Just before the end of 2019, US retailer Lands End provided a flurry of excitement in an otherwise essentially downbeat market by showing signs that its long-awaited turnaround is finally paying dividends. On the back of decent Q3 numbers, the company’s share price soared 21%.
It may be too soon to declare that the company is out of trouble just yet, but as noted in December, it’s certainly looking like it’s on firmer ground than it’s enjoyed for some time. So what’s happened? At the recent ICR conference in Orlando, CEO Jerome Griffith provided some insight.
Griffith took over the top job in early 2017, attracted by a brand that while underperforming, still had customer loyalty and affection:
I thought it was a brand that still had a great brand name. It just had other problems.
He was also intrigued by another characteristic of the firm:
It was an e-commerce company that didn't run itself like it was an e-commerce company. In fact I'm not even sure they knew they were.
In fact, Lands End started life as a catalog-based firm, but unlike some other retailers with the same sort of roots, has made a successful transition to the online model. Today, some 60% of revenue comes from its US e-commerce business and a further 12% from international.
The firm has a stated ambition to be digitally-driven with three key elements:
- Data-driven decisions built on a test-and-learn philosophy.
- A mobile focus - today 50% of customer engage with Lands End via mobile devices.
- Using AI for dynamic pricing and price clarity, encouraging upsell and conversion by making real-time deals.
The tech focus is something that Griffith is pleased with:
We’ve done early work on AI, early work on machine learning, we've done some early work on 3D design and making a lot of efficiencies in the company and that's going in the [right] direction, but there's so much more to do. And the thing that always amazes me is when you think you really got it, there's new technology and there's like, 'Oh wow, we want to do that'. You have to think about the investments that you're making, and where you want to get your best ROI.
A multi-year $70 million ERP rollout is now behind the firm and there’s work afoot on scoping out what a Warehouse Management Systems might look like. Other priorities are clear:
AI continues to be very important for us. We're putting a lot of time and effort into that. We think also that upgrading the mobile experience. More and more customers shop on a mobile phone. How fast can you get to where you want to be? How fast can you check out and pay in the way that you want to pay is extremely important. And stores are important for us, the ability to interact with customers, and make sure that you're meeting their needs.
As far as the stores component of the Lands End strategy is concerned, the company has spent much of the past three years exiting its concessions partnership with Sears and building out its own real estate. Since 2016, the company has pulled out of 300 Sears locations and aims to leave the remaining 29 stores next week.
At the same time, it’s opened up its own footprint. That’s grown from 11 outlets in 2017 through 25 in 2019, with an ambition to have 69 stores by 2022. What is interesting is how these stores function is perceived, essentially as customer service centers where consumers can come in to return unwanted items and make online purchases in-store via kiosks. They need to be the right size and in the right locations, which includes being in the proximity of other competitors.
On the subject of competition, Griffith pitches this as in large part defined by his own customers demographics:
Many people want to talk about other brands, but I don't really look at it that way; I look at like, 'Where does our customer shop?'. So our customer shops at Amazon, they shop at Walmart, they shop at Kohl's they shop at Target. They're a value-oriented customer. The other thing that really sticks out with our customers, they are comfort-oriented. They want to be comfortable and that's what they come to us for.
Passing mention of Amazon brings up the challenge that we’ve touched on so many times at diginomica - how established retailers respond to the online behemoth. Is it fearful apprehension or pragmatic co-operation? For Lands End, it’s definitely the latter. Company data suggests that 72% of its customers regard it as important that Lands End is available via Amazon. Other stats of note - 50% of customers coming via Amazon have never shopped at Lands End before, while a further 27% are lapsed customers who haven’t shopped with the brand for five years.
The emphasis on being data-driven has caused Lands End to invest in its own data science capabilities in-house, building out its own team of experts:
A lot of them come from academics, and they've done a very good job with us, it's probably been the hardest job to recruit for though. You have a lot of other opportunities out there if you're a data scientist today, so getting people to come to work on our industry has been a priority for us. It goes into three areas. One is customer insights. Customer insights is the area where they interact with the merchants as well. My expectation over the course of the next few years, is that the traditional merchandising assistant who sits there and analyses names with paper, that's going to go away, and it's all going to become [about] data analysts. Then we break it down into two other areas. One is analysis and one is the integration.
Griffith adds that there’s a huge appetite for data:
Everything from product data to consumer data to demographic data, everything that we can get our hands on, we've been able to utilise. The hardest thing was really getting everything into a single format from all the different areas where we pull data, because we have different divisions - we have the Leo division, which is all uniforms, we have international, which is on a couple of different platforms, and we have the US and then we have stores. So information coming in from all those places had to be put together in a similar format so you can access it.
That’s a challenge that faces lots of omni-channel retailers, although Griffith prefers a different term - uni-channel, not omni-channel:
I think a lot of people speak about omni-channel because customers shop in different venues. Uni-channel to me means having the same experience everywhere. I had a bad experience years ago with a company where I wanted to buy a jacket and basically they told me a store was a store and online was online and the two didn't come together, and I thought,‘Wow, it's really crappy as a customer experience because they both have your name on them'. So the goal for us is to have a seamless [experience]…And that's the direction we're gonna go to the next couple years.
As we said last month, not out of the woods yet, but there’s no questioning that the work that Griffith and his team have put in over the past three years has been thought-through and executed upon. WIth the Sears distraction finally due to be over later this week, it’s not unreasonable to assume that 2020 can be regarded as a tipping point year for Lands End - and a tipping point for the better.