UPDATED 2/28/2017 With Additional Information
When L Brands, the owner of Victoria’s Secret, decided to eliminate the catalog, they had the data to back it up: In a test conducted during the fourth quarter of 2015, the company reduced the number of catalogs it released by 40 percent without seeing a negative impact on sales. But how has it turned out?
When you consider that the retailer has been producing up to 300 million copies of its catalogs per year—at a cost of $125 million to $150 million, annually—reducing the print run substantially (can’t get more substantial that going from 300 million to zero) without sales taking a nosedive seemed like a risk worth taking. According to their model, any loss in sales revenue would be offset by the savings in printing costs.
As we noted when the announcement was made, to make up for the elimination of what was arguably the brand’s strongest piece of marketing—and most iconic—they planned to focus more on loyalty programs, online, and other customer touch points.
This reduction in catalog printing seemed to be part of an overall strategy of reducing marketing costs—a strategy that seemed to be working. However, things seem to have changed.
L Brands, announced Wednesday, February 15—the day after Valentine’s Day—that same-store sales at Victoria's Secret may plunge 20 percent for February as compared to a year ago. That news was not received well by Wall Street where shares of L Brands (LB) plunged 16 percent on Thursday, February 16. This seems to part of a larger pattern that has seen the stock price tumble more than 25 percent so far in 2017, and more than 40 percent over the past 12 months.
Choosing to eliminate one of their main marketing and sales channels was a bold move that showed they were not content with the status quo—a refreshing change in today’s tumultuous retail environment. But what’s more refreshing, and impressive, is their decision to publicly own up to the results, and seek strategic solutions. Mall stores in general are struggling this year. And that trend seems to have swept up specialty retailers and anchor stores, alike. For these retailers to survive, they need to take a long hard look at the internal and external forces and make some though decisions. It looks like L Brands is ready to do that.
We’ve said it many times—print isn’t dead, it’s evolving. And, research shows that print is still a strong motivator to purchase, especially when it’s part of a robust omnichannel marketing plan.
According to Kurt Salmon, a management consulting firm, 13 percent of consumers say they’d want more catalogs and 44 percent said they like to receive fewer. Based on those statistics, you might understand why L Brands killed off the Victoria’s Secret catalog.
However, that same research shows 58 percent of online shoppers said they get their ideas from browsing catalogs—and nearly a third said they have a retailer’s catalog on hand when making an online purchase. And, when polling women ages 18 to 30, 45 percent reported that catalogs sparked interest in a retailer’s products, and nearly 90 percent bought items they saw first in a catalog. Those numbers seem rather compelling, and are worth a second look.
Today’s marketplace is robust, multi-faceted, and fast-moving. In this environment, eliminating a marketing channel completely can be as risky as using only one channel in the first place. That’s why we focus on helping brands connect with consumers in multiple ways. By uniting online and offline customer data, even if it’s siloed, we can create strong connections across multiple channels and engage customers more holistically.
It seems like the Victoria’s Secret Angels need to get some wind beneath their wings. And catalogs—backed by a new strategic plan—just might help them fly.
Sources: Ad Week, PYMNTS.com, Forbes
Original Post April 30, 2016
Last week the world collectively gasped as Victoria’s Secret announced they will be moving away from their traditional catalog. What?! But it’s an institution! How will women shop for their lingerie? How will we all connect with the Victoria’s Secret brand? How will middle-school boys come of age? The answer to all three is (as expected) the Internet.
While we frequently preach how effective direct mail and catalog campaigns can be for today’s retailers, a company must make decisions based on what is best for the business. The Victoria’s Secret catalog has been a staple in mailboxes around the world for decades, but they must have a reason for what they’re doing. Here are some details.
According to a statement from L Brands, Victoria’s Secret will be reorganized into three core units focused on lingerie, beauty products, and their Pink brand. They plan to focus more on loyalty programs and ways to engage with customers other than print. It hasn’t been made clear if the company will eliminate its iconic catalog altogether or just restructure their strategy to reduce mailings. However, the change must be a big one, as 200 jobs are being cut. More information is expected during their first-quarter earnings call in May.
The Victoria’s Secret brand is streamlining its business, narrowing its product line, and changing a long-standing marketing campaign. It’s interesting to find that L Brands has been reducing their advertising and catalog costs steadily for the past few years.
2013: $452 million
2014: $436 million
2015: $414 million
That trend may have been a sign of things to come. However, even in this tough retail environment, Victoria’s Secret has been faring quite well. Sales are up by 2% from last year, exceeding the 1.7% estimate.
So, in a year where ad spending is down and sales are up, why make these cuts? It’s because Victoria’s Secret is evolving. They built a brand on the strength of their catalog, but have clearly deemed that channel to be less effective/profitable now that they have grown into a dominant global company. They have long benefited from the perceived quality of their products, which has led to significant customer loyalty. Victoria’s Secret is listed as a leading retail apparel brand in the Brand Keys 2016 Customer Loyalty Engagement Index.
Let’s bring this story closer to home. The QuickPivot office is home to a diverse group with various lifestyles and personalities. We do have quite the stylish and talented crew of women on our staff, so we asked around. Most have a positive view of the Victoria’s Secret brand. However, very few women here feel that they will be impacted by the lack of a catalog. It will neither drive their decision nor deter them from making a purchase. That’s not to say that all catalogs are the same. Comments regarding lookbooks from retailers such as Crate and Barrel, Wayfair, and Garnet Hill triggered the opposite response. Those catalogs created an emotional reaction to the products shown, inspiring action. Victoria’s Secret’s publication may have become irrelevant or unnecessary for many. All the more reason to think this could be a smart move on their part.
It may prove to be wise to put more of their effort into loyalty programs and engagement. At this point we must assume that they have identified more effective channels to market their brand, or at least ones with more potential. Victoria’s Secret mobile sales have seen 75% year-over-year growth in Q2 of 2015. While we believe that print isn’t dead, we can’t really argue with making changes to better your business and capitalize on trends. It will be exciting to see what Victoria’s Secret does now, and how effective their new strategy will be.
Sources
http://www.wsj.com/articles/victorias-secret-turns-its-back-on-the-catalog-1460155651
http://brandkeys.com/portfolio/customer-loyalty-engagement-index/
