SkyMall: The Ultimate Catalog Business Model
Worsley’s brain started to work. It was the year that Airphones were launched, enabling passengers to use their credit cards to call anywhere in the world from the sky. If I can call for home delivery of a Domino’s pizza, Worsley thought, why not use the time in the air to do some shopping and have the merchandise delivered to me when I land?
In quick succession, Worsley wrote a business plan, found two investors and signed on three airlines: Eastern, Continental and TWA by 1991. The carriers were not all that concerned about making money; rather they viewed the catalog as a unique service to entertain passengers during tedious hours in the sky, costing them nothing.
The Old Model
Worsley’s initial plan served seven major airports. A traveler placed an in-flight order and met the SkyMall messenger in the baggage claim area to pick up the merchandise. What appeared to be a great idea turned out to be a logistical nightmare. A complete roster of SKUs had to be stocked in seven separate warehouses. In the confusion of crowded airports, many customers missed the SkyMall messenger and never collected their merchandise. Delivery costs could be as high as $40 an order. Ultimately, Worsley discovered that many travelers did not want to add extra baggage to their already bloated impediments, opting instead to take the catalog and order from their own homes.
In addition, the Airphone concept did not live up to its promise. It was hard to hear over the whine of the engines; calling fees were exorbitant (even though orders to SkyMall were toll-free); and, frankly, people didn’t like screaming out their credit card numbers so that surrounding passengers could hear (and possibly steal) them.
But Worsley was moving merchandise. Carlson took notice. In 1991, Carlson approached Worsley, saying the arena was too small for two in-flight catalogs; would Worsley sell SkyMall? The answer was no. Would Carlson sell Giftmasters? Yes. Carlson decided it should not be in the catalog business and Worsley agreed to buy Giftmasters. In 1992, Worsley added five more airlines to his distribution network—American Airlines, US Air, Alaska Airlines, Aloha Airlines and Delta.