Catalog retailer thrives online
Since July 1995, Lands End, a quiet Wisconsin catalog retailer, has been selling clothes on the Internet and making money at it.
"If you are a catalog company and you are not profitable online, then youre doing something wrong," says Bill Bass, Lands Ends senior vice president of e-commerce. Last year, LandsEnd.com racked up $220 million in online sales, representing about 17 percent of the companys $1.3 billion in overall sales, Bass says. Thats up from $140 million in online sales in 1999.
The company continues to grow at a time when even traditional retailers are struggling. Lands End reported last month that first-quarter profit rose twentyfold, after the retailer added a childrens clothing catalog and mixed some Lycra spandex in with the traditional polo shirts and khakis it sells.
The Dodgeville, Wis., company increased Internet sales by 38 percent in the first quarter ended April 27, contributing to its net income of $5.9 million, or 20 cents per share, up from $292,000, or 1 cent per share, for the same period last year.
Catalog companies like Lands End remain one of the few bright spots on the e-retailing scene because they already have distribution systems in place to handle Internet sales, Bass says. They also have customer service representatives to handle customer calls, and established brands that consumers have learned to trust. The other advantage Lands End has on the Net is that the company sells proprietary products that appeal to consumers. "At Lands End, we work directly with mills and manufacturers, eliminating middlemen," Bass says. "If you are not selling proprietary products online, too many people are taking a cut of the profits."
According to industry magazine Catalog Age, Lands End ranks as the 15th largest mail-order company, two spots ahead of L.L. Bean, and No. 2 for apparel. Lands End claims its customers are "twice as likely as the rest of the population to live in an online household, and that 20 percent of LandsEnd.com customers were new to the company last year.
Lands End also uses technology that allows consumers to create virtual models of themselves online to try on clothes. The technology, which debuted on the site in the fall of 1998, comes from My Virtual Model and has helped contribute to the companys profitability online, Bass says. Online shoppers who used the model technology were 19 percent more likely to purchase items than shoppers who didnt use the model.
Lands End is not the only catalog retailer to report profitability and increasing sales online. Currently, 72 percent of all catalogers are profitable online, according to a May survey by Shop.org and The Boston Consulting Group. That compares with 43 percent of store-based retailers and 27 percent of Web-based retailers operating profitability, the survey reports.
Catalog retailers have taken a much more competitive position in the market as they have succeeded in attracting entirely new customers through the online channel, says Michael Silverstein, senior vice president of BCGs consumer practice. "Roughly 40 percent of a catalogers online customers are new to the company," Silverstein says.
Lands Ends key to success is that the company doesnt care whether its selling to a customer on the Internet or through the catalog, as long as that customer is buying. "The No. 1 most important thing is having a product that people want to buy," Bass says.