But losses mount for the home furnishings e-retailer that went public in October.
Who would have thought that Lillian Vernon’s mainstream customers would embrace the web? Lillian did—while she was embracing it herself for things like new-product testing.
Last year’s Razor scooter craze looked like a good opportunity for retailers as it picked up steam with the approach of the Holiday shopping season, and after 50 years as a merchandiser, Lillian Vernon knows how to pick a winner. But she also knows that today’s rocket can become tomorrow’s dud all too quickly; it’s all in the timing.
With tight inventory management a key to keeping costs in line, her company, Lillian Vernon Corp., had a couple of choices. It could order scooters in quantity on the belief that its 24 million catalog and web customers would snap them up, but it would face the headache of major overstock liquidation if it turned out the toy had already peaked. Or it could cut its risk by ordering a smaller quantity, but lose a big opportunity if scooters held steady as a hot item on Christmas wish lists.
Either way, it was a gamble, but thanks to the company’s web site, Lillian Vernon didn’t have to bet. “The web gives you a wonderful opportunity to test merchandise,” says Vernon, CEO of the $287 million company she started in 1951. “You don’t have to roll something out in 16 million catalogs before you even know if it will sell, which can be very expensive. You can put it on the web and know in a week if it’s going to sell.”
To anyone who knows catalog retailing, or has received one of her catalogs in the mail, Lillian Vernon may not seem like the kind of cataloger whose market would be shopping on the web. Yet the company has had a web presence through AOL since 1995 and its own web site since 1996. Today, LillianVernon.com accounts for nearly 10% of Lillian Vernon’s sales and it’s bringing younger customers to the company. That’s one reason the company has spent $4.5 million on a year-long upgrade of its web site, which re-launched in October.
Lillian Vernon’s core customers are homemakers, middle-aged and middle income, and in most cases, married with children living at home. The web has helped add to that group younger homemakers who also work outside the home. “Everyone uses computers at work, and most seem to have one at home, too. It’s always good to try to make your customer base younger, and I think the web can easily achieve that,” Vernon says.
The scooter issue resolved
Lillian Vernon tested the scooter market for Holiday 2000 by purchasing 500 scooters and posting the item on its web site that summer. Sales showed that there was still enough life in the scooter market to justify a place in the holiday catalogs, but not so much that it made sense to stock the scooters in huge quantities. The company ultimately included the scooter in its fall and winter catalogs, but reduced its original projections and its order from the vendor, thus maximizing profits on the scooter while minimizing post-holiday overstock issues.
Since Lillian Vernon’s foray onto the web in the mid 1990s, the Internet’s real utility to the company has emerged on several fronts. Besides being a merchandise testing tool that aids inventory management, it’s proved to be a growing sales channel in its own right. Web sales rose 40% over the same period last year in the company’s first two quarters ended Aug. 25, while companywide sales decreased 13%. They’re projected to contribute some $30 million to the company’s sales in fiscal 2002.
In addition to providing a way to take orders at less cost, the web also has shown it can move overstock more quickly while its value remains higher. “Right now, for example, we’re starting to liquidate Halloween items,” Vernon told Internet Retailer in late September. “With a few weeks still until Halloween, the web will give us a chance to clear maybe $1 million in Halloween merchandise immediately. If we didn’t have the web, we’d have to leave it in inventory until next August.”
The company’s newly re-launched site aims to give its growing base of web shoppers a richer, speedier shopping experience and an updated look. The new site uses Open Market’s content server enterprise software, running on IBM’s WebSphere e-commerce suite platform, to automate more of the order filling process on the back end. The platform and software solution will speed up the turn-around time on customer orders by as much as 40%, the company says.
Not just the best sellers
Prior to the re-launch, online orders required manual processing. The web orders were output at the company in paper form and had to be entered by hand into the back-end system. That time-consuming step has been eliminated. The new web site automates the entire process on the back end from receipt of the online order, including implementation of any shopper instructions on personalization, up to the point of picking and packing. The new back-end system enhancements also makes web site content updates easier by giving non-technical staff more control over content and reducing the time and programming needed to make changes on the site.
Streamlining the back end also will allow the company to load its entire inventory of 6,000 SKUs on the site-previously, it listed only its top-selling 1,500 items-and synchronize web site promotions with catalog mailings for a more cohesive offering across channels, the company says.
That leading-edge web technology will take on a critical role as an increasing share of the company’s performance depends on Internet sales. The company’s web sales are on an upswing even as its traditional mainstay, catalog sales, have decreased.
In fact, in response to lower-than-expected catalog sales in fiscal 2001, which the company attributes to a weaker economy, Lillian Vernon Corp. this spring implemented a 12% staff reduction across the board and consolidated its Las Vegas call center operation into its Virginia Beach, Va., distribution facility, among other cost-cutting measures. For its fiscal year ended Feb. 24, the company posted a net loss of $1.4 million on revenues that rose to $287.1 million from $281 million the previous year. Revenues for the year rose partly because of the company’s acquisition in April 2000 of Rue de France, an upscale home furnishing catalog which also operates its own web site, but the company still reported a loss due in part to restructuring and severance charges.