Kids Cancelling Catalogs

If you were at work this morning when The Today Show featured a piece on how to cancel catalogs, please watch the segment here.

Ann Curry sat at a computer monitor, and opted-out of Red Envelope, Pottery Barn and Mrs. Fields catalogs.

Kudos to Catalog Choice and those cute kids for getting attention via grass roots efforts. This goes to show you how individuals and small teams can make a difference. How things get done in this world is rapidly changing ... Catalog Choice provides a great example of how to market a useful service via social media, illustrating how mainstream media does the work for you when social media is executed properly.

Catalog Choice reports that they've had an onslaught of traffic today. Ted Wells reports that 500 visitors an hour are checking out his blog.

The Today Show, via their website at MSNBC, is challenging all schools to do what the cute kids accomplished. Here is a link to the Today Show Challenge.

Of course, there's some level of irony involved in having NBC and The Today Show take shots at companies like Red Envelope, Pottery Barn, and Mrs. Fields.

When I ran Ann Curry's video on the MSNBC site, I was subjected to unsolicited advertising from Best Buy, I could not fast-forward over the ad, MSNBC forced me to watch it. I might have wanted to opt-out of that advertising opportunity, however, I could not.

Here's a sampling of the national companies that pay the salaries of employees of The Today Show via unsolicited commercials I did not have a choice to opt-out of while watching the program in real-time this morning:

• Honda, Smuckers, Hyundai, Pillsbury, Olay, Air Wick, Dannon, Clorox, Turbo Tax, Slim Fast, Pampers, Cheerios, Kashi, Olive Garden, Progresso, Oreo, Bank of America, Head and Shoulders, Nestle, Lysol, Visine, Capital One.
  

Obviously, I cannot speak to any details on the practices of these companies ... I am simply hopeful that all of these companies don't over-harvest trees or mis-use fossil fuels to produce the products, services and packaging that paid the salaries of the folks bringing us The Today Show, the show that promoted Catalog Choice.

Online Advertising And The Marketing Digital Divide

Using SpyFu, one can get very rough estimates of what leading brands spend on online advertising on a daily basis. The data is prone to errors and inaccuracy, but can be used to view general trends.

Take three companies that thrive on catalog marketing, namely L.L. Bean, Lands' End, and Pottery Barn. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.

• Annual Average Spend Across These Brands = $10,201,000.
• Average Annual Clicks Generated From The Advertising = 12,015,000.
• Average Cost Per Click = $0.87.

Next, look at three large retailers, namely Macy's, Nordstrom and Neiman Marcus. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.

• Annual Average Spend Across These Brands = $23,550,000.
• Average Annual Clicks Generated From The Advertising = 33,312,000.
• Average Cost Per Click = $0.78.

Finally, look at two larger-sizes online pureplays, namely Zappos and Blue Nile. Here is what SpyFu suggests these companies spend in online marketing, on an annual basis.

• Annual Average Spend Across These Brands = $40,654,000.
• Average Annual Clicks Generated From The Advertising = 63,483,000.
• Average Cost Per Click = $0.68.

Notice that as we progress from companies with a catalog heritage, to companies with a retail heritage, to companies with an online heritage, the amount of online spend dramatically increases --- and, the average cost per click actually decreases. This is counter to what analytical folks expect to see happen.

I tried to pick companies that had annual traffic that was directionally similar. How the businesses use advertising to drive web traffic is very different. What this does show is that there may be a marketing digital divide. There may be a way for catalogers and retailers to migrate advertising online, and actually see better returns on investment.

As postage escalates, traditional catalogers have an opportunity to emulate the techniques that the folks at Zappos and Blue Nile use. Over the next five years, there is an opportunity to transition advertising strategy from print to online. There is an opportunity to cross over the marketing digital divide.