Earlier this week we looked at three US retailers who have embarked on investing in their legacy store estate as part of their omni-channel transformations. For those three - Old Navy, Abercrombie & Fitch and Nordstrom - this is built around upgrading what’s been left to age.
It’s a rather different challenge at Lands End, where the troubles that store partner Sears found itself in last year have accelerated the former’s need to build out its own offline network, basically from scratch. With that in mind, this year will the opening of up to nine stores, which will leave the firm with 28 locations. By the end of 2022, that number is pitched at 70 stores.
It’s ambitious, but essential. The question is - is there time to pull it off? The company just turned in another set of dismal results. Net loss for the quarter was $6.8 million compared to a net loss of $2.6 million for the same period last year. Revenue was down 12.5% to $262.4 million compared to $299.8 million last year. Meanwhile the share price has tanked by 41% over the past 12 months.
CEO Jerome Griffith is, inevitably, full of public-facing confidence that he can move the firm from being heavily e-commerce focused to a more balanced omni-channel presence:
Our goal is to offer our products however, wherever and whenever, our customer wants to shop, whether through e-commerce or brick-and-mortar stores. At Land's End, our e-commerce business represents over 90% of our direct-to-consumer sales. While industry wide, only 25% of all apparel sales occur online, digitally-native brands are recognizing that there is a value in having a storefront presence. Our digital customers want to shop our brands in brick-and-mortar stores as a way to enhance their digital experience.
From a bottom line perspective, an omni-channel approach also provides more potential for upsell, he adds:
These stores enable us to showcase our assortment, presented by well trained sales associates, providing us with the opportunity to further engage our customer with the brand, as well as our product look, feel and features. In addition to providing greater convenience for our customers, we know the customers who shop in more than one channel of a brand are the most productive customers. Our stores also represent a powerful brand and marketing tool, and we remain very disciplined in how we expand our footprint to leverage our strong brand and heritage.
But despite this, Lands End is a digital-first retailer, says Griffith, and that’s not about to change:
To be clear, we are and will remain an e-commerce-led, direct-to-consumer company. But in support of our unit channel strategy, we will also be where our customers want to shop and provide a consistent customer experience across all channels….We’re focused on maintaining our connection with our current customers and attracting new and lapsed customers to Land's End. Our buyer file is healthy with growth in the quarter, driven by new customer acquisition.
The strategy calls for serious investment in tech and Griffith insists that there is evidence that this is paying dividends, such as improved search engine optimization:
When our customers search for products, we consistently appear early in the search results. Our strategy to match relevant products based on customer behavior enables us to optimize investments across media to continue to grow our customer file.
Additionally, we remain focused on providing a strong value proposition to our customers through pricing and promotions. In our ongoing efforts to improve margin, we are evaluating how AI-based algorithms can determine the optimal offer to place on a given item to drive the best response from our customer. While still early, we're pleased with the results and we'll continue to test and learn through the spring summer season with a goal of having our dynamic promotion model in place for holiday peak.
Mobile remains a top priority, he says, with mobile traffic now exceeding desktop traffic and up 25% in the most recent quarter:
We expect that trend to continue through the year. This is particularly exciting heading into the back-to-school season as we know the smartphone is a busy parent's preferred device. We made improvements to our mobile site speed in the first quarter and over the next several quarters, we'll increase our efforts to further improve site speed and optimize our mobile experience.
Customer behavior continues to shift somewhat from desktop or laptop and then into mobile. We think there's a lot of opportunity for us on mobile with our product display pages and being able to get the product in front of the consumer faster, making it easier for them to check out.
So when it comes to continued spend on tech, it’s a case of having to grit the corporate teeth and get on with it. Griffith observes:
There's really no end of technological advancements out there. So we think this is going to be long term for us. But we think when it comes to expense, we've spent a very large amount of money over the last few years on our backbone system,. Our ERP is complete now. EOM [Enterprise Order Management] is under way. Those are bigger expenses than continuing to manage your website and upgrade the speed or upgrade the flexibility of your website. We think the bigger costs for us are behind us. But we will see continued investment into our website going forward, that's not going to stop. And as customer behavior continues to evolve, we'll evolve right along with it.
In the real world, land’s end is typically a steep cliff face off of which it’s all too easy to fall if you’re not careful. Tracking Lands End’s omni-channel transformation does require an acceptance that its circumstances are different to other retailers, thanks to its former dependency on its Sears relationship. Having gone cold turkey on that, the challenges ahead are manifold. I do remain concerned that Griffith still talks in rather cautious terms about needing to learn about stores, but the firm is coming from behind on this front so perhaps it’s inevitable. But getting to that ‘loving the store’ omni-channel balance is some way off I fear.