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E-commerce declines for Lands' End, but third party online marketplace revenue is up 37.5% year-on-year

Stuart Lauchlan Profile picture for user slauchlan March 17, 2023
Summary:
Online marketplaces run by other retailers are proving a positive move for Lands' End.

Lands End

Third party online marketplaces are offering some comfort to retailer Lands’ End even as its global e-commerce revenues are on the decline. 

The company yesterday announced that its Q4 revenue declined year-on-year by 4.6% to $529 million, with e-commerce down 6.1% to $414.5 million. 

But third party revenues, including online marketplaces, was up eight percent to $39.2 million in Q4 and 37.5% for the full year. It’s some vindication of the belief outlined by former CEO Jerome Griffith in January when he noted of increased customer engagement:

These new customers come in through these marketplaces: 75% of them either never shopped at Lands’ End or are lapsed customers and haven’t shopped at Lands’ End for five years.

Lands’ End currently has online partnership with Kohl’s. Target, Walmart and Amazon and is set to launch on Macy’s marketplace in a few months. It’s all about extending channel choice for customers, according to CEO Andrew McLean:

It's worth noting that while we seek to meet customers where they are, over 90% of our revenue comes from a click. So, we will continue to emphasize digital channels for serving existing and new customers. At Lands’ End, we're customer obsessed. The key to executing this product strategy is making sure we reach our customers in the right cadence with the right products at the right time, helping them to build their basket across categories. In essence, we're going to take a page from our history and focus on engaging directly with our customers, while encouraging them to shop across the preferred channel. 

Lands’ End already has a robust buyer file, nearly 7 million strong, and we are going to double down on our approach to understanding our customers, both current and potential, and seek to grow our share of our addressable market by leveraging our proprietary data. Our focus will be on deepening relationships with existing customers, while simultaneously bringing in new customers to the brand.

This will involve qualitative and quantitative assessments that are just kicking off, which will provide us with an even better understanding of our customers, including how they view our brand, what other products and product adjacencies they may be looking for, and how we can best engage with them. We'll also use our proprietary data to better understand our own operations, providing our product teams the tools they need to make better design, sourcing and buying decisions.

Data, data, data

This data centricity is an aspect of Lands’ End’s operating strategy that will only increase, said McLean: 

We do see a lot of data. We have an amazing amount of data. We stopped looking at the customer just in terms of a demographic, and we started looking at behavioral cohorts. And as we got further into those behavioral cohorts, we've seen that there are patterns in the customer that we can use to help them connect the dots across our categories. So, whereas we have had cohorts for the customers who tend to just shop one item, outer wear, that might be the shop that they are, swim, that might be the shop that they are, we will look for ways to connect them across our categories.

The best example I can give you is the mom who's shopping for a school uniform for her kids. It's a great school uniform business for us. We see that she was leaning into our swim, and by encouraging her, by advertising to her directly, marketing to her with our catalogs, we've been able to engage her with our swim product. Once you get her into the swim product, we see that the collection of goods that sit around that, which is going to move from slides on her feet, hats on her head, and swim dresses in between.

He added: 

We moved in the fourth quarter to an AI integrated system for email. And within that system, we're able to look at these customer cohorts and look at the behaviors that they exhibit, and market more specifically against them. So, we're guessing less and being more specific and accurate and thoughtful going forward. And that's a big effort for us as we sort of bring that into the business in general from how we approach search in the future, to how we think about alternate digital channels. That's going to remain really important to us.

My take

Lands’ End clearly still has its problems. The Q4 earnings reported a net loss of $3.3 million against a profit of $7.1 million for the comparable year-before period. That said, the strategy of tapping into third party marketplaces to increase the reach of the brand is a sound one and complements the firm’s continued emphasis on a catalog approach to engage with customers. (The firm only has 33 physical stores.) McLean talks about “strengthening our digitally native capabilities through enhanced use of data analytics, which we expect will drive deeper brand affinity and grow our share of our addressable market”. That’s the plan. Now for the tricky bit - the execution in a hugely competitive and turbulent omni-channel retail sector. 

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