Opinion: What really killed SkyMall
Say bon voyage to a friendly in-flight travel companion for the past 25 years. SkyMall has crashed.
Last week, SkyMall LLC, which publishes the well-known in-flight catalog, and its parent company, Xhibit Corp., filed for Chapter 11 bankruptcy protection in Phoenix court. SkyMall has suspended operations and fired nearly a third of its staff.
The company’s interim management says it’s hoping to keep the SkyMall brand alive through a sale. But it’s difficult to see who the buyer would be considering major airlines, such as Delta and Southwest, already have canceled their deal to carry the catalog on their planes and other airlines are likely to follow as the company faces the financial abyss.
So it looks like the end for SkyMall. The company had a good run for more than two decades. And when you consider many of the unintentionally hilarious products in its pages, it’s remarkable that it stayed afloat for as long as it did.
Perusing the SkyMall magazine at 35,000 feet on a flight from Los Angeles to New York, it was hard to imagine someone feeling the immediate need to spend $1,800 on an electric unicycle or $70 and on a lithograph of a drunken cat ($1,200 if you wanted it on canvas). I will cop to a passing interest in the “LaserComb” that promised to regrow hair, because, well, what if it worked! But I never actually considered buying the thing.
I was in the minority, however, because people apparently were shopping at 35,000 feet, lots of them. SkyMall’s strategy was based on those pure numbers. It said it reached roughly 650 million passengers each year. So SkyMall negotiated deals to make it the exclusive in-flight catalog partner for numerous airlines. Ultimately its reach covered 90% of the passengers on U.S. flights. And the company’s internal research indicated that about 70% of all passengers read SkyMall on every flight.
This was the key to SkyMall’s business plan. It didn’t make anything it sold. Instead it was an advertising vehicle for other companies to sell their products. And in light of the audience SkyMall reached, companies would pay handsomely to place their ads on SkyMall’s pages. SkyMall charged anywhere from $40,000 and $130,000 depending on the size of an ad, as well as hefty transaction fees. And all SkyMall had to do was cover the printing costs and maintain the SkyMall website, which accounted for nearly two-thirds of its sales.
For a long time competition was not a problem for SkyMall. Specialty stores like Hammacher Schlemmer, Brookstone, and Sharper Image all sold similar items and had devoted followings. But SkyMall had a captive audience for several hours to peruse its catalog. And even as airlines added entertainment alternatives in the cabin, SkyMall still was able to capture people’s attention and sell products.
It was a beautiful plan. Until technology got in the way.
The undoing of SkyMall started in 2009 with the introduction of Wi-Fi on planes. And while Wi-Fi in the sky has taken a little while to catch on, it’s taken a major bite out of SkyMall.
With the Internet available on planes people can shop while they fly like never before. But they don’t need to use SkyMall to do it. Amazon, eBay, every shopping website you want, are all at their fingertips.
This has taken a major bite out of SkyMall’s business prospects, profitability, and capital position. The company’s revenue projections for 2014 are down nearly half from 2013. It has less than $10 million in assets and owes around $12 million to suppliers, vendors, employees, and others. And it reported an operating loss of $16.7M in the most recent quarter.
That’s the story behind SkyMall’s demise. It it’s dead, technology killed it off. The company’s advantage was always about having a captive audience for the products it advertised. But as soon as other stores entered the airplane cabin, that advantage was gone.
The failure of SkyMall is the familiar story of obsolescence in an ever-modernizing world. As technology transforms the way we fly, SkyMall seems destined to become an airline artifact, like smoking sections and comfortable legroom. Our shopping malls have moved to the sky. So there’s no longer a reason for a SkyMall.
Eric J. Weiner is the author of the books “The Shadow Market” and “What Goes Up.”
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