ComputerLink articles by Brian Pitre

Online Catalogs

"The Web lured 20 million people to buy some consumer item in the first six months of 1998, double the number for the same period a year ago"

Led by the virtual stores like Amazon.com and CD Now, the Web is seeing an explosion of retail based, database driven, e-commerce sites. Unlike these two pioneering "virtual businesses," many of today’s electronic commerce sites are the e-commerce offspring of major print catalog merchants. Whereas traditional "brick and mortar" retailers often have significant internal resistance to overcome in order to embrace the potential of the Web, catalog merchants have an almost instant affinity for it. For them, the Web is but another form of their basic product - the catalog. And the promise is clear: lower costs, increased reach, and higher profits.

When most people think of catalogs, they are thinking of the countless retail catalogs, which stack up on the kitchen counter. These are, of course, Business-to-Consumer catalogs. But there is another world of catalogs just as pervasive: Business-to-Business. Both kinds can be found on the Web in rapidly expanding numbers. 

Business-to-Consumer catalogs 
Companies such as L.L. Bean and Lands End are enjoying tremendous success in this new medium. Although Lands End began its experimentation with the Internet by using it to sell inventory overstock, the company quickly evolved its Internet strategy. Today, Lands End, L.L. Bean and many others place the Internet at the heart of their companies’ strategic plans. Why? Because the Internet works. 

Business-to-Business catalogs 
Business-to-Business catalogs come in many forms. Depending on the size of your company, it’s likely that dozens, even hundreds of catalogs, from suppliers of all descriptions, are filed away in file cabinets throughout your organization. Whether full-scale product or parts catalogs, or simply price lists, they nonetheless represent your first and foremost means of facilitating a purchase. Yet, in all likelihood, the vast majority of the catalogs you inventory, at any given point in time, are out of date. 

Now, imagine if all these catalogs were converted into effective Online Internet implementations. First, you could clean out all those file cabinets. Second, this would represent a tremendous opportunity for your supplier to improve the service they provide your company. Suddenly, they can give you 24-hour, 7-day a week access to the most current product data, availability and pricing information. It’s a win-win proposition: as your suppliers’ service to you improves, so does the service you provide your customers. 

The benefits of e-commerce are even more pronounced for suppliers of digital products: Virtually every software company could run a majority of its operation as a Web service. Today, many software companies make updates to their software available for download via the Internet. But increasingly, the initial purchase will be transacted this way as well, eliminating even the need for the CD. 

Implementing E-Commerce – It’s more than Credit Cards 
If your company is considering implementing e-commerce, it’s important to remember that completing the business process is the ultimate goal. While consumer e-commerce relies heavily on credit card transactions, business to business e-commerce needs to accommodate checks and purchase orders, just as print-based catalog transactions do. Just presenting the product on the Web is not enough. If you direct the Web site visitor to another medium (such as to a fax machine or an 800 number) to submit the order, you risk losing the attention of a high percentage of purchasers. Many companies believe a successful on-line catalog implementation will require a substantial investment in more 800 lines and operators to process orders. That’s not necessarily true; the transaction can be completed electronically, bypassing the telephone operation entirely. Effective implementations tie directly to existing systems to verify inventory, capture and process orders, generate shipping documents, and transfer funds.

Challenging the print-based convention 
It’s perfectly understandable that businesses which have relied on the printed page (or the shop window) to sell their products initially find the idea of bypassing these conventions, and the paper-based transactions that go with them, frightening. This is no doubt why many companies who currently have major investments in print catalogs, view the Online catalog as an adjunct to their mainstream print product. The thought of actually replacing the print-based approach with the Web may still be considered blasphemous in many catalog companies. Yet the advantages of the Web will inevitably win out, as companies continue to realize increased efficiencies through more thorough utilization of Web technologies.

The issues which challenge the Online catalog merchant are quite different than those which face the paper-based catalog retailer: they include considerations of data source(s), ease of update, the ability for the customer to output to a printed catalog, etc. But perhaps the biggest issue, and in fact the biggest opportunity, is the potential for dramatically improved timeliness. While most printed catalogs are updated yearly, quarterly, or monthly, Online catalogs can be and should be current to the minute. 

Forecasting your ROI
It is generally accepted that sales from an effectively promoted new Online catalog will grow at a rate of 10% per month in the first 12 months. To calculate the ROI you might receive and arrive at an appropriate budget, use the following example: $50 million in catalog sales x 10% incremental expansion = $5 million in new business x 10% cost of acquisition of that new business = $500K budget (or with $5 million in sales = $50K budget). That overall budget should then be allocated as follows: 50% toward infrastructure and software development, and 50% for advertising and promotion of the new catalog. 

Success begins with your current customers  
Active promotion of the Online catalog begins at home, with your current customers. Converting existing print-based customers to an Online relationship is a natural process, and what could be better! It save trees, production money and transaction costs, all the while providing vastly improved customer service. But remember: "If you build it, they will come" simply is not true on the Internet. Let your customers and prospects know it exists if you expect to be successful. Look at the cover of the next Land’s End catalog you get: the on-line catalog address is right there!

Disintermediation  
Companies that move toward Online catalogs inevitably begin to dismantle their classic, stepped channel of distribution system. This is called disintermediation, or "cutting out the middleman." Typically, the resulting cost savings are shared by both the customer and the manufacturer. Imagine the profit margin advantage Dell Computer has over computer manufacturers who sell through retail channels. Dell’s customers receive the benefit of a lower cost computer system because they are dealing directly with the manufacturer. 

The future of Online catalogs is bright indeed. They will one day replace virtually all the catalogs in your file cabinets at work, or on your kitchen counter at home. If your business operates with print catalogs and you haven’t yet begun to consider a move to the Internet, start today. Your competitors may be way ahead of you.