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Here's what's sending SkyMall into bankruptcy — and what could save it

Get them while you can.
Get them while you can.
SkyMall

Get those skeleton lawn gnomes and iPhone neck lanyards while you can. Xhibit, the parent company of SkyMall, filed for bankruptcy today.

The catalog's revenues had fallen off dramatically in the last year, from $33.7 million in 2013 to $15.8 million for the nine months ending in September, the Wall Street Journal reports. If it can't find another buyer, flyers might soon have one less distraction on their cramped flights.

But as one catalog inches toward the grave, another is being reborn — JCPenney this week announced it's bringing its catalog back. And taken together, the two stories provide a glimpse into what makes a catalog work in a digital world. As retailers are increasingly understanding, a catalog can work, but only if you use it with other channels — websites, email, stores — to drive customers to spend more.

Let's start with SkyMall. Maybe the biggest reason it's failing is that it has been losing its biggest advantage: its captive audience. As the blog Priceonomics wrote in 2013, SkyMall has worked out a deal with major US airlines to be their sole in-flight catalog. That gives SkyMall access to 90 percent of the flying market — according to the company's figures, it had the potential to reach 1.8 million passengers each day — 665 million per year. Crate & Barrel and Pottery Barn would kill for that kind of reach for all the catalogs they instead jam into your mailbox.

"With the increased use of electronic devices on planes, fewer people browsed the SkyMall inflight catalog," the company wrote in its filing. With air carriers increasingly offering internet access, plus the FAA's decision to allow us to use our cell phones during take-off and landing, and you have people reading the news or shopping online instead of buying grill Roombas.

Skymall knew this was a problem. In its bankruptcy filing, the company said it wanted to start relying less on catalog sales and start attracting more customers online, as Mashable reports.

In other words, it wanted to become a company where you go to its website when you're just sitting around browsing at home, not just after you've found something you like on an airplane. Though the company sells its goods online, the company says 70 percent of those sales are "driven by" catalog readership — and those catalog readers were going away.

Unfortunately, Skymall wasn't able to shift to this online-focused strategy quickly enough to ward off bankruptcy. According to the filing, the company tried to "reduce its dependence on its in-flight catalog business and to reposition SkyMall as a direct retailer in the e-commerce space," but that "operational and liquidity challenges" got in the way. The company failed in several attempts to get more capital to beef up its online presence at the end of 2014, the filing says.

At the same time Skymall has been imploding, some other catalogs have been staging a comback. In 2013, retailers sent out 11.9 billion catalogs in the US, the first uptick since 2007, but also down from nearly 20 billion sent out in 2007, according to the Wall Street Journal. And that's in part because retailers have increasingly figured out how to use catalogs to their advantage.

For an example of this, look no further than one resurrected catalog: JC Penney. That retailer announced just this week that it's bringing its catalog back from the dead. Yes, catalogs take money to print and distribute, but they also bring customers in. In a recent report, retail consulting firm Kurt Salmon found that eliminating catalogs in an effort to cut costs can backfire for a retailer, because it engages customers so much less. Meanwhile, customers engaging with a retailer on multiple platforms (online, with catalogs, in stores) also spent a lot more. This is part of what retailers call an "omnichannel" strategy — using several mediums simultaneously to attract customers. And it makes intuitive sense: encourage customers to find your goods in a variety of ways and places, and they'll both remember you and keep coming back.

Skymall, of course, doesn't have brick and mortar outlets like a JCPenney or a Land's End, nor does it mail its catalogs to millions of people. Which might have made a bigger online strategy all the more important.

It's hard to know exactly what its online strategy might have looked like — more online advertising? more email marketing? — not to mention how well the company can even compete in the e-commerce space. But if it is going to survive bankruptcy, its new buyer might want to take note: there's a way to make a catalog work, and it's to make your business about far more than a catalog.