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Columbia House Is Finding Success Online

1 Feb, 2002 By: Joan Villa

While many retailers have had mixed success with their online endeavors, Columbia House is a longtime video player that has pulled off a smooth transition to the Web thanks in large part to the popularity of DVD.

"We definitely have caught the wave on DVD," conceded Bill Ostroff, president of New York-based ColumbiaHouse.com, a joint venture between AOL Time Warner and Sony. "We do believe that the consumer interested in buying DVDs certainly buys newspapers, reads magazines, opens their mail and goes on the Web. Our strategy is to find as many places as consumers aggregate."

The tack seems to be working, since ColumbiaHouse.com has landed on several research firms' lists of the top holiday sales sites by touting a familiar offer made famous for years in magazines and now tailored to DVD. The enticement allows consumers to choose four titles at 49 cents apiece with the obligation to buy four more at regular prices over a two-year period.

"Our experience tells us if you solicit a customer via mail to first create a relationship with a company like ours, generally they're going to respond to you by mail," he said. "But once they are a member and we're trying to sell them product, we operate from a true multi-channel perspective -- we'll send them a catalog at the same time as an e-mail and invite them to transact via phone, mail and online."

Ostroff believes the DVD consumer has a "high propensity" to transact online compared to purchasers of other products, including VHS, giving Columbia House a real reason to be on the Web.

"We felt we could give consumers better service online versus the typical interface we had put forward in the mail," he added. "For a consumer that has adopted online as part of their lifestyle, it's easier."

Analyst Christopher Kelley with Forrester Research says several factors converged to create ColumbiaHouse.com's recent success: DVD's growing popularity, the format's low price point particularly in a gift-giving season overshadowed by recession, and the tendency of DVD users to quickly adapt to the Web. Overall, he says, DVD and VHS sales grew online from $135 million to $192 million from November to December, 2001.

"It's relatively easy to segue from mail order to being online," explained Kelley, who points to the online success of mail-order catalogs such as REI, Land's End and LL Bean. "Something Columbia House has in addition to that is DVDs lend themselves to being sold online because there are no size and fit issues as there are with clothes."

Jupiter Media Metrix research ranked ColumbiaHouse.com the 7th busiest on its top 15 shopping sites for the 2001 holiday season. The subscription service didn't make the list in 2000.

"Their approach is the best of all worlds," agreed Greg Durkin, research director for Alexander & Associates, which projects that ColumbiaHouse.com gained 8 points of market share in the fourth quarter 2001 compared to the previous year. "They know how to use traditional print advertising methods, but they've fully taken advantage of what the Internet has to offer."

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