Whither the Holiday Catalog?

Dec. 20, 2004 -- -- When the makers of the popular Power Ranger dolls told JCPenney in 1994 they could not make enough dolls for the holiday season, the retailer axed the toy, expected to be one of the hottest gift items of the year, from the JCPenney holiday catalog. A month later, the toymaker recanted, saying there were plenty of dolls to meet the huge demand.

With more than 11 million catalogs already in mailboxes across the country, JCPenney officials wrangled over how best to publicize the toy to their shoppers. A decision was made to post a photo of a Power Ranger on the company's fledgling Web site alongside the 1-800 ordering number. And so began the boom of Internet retail.

Today, American consumers are avoiding shopping mall crowds in record numbers, preferring to order holiday gifts with keyboard and mouse clicks rather than braving checkout lines. And though catalog sales -- most shoppers use the 1-800 number -- still outpace Web orders, the explosion of Internet retail has some experts wondering about the future of the Web's shop-from-home predecessor, the mail-order catalog.

Internet retail sales have nearly quadrupled during the past five years, growing to an expected $52 billion in 2004, according to statistics from the Direct Marketing Association, a New York-based trade group. Catalog sales have also grown during that period, but at a much slower pace.

"It's primarily a shift in dollars from off-line to online sales," said Graham Mudd of Comscore Networks, an online tracking and research firm. "This is the beginning of what I assume is a long trend."

Comscore forecasts shoppers will spend $15 billion online in the November-December holiday season, up 25 percent from last year. And the DMA projects overall Web-based retail sales will jump 27 percent this year compared with a modest 6.7 percent rise for catalog sales.

But that doesn't mean catalogs are going the way of the Betamax. Retail experts say catalogs remain an important component of marketing. Companies believe catalogs are often the first place consumers see merchandise and therefore serve as a valuable tool in motivating people to buy. The sharp rise in Web sales may have taken some dollars away from the catalog business, but catalogs continue to drive customer interest and generate Internet, phone and even in-store sales.

"The print catalog is far from being a dinosaur," said the DMA's Amy Blankenship. "Companies will tell you that when they send out their catalog, Internet traffic and orders spike. Some of those Internet sales are driven by catalog shopping."

The DMA projects 2004 retail catalog sales at $143 billion, still nearly triple Internet sales. But the growth of Web sales suggests that disparity will shrink in the future.

JCPenney has printed a catalog for more than 40 years, the first appearing in 1963. The circulation has varied during that time, from 2 million issues of the original to about 10 million of the 2004 edition. Since the Power Rangers experiment 10 years ago, the company has watched Web sales skyrocket.

"Internet sales have really taken off, and part of those sales came out of what was traditionally catalog sales," said Bernie Feiwus, JCPenney senior vice president. "When you send out some of these big books it can be expensive. And the cost of delivery is going to climb over the next 18 months to two years while the cost of technology -- i.e. the Internet -- is not."

Despite looming increases in the cost of postage and the paper used to print the catalog, JCPenney has no plans to abandon its production. That's a stance most of the retail world shares.

Companies like L.L. Bean, J. Crew and Sears have watched similar spikes in Internet sales versus their traditional catalog business, but none is planning to shut down catalog operations, according to the National Retail Federation's Ellen Tolley. NRF research shows that 50 percent of online shoppers say a catalog has influenced them to shop online. The retailers are not prepared to leave that customer base untapped.

Instead of dropping catalogs completely, they are more likely to tinker with the circulation and content, even tailoring them to customers' buying habits. For shoppers who typically order online, retailers may send out a smaller catalog catering to their buying history while still sending out the full edition to traditional catalog phone buyers.

"Companies have a hard time determining where sales originate. But in the end, they don't care where you buy from as long as you buy," said the DMA's Blankenship.

For JCPenney and other retailers, the challenge is to find the balance between investing in catalog printing and promoting their Internet operations.

Feiwus pointed out there is no way to determine how much catalogs spur Web traffic. Online sales could be motivated by a number of things, including Web advertising, catalogs, and traditional radio and television ads. But determining which of those brings in the most customers is difficult. It's a formula retailers will continue to tinker with in the coming years.

"If you asked me when catalogs will cease to exist ... my crystal ball is too cloudy for that. But it's not happening in the short term, and it's going to take longer than people think," said Feiwus.

In the meantime, shoppers will have the option of pounding the pavement, flipping through pages or surfing the 'Net. As long as all three continue to draw buyers, it's likely those options will remain open.