By Sacrificing Its Catalog, Will Disney Spoil Its Internet Business?

NEW YORK (NY Times) – Mickey Mouse’s next big role: e-commerce renegade. The Walt Disney Com-pany, an icon of mainstream America, will move against the grain of conventional business strategy this spring when it stops distributing a catalog that has filled the mailboxes of tens of millions of households for the last decade, and instead embarks on a Web-only initiative. "Customers almost dictated this to us," said Paul Gainer, vice president of Disney Shopping, a division of Disney Consumer Products. "Once they go online we just don't see them going back to the phone." The move bucks a trend that has practi-cally become gospel in online commerce in the past several years — namely, that retailers who sell through the combined channels of catalogs, Web sites and physical stores engender more customer loy-alty and bigger profits than those that do not. Why catalogs? Simple, executives say: they're pretty. Unlike most other advertising media, catalogs are something customers want to cozy up with on the couch and browse. But useful as they may be, Mr. Gainer said, catalogs were simply not ringing the registers as loudly. Disney spent $18 million to mail 30 million catalogs last year — half of them sent in the holiday season. The holiday mailing went to similar groups as the previous year's did, yet Disney had a 45% drop in phone orders. The number of customers who responded to e-mail and other online marketing mes-sages, meanwhile, skyrocketed. "I think it's time to focus just on e-commerce, and see how great we can be," Mr. Gainer said. Disney isn't the first cataloger to cut back radically on its mailings in an effort to shift more business to the Internet. In 1999, Lands' End cut its catalog circulation by 9%; its revenue soon fell by nearly twice that percentage, in an experiment that many online executives still point to as evidence that catalogs are more critical to driving Internet sales than they may appear. But Mr. Gainer says 2006 is a much different selling environment online. Not only have high-speed Internet connections led to more aggressive online buying by mainstream customers, but search engines are considerably more effective in helping attract those customers than they were in 1999. More than 80% of Disney Shopping's sales now come online. In fiscal 2005, Disney's consumer products division, which includes stores, product li-censing, catalog and the Internet, sold nearly $21 billion globally. The $18 million that went into the cata-log division will instead be used to buy search-engine advertisements, improve the company's e-mail marketing campaigns and develop a more extensive roster of third-party sites, known in industry parlance as affiliates, to help refer buyers to Disney.com.