The "Big Book" is back! J.C. Penney (NYSE:JCP) recently announced it was bringing back its popular printed catalog. Sort of.
Killed off a few years ago in a bid to save money, the new catalog that will be distributed in March will weigh in at just over 100 pages and focus on J.C. Penney's home department goods. That makes it a shadow of the retailer's former all-encompassing tome that often went to 1,000 pages or more, which is probably why the retailer insists it's a marketing tool, not a catalog.
According to ABC News, J.C. Penney says it's "simply issuing a more robust home mailer, which is something we used to do prior to 2012 before new leadership took over. Customers, particularly when it comes to home items, still like flipping through a traditional print piece."
Another arrow in the quiver
High-end home goods retailer Williams-Sonoma (NYSE:WSM) uses catalogs as a key component of its business, particularly for its Pottery Barn and West Elm businesses.
As well they might. Although printed catalogs came into their own in the 1980's when retailers like J. Crew, L.L. Bean, and Talbot's helped them proliferate while enjoying a sales boom, in today's age of online shopping apps geared toward smartphones and mobile devices they seem almost an anachronism.
Yet they remain popular.
According to the Direct Marketing Association, U.S. catalog mailings peaked in the 2007, but as many as 12.5 billion catalogs were mailed last year, an increase from 2013 and only the second time since 2006 they've risen, indicating retailers still see them as a very effective sales tool.
But catalogs have to be done right
Advantages aside, catalogs do come with a cost. As Williams-Sonoma can tell you, postage is a substantial expense, and the U.S. Postal Service has initiated several rounds of rate increases over each of the past few years. Along with rising paper and printing costs, the retailer last year was forced to consolidate all of its printing work into the hands of a single printer. That increases its risk in the event something goes awry at the vendor.
And though J.C. Penney had shipped catalogs for decades before stopping production on them, it's worthwhile noting catalog sales are highly dependent upon product offerings, assortment, and display. Basically, you have to have products people want, have enough of them on hand, and make it all pretty to look at.
Last year The Wall Street Journal reported Gap Stores' (NYSE:GPS) small, catalog-based Athleta brand featured tights that struck a chord with consumers who flocked to the store to buy them only to find they hadn't arrived yet, disappointing its customers.
But J.C. Penney is still onto something here. Its home department accounted for 40% of all online sales. Over the next five years, the retailer is looking to realize some $2.55 billion worth of sales growth, and of that amount fully 30% of it is expected to come from the home department, or $750 million.
By using its revamped catalog -- er, marketing tool -- to key in on that segment, it will be providing a tailwind for further sales growth.
Shoppers can't resist the pretty pictures
The DMA says more than 89.6 million Americans bought an item from a catalog last year while the American Catalog Mailers Association says on average, consumers who receive catalogs spend $850 per year on catalog purchases.
But it's still seen as something of a hit-or-miss business. On Thursday, Land's End (NASDAQ:LE) warned fourth quarter earnings would likely be down 3%-5% when it reports its full year numbers, mostly because of an 18% decline in retail sales, but since it's primarily an online- and catalog-based retailer, it was expecting revenue to be soft there as well.
Home and furnishings were once an integral part of J.C. Penney's revenue picture and became undone by many of the reforms initiated by ex-CEO Ron Johnson. According to Penney, the home department suffered:
- Largest sales decline
- Largest market share decline
- Largest sales dollar per square foot decline
- Largest drop in dot-com sales
The new catalog (marketing tool) J.C. Penney is resurrecting has the potential to turn that story around even more, as well as bolster other divisions within the retailer. It may be a slimmed down version of its previous iteration, but it might just be able to provide a fatter bottom line.