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Catalogue companies continue online sales despite slim profits

Catalogue companies continue online sales despite slim profits

Catalogue companies making the leap to the Internet are finding modest sales and slim profits, and significant growth is many years away. Still, they are encouraged by early reviews.

It is particularly easy and natural for catalogue companies to go on the Internet, because they have back-end fulfilment, order-entry and payment-processing systems designed to work with remote customers. And it is fairly simple to hook those systems up to the Internet.

"Anybody who's got a catalogue and is not using the Internet is out of their mind," said John Nylander, director of information services at the International Male men's clothing catalogue, a unit of Hanover Direct.

According to International Male, it is achieving modest profits by creating a simple, functional site and keeping costs down. It outsourced its catalogue creation and maintenance to Viaweb. International Male receives about 10,000 to 15,000 site visits per month. Although revenue is small, the cost of doing business online is even smaller - Viaweb charges $US300 per month, Nylander said.

Housewares company Lillian Vernon contained costs by having its marketing and information systems staff create its site.

Despite early promising sales, officials at catalogue companies said they are looking at the long term before revenue on the Internet becomes significant. "We're not talking about a lot of business here," said Joshua Tretakoff, manager of alternative media at The Sharper Image. "We're talking about $1 million total. A single one of our stores does that much business."

The company has about 90 stores worldwide.

Lillian Vernon currently earns less than $1 million per year in Internet sales, compared with $240 million per year through paper catalogues. It doesn't expect to see annual sales of several million dollars for five to 10 years. Likewise, L L Bean optimistically hopes to see online sales top 5 per cent of overall sales within three to four years.

And it will be a long time before online sales actually exceed sales from the print catalogue, if that ever happens, said electronic commerce executives.

Emily Green, an analyst at Forrester Research, said items that sell well online include products that buyers like to research, and replenishment goods, such as underwear or button-down shirts, for which going to a store and handling the product isn't important.

But, Green said, figuring out what sells is mostly a black art. "Merchants often don't understand what to offer, how to offer it and who to offer it to," she said.

"If they can nail down one of those variables, they can do well."

Mail-order sales totalled $US74.6 billion last year, according to the Direct Marketing Association, an industry group in New York.


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