Amazon turns to catalogs for holiday boost

The e-tail giant is distributing its Holiday 2000 Gift Book to its roughly 10 million customers, company spokeswoman Lizzie Allen said. The catalog is just one part of the company's marketing strategy this holiday season, Allen said.

"This is not what we depend on," Allen said. "We're trying new things, exploring what works."

But the catalog is more than just a marketing ploy, said Jeff Matthews, general partner with the Ram Partners hedge fund. The catalog is further proof that Seattle-based Amazon's business model doesn't work, according to Matthews, whose fund is short on Amazon. Funds that sell stock "short" make money when a stock price falls.

"This is about as desperate as it gets," he said. "Next they're going to open stores, and that wouldn't surprise me a year from now."

Amazon's catalog goes against the predominant stream of e-commerce moves. In recent years, traditional and catalog retailers have been more likely to set up shop online than pure play e-commerce firms have been to launch physical stores or send out catalogs.

But a growing number of e-tailers have decided to experiment with catalogs. Gift e-tailer RedEnvelope, for instance, launched a catalog in February. And eToys recently distributed a catalog circular in Sunday newspapers.

The catalogs are part of an effort by such companies to cut marketing costs. Instead of building their brand awareness through flashy--and expensive--TV campaigns, many dot-coms have chosen this year to focus on less expensive direct marketing efforts such as direct mail fliers and catalogs.

Amazon's 24-page catalog highlights a few products from each of Amazon's stores, as well as some products from partners Drugstore.com and Ashford.com. The catalog does not provide any kind of order form, instead directing customers to Amazon's Web site.

This is the second year Amazon has sent out a holiday catalog, Allen said. She declined to give details on last year's version. Amazon is distributing this year's catalog both solo and included in order packages.

The catalog is a "smart" idea, said Goldman Sachs financial analyst Anthony Noto. The catalog should help Amazon boost customers' awareness of its growing product selection at a relatively low cost, he said.

"People are calling them Web-alogs and they seem to make sense," Noto said.

Although Amazon may appear to be taking a page out of the book of an L.L. Bean or a J. Crew, the e-tailer's business strategy is much different from those catalog retailers, Noto said. Amazon is not directing customers to a call center, but to a Web site. And the catalogs are just a marketing effort; they aren't the company's whole business, he said.

But Amazon may come to depend more on catalogs and other, more traditional means of doing business that it previously thought, Matthews suggested, pointing to the lessons of Lands' End. Although Lands' End initially hoped its Web site would diminish the need to send out catalogs, the company found that customers didn't order unless a catalog was in front of them, Matthews said.

"If you asked Amazon a year ago if they'd resort to dead-tree catalogs, they'd laugh you out of the room," he said. "I think it's telling us that even for the guy with the biggest Web site, (the e-tail model) doesn't work."