Magazine article Marketing

Catalogues Face a New Order

Magazine article Marketing

Catalogues Face a New Order

Article excerpt

Catalogues face a new order

As top-ranking German mail order firm Otto Versand looks ready to pounce on floundering Next, a clutch of other UK catalogue operations may also fall prey to more successful European rivals, says Suzanne Bidlake The world's largest mail order operator, Otto Versand, is set to swoop on the UK's outdated catalogue shopping industry.

The rich, acquisitive West German mail order house is in talks to buy Next's Grattan catalogue operation, as Next group chairman David Jones revealed at the end of last week.

And Littlewoods, the UK's second largest mail order company controlling a 24.5% market share in 1989, has also hung a "for sale" sign over its home shopping business.

Other foreigners such as the German Quelle and French La Redoute are circling menacingly.

Whatever the outcome, one thing is certain: the UK home shopping business is in for a dramatic shake-up. European mail order outfits rely on modern direct selling methods as opposed to the UK's traditional and expensive reliance on agents. These agency selling practices, with roots deep in Victorian culture, provide a rich seam of potential cost savings and marketing improvements for foreign predators.

And now, the pickings are easier than ever before as the recession forces retail-cum-mail order companies to decide on which to concentrate.

Should Otto Versand make the move, the effect will be marked. Set up in 1949 and run by the founder's son Michael Otto, the West German giant has already made some initial grazes on the UK with its Rainbow company, owned jointly with the Bradford-based Fine Art Developments in which it holds a 5% stake.

Rainbow has had early success with its Together and Ambitions catalogues launched last spring, rejecting the agency system which still accounts for 80% of UK mail order business and plumping instead for the less wasteful direct selling technique.

Otto is famed for its "slick" marketing, its professional management, low operating costs and, of course, its tremendous buying power. It's a combination that will send a shiver through the UK industry.

If Otto clinches Grattan, the repercussions will fall most heavily on UK market leader GUS, with a 36.3% share. Empire Stores, which only last week announced redundancies, looks vulnerable, but may be protected by stake holders La Redoute and the Italian Gecos.

Freemans is regarded as a strong business by the City, but it will have lost out on an acquisition opportunity of its own if Otto moves in.

Otto's great strengths lie in customer acquisition and customer retention. It has proved itself in France (where it owns Trois Suisses) and in the US with its Spiegel catalogue. There it has used a whole range of advertising and list rental techniques to pull the punters in. "It is extremely good at manipulating the information it gets," says Robert Grech, director of home shopping at Management Horizons.

Its detailed attention to service gives it a distinctive edge in keeping its customers loyal. It also, says Grech, "advertises cleverly so that the whole package looks good".

Changes to the catalogues themselves are likely to be more gradual. Parts of Together might appear in an acquisition's books eventually followed by some German products. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.