CDs resurrected as e-Tail marketing tool

Last week, the CD-ROM catalog marketing returned - inserted in 1.3 million copies of Marie Claire magazine. Will CD-ROM catalog go further this time around after its flop in 1998?
Written by Mike Cleary, Contributor

As recently as two years ago, companies were rolling out catalogs on CD-ROM, thinking they would make marketing history. Instead, they rolled into the dustbin of history and technological also-rans. When customers discovered the Internet, they abandoned the discs, quashing the hopes of another would-be hit.

"Once the Internet exploded in Christmas 1998, it pretty much rendered [CD-ROM catalogs] a non-issue," says Rick Fazekas, director of research at W.A. Dean & Associates in San Francisco. "We really thought it was going to be a big thing."

But last week, the CD-ROM catalog returned - this time inserted in 1.3 million copies of Marie Claire magazine. They are the brainchild of a Napa, Calif., company called Internet Plus, which has even bigger plans for CD-ROMs - and DVDs. It's one of a handful of companies working to put e-commerce onto the shiny plastic discs, and believes it is among the first to roll out Internet shopping carts powered by CD-ROM for the consumer market.

For retailers, it marks a rare foray into CD-ROM catalogs that have traditionally been used for business-to-business marketing. What makes Internet Plus' backers think CD-ROMs will go further now, especially when the Internet has spread its web and is getting stickier all the time? People just weren't ready five years ago, they say.

Making the case

According to Internet Plus, consumers are ready to go back to the future. "We're another way to conduct e-commerce," says Ralph Hints, chief financial officer at Internet Plus.

The company has its work cut out for it, as it hopes to establish the CD-ROM as a direct marketing tool for retailers and media companies eager to reach the lucrative consumer market. For starters, Internet Plus can only point to a limited track record. The 4-year-old company has used its CommerceDirect product since December 1999 to help the U.S. Postal Service sell bulk mailing service to small-business customers. While the USPS seems happy, even Internet Plus admits the CD-ROMs used in that case addressed a niche market full of buyers with a clear need for the service who also wanted the complicated topic laid out for them in detail.

Consumers are far more fickle and far less tied to any single marketing channel. Analysts say even the latest versions CD catalogs don't stack up against the Internet.

The CD-ROMs included in the October issue of Marie Claire show merchandise from 42 vendors, including designers Anne Klein and DKNY, beauty products maker Lancome and bag maker Dooney & Bourke. "It's a virtual Bloomingdale's," says Katherine Rizzuto, publisher of Marie Claire, referring to her magazine's 3-year-old partnership with the East Coast department store chain. Both believe the CD-ROM catalog can help strengthen their ties to customers, as well as ring up sales for Bloomingdale's.

The magazine sold a 24-page advertising section to promote the CD-ROM, Rizzuto says.

After an opening video and audio show discussing fashion trends, the CD-ROM catalog dishes up a collection of still pictures of clothing, jewelry, beauty products and accessories, sometimes rotating images to show the products from multiple angles. The catalog lets shoppers search according to product category or by the brand name of vendors that have bought advertising in the catalog.

What's new this time is e-commerce software by Internet Plus that lets shoppers at home fill in shopping carts; the software then dials in to the Internet and transmits the order.

This is where Internet Plus makes its money. While it charges vendors and retailers for creating the multimedia presentation on the disc, the important revenue stream is pure e-commerce - it takes a cut of each transaction that goes through the CD-ROM. That's what Internet Plus' unidentified international and New York backers are betting will take off. They have put about $10 million into the company so far.

The big question is whether people will use the CD-ROM and buy through it. After all, if consumers need to log on to the Internet anyway, why bother using the CD-ROMs, asks David Cooperstein, head of e-commerce research at Forrester Research. "Why create this static medium when you have the Internet?" he says.

The inflexible nature of the CD-ROM - once the catalog is created, there's no way to change it - caused the failure of the last CD-ROM catalogs. Unlike the Internet, CD-ROMs printed weeks or months earlier can't say what inventory a store has available now. And with the arrival of fatter broadband pipes promising even faster Internet communications within two years, anything less than real-time communications seems out of fashion.

Internet Plus says it has added a feature that lets users update the product listings through the Internet in advance of buying, or automatically as the transaction closes. The shopping is faster and more secure, Internet Plus' Hints adds. Consumers don't need to wait for download times or Internet congestion to clear before they see pictures of the merchandise. Once the order is compiled, the CD-ROM logs in to a virtual private network. The shopper doesn't even need an Internet service provider, just a modem, he says.

Cooperstein doesn't believe these advances will let CD-ROMs catch up with the Net. Though the technology might have some value to retailers that want a controlled marketing device, he doesn't quite see it as the revolutionary advance that its backers describe.

"It feels like one step backwards," he says. "It sounds more like an alternative to print catalog vs. an alternative to the Web. Most people are migrating to the Web, which is more flexible and real-time."

That's actually a disadvantage of the broadband Net, says Bob May, president of Tempo, an Atlanta company that creates CD-ROM promotions and is working with Internet Plus. May says broadband will bring faster speeds initially, and then congestion will return as sites fill the pipeline with new, richer and more bandwidth-intensive content.

"I think it will bring the mess of the Internet to people faster," May says. CD-ROMs "will allow people to get focus on their lives."

Early CD-ROM catalogs also failed because people weren't familiar with them or because unfamiliar companies issued the CD-ROMs, a point that Cooperstein acknowledges. Now the CD-ROM-spinners think the time is ripe to try again.

"Back then it was kind of pioneering. Now, the public is much more cognizant of the Internet and CD-ROMs," says Andrew Black, vice president of global advertising at DKNY.

Whatever else may be the case, the lowly CD-ROM is increasingly popular with retailers and marketers, which use it to sell products as diverse as golf balls, cell phones, fishing gear and cereal. No one tracks how many CD-ROMs are used for promotional purposes, let alone other uses such as playing music or games, or running software.

May says Tempo, which handled 5 million CD-ROMs in 1997, expects to produce at least 50 million next year.

None of which is to say that people will use the CD-ROMs to buy on the Net. Contradicting the analysts, Marie Claire's Rizzuto points to a survey of readers that the magazine conducted six months ago. "The overwhelming response was yes," she says.

Early signs show that they meant it. Right after the magazine hit the newsstands, Internet Plus recorded 2,600 "updates," indicating that people were trying out the CD-ROMs, Hints says.

And even if the e-commerce engine won't fire up use of promotional CD-ROMs such as catalogs all by themselves, that's not the only market Internet Plus intends to tap, Hints says.

"There's an entire other world of existing CDs," he says. "Three billion were consumed last year. Our application can sit on top of music CDs and movie DVDs and turn them into e-commerce tools. That hasn't been done before."

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