WIRED ON FIRDAY: Internet sales are replacing catalogues as sites display a remarkable degree of sophistication when it comes to giving shoppers what they want.
AS many Americans can attest to, their mailboxes bulge daily with letters, advertisements and catalogues from mail order companies.
Some of these companies were exclusively catalogue firms until they began to offer their products on the Web and in some instances, to open stores. Two of the most prominent of these are Lands' End and J. Crew. On Monday, Sears, Roebuck announced it would buy Lands' End for $1.9 billion (€2.09 billion) in cash to re-energise Sears' apparel business.
J. Crew is a private company that has been going through some trouble recently. Its chief executive officer, Mark Sarvary, resigned this month and sales have fallen in the past 18 months. Sales were $778 million, a fall of 6 per cent, in fiscal 2001 and last year, the company had a net loss of $11 million, compared to a profit of $11.9 million for fiscal 2000. Earnings before interest and taxes were down by more than a third, to $53 million.
Texas Pacific Group, the leveraged-buyout specialist, bought 60 per cent of J. Crew in 1997 for $560 million. Its idea was to convert J. Crew from a catalogue company (which it has been since 1983) into a retailer with stores in many shopping malls. Since then, it has opened 25 to 30 stores a year and has grown from 51 retail stores to 143 and it has 41 factory outlet stores.
While some customers have been drifting away, the one bright spot for the company seems to be online sales. A spokeswoman at J. Crew's head office in New York would not reveal the percentage of sales that the company derives from the catalogue division versus the Internet but she did say "there has been growth on the Internet for us as a multi-channel retailer".
The New York Times reported in March that for the first time J. Crew's Web sales eclipsed its catalogue sales. During February, the $13.1 million worth of goods the company sold online surpassed catalogue sales of $10.7 million.
"The milestone points to the continuing online progress of the biggest catalogue marketers, which started their e-commerce efforts with obvious advantages over traditional retailers and internet start-ups - expertise in selling to customers remotely - and which have continued to refine their online selling approach over the last three years," Bob Tedeschi wrote on March 25th.
The average J. Crew order is bigger on the Web than through the catalogue, although, the spokeswoman said, many of their online customers are those who receive the catalogue in the mail where they see something they like and then decide to order it online. The Web is a cheaper way to interact with customers given the industry standard of $1 to prepare and ship a catalogue.
Lands' End, another direct merchant of casual clothing for men, women and children, had internet sales of $299 million in fiscal 2002 compared to $218 million in 2001 and $138 million in 2000, said Charlotte Lacomb, director of investor relations at Lands' End in Dodgeville, Wisconsin.
Customers can shop by calling Lands' End on the phone, send their order by mail or fax or on the internet at landsend.com. Last year, Lands' End mailed 269 million full-priced catalogues worldwide. Merchandise sales in its core business segment, which is adult apparel, were $814 million in fiscal 2001 and merchandise sales in its speciality business segment, which includes children clothing, products for the home and corporate sales, were $408 million in fiscal 2001.
Lands' End has been selling on the internet since 1995 - in fact, internet sales that year amounted to $160 - and it has been profitable on the Web since 1997. Each year, the company sees a 5 per cent increase in sales online. In fact, the online division's profit margins surpassed the catalogue division in 1999.
"Internet sales now account for 21 per cent of all our sales," Ms Lacomb said. About 19 per cent of these shoppers are new customers and about 8 per cent have been sent catalogues in the past but decide to place their first order with Lands' End on the internet. However, it still gets 79 per cent of its business from non-internet methods, mainly over the telephone, with a small number coming by fax and money order.
It has 16 outlet stores, but the deal with Sears will mean customers will be able to return items ordered through the Lands' End catalogue or website to any of Sears' 870 stores nationwide. Apparently, Sears was attracted to Lands' End's leadership position in the direct-to-customer market, as well as its Web technology which helped it top Forrester Research's list of the best e-commerce sites.
"The internet is continuing to grow for us," Ms Lacomb said. "It is very well tied in to our catalogues. There's a lot of synergy between the channels."
Andrea Stephenson of internet communications at Lands' End, said noon on weekdays is the busiest time for shoppers.
Each year it strives to add a new technology to the site. One customer-friendly feature is Lands' End Live which provides real-time assistance online. A customer with two telephone lines could click on an icon and a Lands' End service representative would call her back. They can talk, share screens and the representative could send pictures of say, a cardigan, she might like.
Other features include a virtual model for men and women where customers can create their own virtual image by keying in their measurements and seeing how clothes will look on them. Since the model was introduced in 1998, two million have been created. Customers can also have jeans and chinos custom-made to be ready within three weeks.
The company has redesigned its search engine and the back-end servers can quickly create outfits. So, when a customer is checking out, the site will push another product that may go well with the clothes he is already buying.
Also, when customers are shopping for swimwear they can sort out bathing suits according to their body shapes, styles or to reduce the anxiety level about certain parts of their bodies.
Lands' End has six international sites that account for 10 per cent of business and they are Ireland, France, Japan, Britain, Germany and Italy.
On these sites, it promotes items suited to particular tastes, for example, the Irish site features jumpers whereas the Italian site features leather goods.
"The goal is to help our customers find what they want," Ms Stephenson said.
