Lands End - digital innovator once more, but not chasing 'pretty' stores?

One step forwards, two steps back - a wise move when you’re on a cliff edge, but less so if you’re Lands End. But that’s the situation the US retailer finds itself in again, turning in a 59% year-on-year drop in profit for its latest quarter, while sales fell 1.6% to $502.3 million.

Despite the numbers, CEO Jerome Griffith boasts that progress has been made to “ leverage our data to become a more digitally-led organization, adapting to ongoing shifts in customer shopping behaviors”. He argues that this in fact a return to basics for the retailer:

Operationally, we function like the digital innovator that we were once famous for being.

That may be a characteristic of Lands End that has escaped universal attention, but Griffith insists that the past year has seen a return to some best practices:

We were agile, we took a test and learn approach to our website innovations, and we were nimble in our response to changes in customer trends. Specifically, we focused on our internal and external search efforts, improved mobile site speed and leveraged the price clarity across all platforms.

The result of these efforts? Double digital US e-commerce sales growth - and coming from one platform in particular, says Griffith:

Sales on mobile devices grew more than three times as fast as the total. In fact, during the quarter, mobile traffic exceeded desktop traffic for the first time.

That has implications for where to focus investment, he adds:

Our work on search will continue to focus on key items, seasonality investments and updates designed to better align with our customer search habits. We understand that our customer is increasingly discovering Lands End via search on their smartphone. So we are expanding initiatives centered on the customer's experience by offering personalized messaging, improved product presentation, and a faster website.

Not just pretty stores

In common with other retailers, Lands End has also had to make a decision about its relationship with Amazon - threatening presence or complementary route to market? It’s the latter option that Griffith points to:

While we're making it easier than ever to shop through our own stores and website, we see tremendous potential to increase brand awareness and expand our customer reach, by selling Lands’ End products on third party marketplaces in the US and internationally. We began selling key items on Amazon in the US last year, and during the fourth quarter, we also began selling on Amazon in Germany.

It’s early days, he admits, but the initial signs are promising:

Even though this business remains very small, we're encouraged to see that more than half of our Amazon customers are new to the brand, while in general, customers who shop with us on Amazon have similar characteristics to customers in our other channels. We do note that for the holiday season, a new Amazon customer skews slightly younger and more male, and items that are selling well on Amazon are the same key items that are selling well through our own stores and website, which reinforces that our product and merchandise strategies are working.

Stores remain part of the equation and with the collapse of Sears and the expansion of Lands End’s own outlets, there’s some positive data with sales in company-operated stores rising 15.1% year-on-year. The Sears demise has actually turned into a potential benefit for Lands End, building out a store infrastructure without having to lose the ‘bloat’ that many others still struggle with.

That allows for some strategic manoeuvrability. Griffith says:

I've never been a fan of opening up stores just to make yourself look pretty. They need to be profitable and they are and they will be. I will say, when you look at stores today, I don't believe that you can just look at four walls and say this makes a store good or not.

I think, with the way that customers are shopping today, they want what they want where and when they want it. So our customers interact with us in the stores but they've also interacted with us online. So we're really looking at the total trading area to say what does a store actually bring to us for the customer experience in the trading area?.’

One manifestation of this thinking is the use of more tech within the stores themselves:

You'll notice inside the stores, our employees carry i-pads. We have kiosks in the store, so that you can interact with us online, because based upon the size of the store there's no way that they can carry the full range of product that we offer in the store. But we don't want to penalize the customer. We want the customer to have a great shopping experience. So therefore we make the full line available to them in a different way.

As with all our distribution channels, our retail stores represent the Lands’ End American Heritage aesthetic making it easy for customers to find our products in an inviting, brand appropriate setting, while also enabling us to better engage and connect with our customers…We're also encouraging customers to shop on our in-store web portals where we can showcase our full online assortment and we've observed that our new stores are driving a larger percentage of these sales.

Behind the scenes, a new ERP implementation is nearing completion, while an enterprise Order Management System rollout is getting underway. Next up will be a Warehouse Management System project, currently being scoped. These back-end upgrades will enable greater agility moving forward, says Griffith:

With our updated ERP system in place, we're enabled to build on that backbone and upgrade the way we take, process and fulfill orders across our enterprise. We expect that the Enterprise Order Management system will enable us to better utilize inventory across our company and allow for numerous fulfilment options, such as Buy Online, Pickup In Store, and Buy Online, Ship to Store.

My take

The store growth looks encouraging, but then again it’s starting from a very low base. The digital growth numbers remain consistent - and that’s probably the story of Lands End in 2018. No great disasters, but no great progress - keep on, keeping on. It’s not the greatest story of retail digital transformation, but nor is it the worst.