Lands End ends eleven quarter run of falling sales as e-commerce focus takes hold

SUMMARY:

Shaking off the Sears legacy and a misguided effort to go high-end, US retail giant Lands End is firmly focused on e-commerce, data analytics and building out its own retail destiny.

The current US retail landscape is turbulent enough for everyone without having to try to recover from previous strategic errors. For long-standing catalog-based retailer Lands End there are two such errors that need to be tacked.

The first, and most serious in retrospect, was the 2002 decision to be acquired by Sears, which began selling Lands End. clothes in its stores. That may have seemed a good idea at the time, and certainly provided a short-term boost in sales, but longer term the relationship was troubled. This culminated in 2014 with Sears spinning off Lands End as an independent retailer again, looking to find its feet in a world where the traditional catalog model had been replaced by the online marketplace.

The second error was the brainchild of CEO Federica Marchionni, drafted in from Dolce & Gabbana, who decided that Lands End’s future lay at the high end of the market, rather than the ‘Middle America staples’ end. Marchionni stepped down last September, replaced by Jerome Griffith, who sees the future as firmly based on making an essential transition to e-commerce and digital:

For many years, we’ve operated as a catalog business with a complementary online e-mail and digital presence. We’ve been working to shift the relationship among these direct channels and bring our marketing expertise to the digital world.

To achieve this, Lands End has been focusing on upgrading and standardizing technology platforms, both front and back of house. Griffith says:

Currently, we utilize multiple e-commerce platforms across our business, and we will work to rationalize and enhance this key infrastructure in the future. We also intend to integrate emerging technologies so our customers have the tools necessary to easily explore, shop and utilize and share social feedback on our products regardless of the device they use.

He adds:

We’re focused on further strengthening our infrastructure to increase efficiency across the organization. We’re already benefiting from the first phase of our ERP upgrade, rolling out our finance and merchandising operation system earlier in the year. We expect to implement additional finance and merchandising operations capabilities along with inventory planning capabilities later this year.

We believe these foundational systems will provide us with a springboard for strategic capabilities, including order management and warehouse management, allowing us to operate as a global omni-channel player.

Bricks v clicks

Omni- does imply a continuing brick-and-mortar presence, one which is looking under threat for Lands End as retail industry Cassandras continue to predict that Sears will be the next big name to fall. Certainly Griffith seems prepared for that eventuality:

Sears has been closing store locations over the past several years, and we have been preparing alternative strategies to best serve our bricks-and-mortar customers. As part of this, we have a preliminary plan to open several of our own stand-alone Lands’ End stores in fiscal 2018.

We’re working on a strategic plan for that now. Working on a concept for the stores, depending on what we want the store to look like and also what type of technology is going to go into the stores. We’re kind of finalizing the plan throughout quarter three. We have a bunch of stores right now, about 11, and overall, we make money in those stores. But we didn’t really feel like it was a smooth customer experience. We didn’t feel that the concept was really right, so we’ve been putting together a real estate strategy, and we’ll probably open mid-single digits in stores next year in areas where we know that we have a very good customer base in order to test this out or to make sure that we have a good profit model before we move forward.

Brick-and-mortar sales only account for 14% of overall Lands End revnenues. but the mission statement is clear:

We’re committed to putting our retail destiny firmly on our own control over the long term. This will help to ensure that we’re giving our customers what they want, while also giving them the options to buy it, exchange it and return it when and where they choose, whether that be online or in person.

The customer base is what’s really at the heart of Griffith’s long term omni-thinking, with the firm having a significant asset to be tapped into:

Given our long history of serving customers across the country through our catalog and online, I can confidently say that we have a very good grasp on the needs of our customers. We will leverage this data to inform our decisions and create differentiated experiences as we open new locations.

What matters is becoming an ever-stronger customer-centric organization, he argues, and part of that will involve examining marketing strategies to attract online shoppers:

We’re working to apply the latest direct marketing principles to our e-commerce platform as well as to our product and digital marketing messaging. This will be driven by a cultural and process transformation using advanced analytics to improve decision-making and enhance our focus on the customer.

To come

Exploiting that analytics expertise to get a better understanding of the customer will be essential, says Griffith:

As an organization, we’re getting much better at testing and reacting to selling trends, customer data and website metrics. We expect to continue to elevate these capabilities going forward. This will be evident both in our merchandise offering as we strive to create assortments that better reflect our customers’ sensibilities and needs as well as through our marketing efforts, which will be focused on making the customer experience more personalized and relevant.

We will also use the data we’re gathering to enhance customer experiences, enabling us to more easily personalize customers’ interactions with Lands’ End. We believe this will ultimately allow us to create deeper connections, improving customer satisfaction and drive higher conversion. As an example, we’re seeing success personalizing e-mails by leveraging individual browsing behavior at the time of day they typically open their e-mails. In addition, we’re taking steps to strengthen our omni-channel capabilities to make it easier for customers to find, shop and buy products that fit their needs. This includes continuing our shift towards becoming an e-commerce led business through enhancements to both our online and mobile experiences.

Mobile, in particular, can benefit from some increased attention:

While we’re pleased with the progress we’ve made so far, we see opportunities to further improve customer engagement and use the user experience for customers shopping Lands’ End from their mobile devices. We’re creating an easier mobile shopping experience with a cleaner design to enhance navigation, quicker load speeds and options to get order notification straight to your phone via text message. We believe that these improvements will significantly impact both mobile traffic and conversion.

The ability to service customers and bolster engagement levels is also a focus of attention, with Griffiths setting out his stall:

While we already provide award-winning customer service, we’re working to reimagine the shopping experience as we strive to delight and surprise customers every time they engage with Lands’ End across channels.

We’re evaluating capabilities that will allow us to position data-driven customer sentiment insight into the hands of our employees, so they’re fully equipped to meet our customer’s expectation. This will be an ongoing process to ensure that we are continually meeting our customers’ needs. In the near term, we’ll be focused on helping customers find the right item through enhanced fit and product finder solutions. This includes our proprietary interactive Swim Finder and swim mix-and-match tools, which are generating great feedback.

My take

After a year in the top sear, Griffith can take some encouragement from fact that the firm just ended an eleven quarter run of declining year-on-year sales, boasting a modest 3.5% increase for its latest quarter. The fact that losses were up from $2 million last year to $3.9 million this year serves as a sharp reminder however that there’s a lot work still to be done.

Breaking down the numbers further provides some other positive indicators though. Online and catalog revenues rose 5.5% year-on-year and while brick-and-mortar sales drop by 7.4% overall this seems attributable in the main to Sears closures. Sales at established Lands End brick-and-mortar locations were up 3.8%.

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Image credit - Lands End

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