In its second-largest acquisition, Amazon buys the company for $970 million.
Lands’ End will spend money on technology that increases web-based sales, such as search and customer service, but needs to see customer demand before proceeding.
It appears that Bill Bass, senior vice president of e-commerce at Lands’ End Inc., has heard enough talk about how hard it is to make money on the web. “If you’re a catalog company,” he told attendees at the eTail 2001 Conference this week, “there is no reason not to be profitable on the web, unless you waste a lot of money on developing things that don’t matter.”
Bass attempted to prove his point by showing how his company’s no-frills, evolutionary approach to web development has produced some of the best financial results in e-retailing. Lands’ End online sales have grown from $67 million in calendar 1998 (fiscal year ended January 31, 1999) to $232 million last fiscal year. The site has been profitable during that period, and its profit have grown to exceed those of its foundation catalog business. And the web’s share of the company’s total revenues has grown from just 5% in 1998 to 20% in the first quarter of this year.
Bass explained that such success on the Internet can be attributed to the types of investments Lands’ End made to improve customer service and the investment mistakes it avoid. He cited five profitable customer service investments:
--Multi-Channel Integration. “When people come to Lands’ End from any source they think of us as one company, and they don’t want to hear that our web operation is separate,” he declared. “A multi-channel customer is your best customer, and for us accounts for twice the sales volume of a single-channel customer.”
--On-Line Tools that Stress Customer Service. “The most important thing for a retail web site is that it be fast. If it’s not fast, people will leave,” Bass said. “People do not come to a web site for an experience, because the Internet is a terrible experience. The Internet is all about shopping efficiency, not about a pleasant experience.” Bass’s comment took critical aim at a presentation on Wednesday by David Lauren, who stressed the importance that his Polo.com site puts on stylish images, heavy life-style editorial content and slick videos of runway models. (See “Polo.com: Using style and slick media to generate sales.”)
In making investments in on-line tools, Bass said, Lands’ End focuses on one key customer service project each fall that it believes will have an immediate payoff in increased sales. In 1998, he said, that involved the addition to the site of the My Virtual Model technology that displays different fashion styles and colors on a web model with the click of a mouse. That technology alone, Bass said, accounted for a 13% increase in the average order volume on the site and a 26% increase in the rate that site visitors are converted into web buyers.
--Access to Live Customer Service Representatives. In 1999, the cataloger’s web site was enhanced with “Lands’ End Live,” which put customer service 800 phone numbers on every web page and put veteran customer service reps at the ready to answer questions from web shoppers. “Customers just love this,” Bass gushed. Prepared web responses to frequently asked questions “don’t help when the customer is stuck on the site,” he declared. “When people get stuck they want to talk with a live person for help.” The implementation of the Lands’ End Live feature, he said, produced an 8% increase in average order volume and a 67% gain in the conversion rate.
--Personalization and Privacy. Lands’ End introduced its personalization technology (called Personal Shopper) in 2000, and it immediately produced a 10% increase in average order volume and an 80% boost in conversion rates. “Personalization is the technology I am most intrigued with now,” said Bass, but he noted that care must be taken to protect the information that is acquired through the use of this technology. “Some companies on the web are doing some fairly distressing things regarding privacy,” Bass said, explaining why Lands’ End does not share such data with affinity marketing partners. “People who shop at your site expect that the data they give you will stay with you and won’t be shared with others,” he said.
--Enterprise-wide CRM. Bass is impressed with the customer service power of CRM technology, but he cautioned that data collected and used by CRM systems must be meaningful for the customer service equation, not frivolous. “These suckers are expensive,” Bass said of CRM systems. “You can quickly get into a diminishing returns situation on investments. So you must be cautious on what information you choose to put into the CRM development. CRM is fraught with peril, but you have to have it.”
Just as important to Bass in explaining his company’s web retail success are the lavish-but unproductive-bells and whistles that Lands’ End eschewed. They include investments that utilize broadband technology. “I haven’t had a single customer say to me that they need to see runway videos on our site,” said Bass. “The vendors want to push it, but the customers don’t want it.”
Wireless, he said, is another non-starter for a web site. “I heard a consultant say that 80% of the people shopping on the web will be using wireless,” Bass said. “That was malpractice. Travel services and a few other areas may work with wireless, but customers really don’t care that much about it.” He believes auction and other sophisticated pricing models are equally a waste of development money. “Our customers don’t ask us to auction socks,” he said. “If you price it right in the first place, auctions won’t matter, because people go to web sites for convenience. They want to come in, buy and leave.”
One technology that Bass conceded his site has overlooked until recently is the search engine, which is the second most-visited place on the company’s site. “Our search engine was terrible, which is why we just went with EasyAsk technology for search.” (See “Lands’ End chooses EasyAsk to enhance online search.”)