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Catalog Orders: New Stores
Expansion Demands a Retail Strategy Mix
by Judi Biederman
As e-commerce “clicks” into wide public use and changes the way America
shops, many market analysts forecast the demise of store-based retailing. Shopping on the
Web offers undeniable advantages to both consumers and retailers from the perspectives of
saving time and money. But don’t count stores as dead and gone just yet. They may be
an old-fashioned method of merchandising, but stores are still powerful retail venues.
Catalog merchandisers on the move are finding that they need a retail strategy mix to
successfully compete in today’s market, and many catalogers are creating that mix by
opening stores.
The catalog-to-retail switch is not a new story; Sears tried it as long ago as 1925, when
the now-giant retailer experimented with its first store located in a Chicago mail-order
plant. The Sears saga has been followed by a number of success stories, including those of
Talbots, Eddie Bauer, Crate & Barrel, Williams Sonoma, and Gymboree.
When the step from catalog to store is made today, however, it is accompanied by an
equally hard push into e-commerce operations. And unlike Sears, who eventually gave up its
book, today’s catalogers are combining their old way of doing business with new
strategies in order to reach a broader audience. Catalogs are used to penetrate markets
and establish brand presence and then they are backed up with Internet and store-based
operations. It’s kind of like a rewrite of the old Girl Scout song, “Make new
trends, but keep the old...”
The venerable L.L. Bean, in business since 1912 with a now internationally-known set of
catalogs and one Freeport, Maine headquarters store operation, raised eyebrows across the
industry last May when it announced it would be expanding its retail store presence. The
outdoor outfitter will establish its first new store in 88 years with a 75,000-sq.ft.
anchor at Tysons Corner Center in McLean, Virginia. The new location is expected to be the
prototype for a continued retail expansion.
“E-commerce is changing the whole face of marketing,” says Bill Shea, senior
vice president and general manager of retail for L.L. Bean, adding, “Our move to
retail is really strategic positioning. Wherever the customer wants to be is where we want
to be. If they haven’t seen us lately, they haven’t seen what L.L. Bean is all
about. Our goal is to be the number one service provider of great products.”
Shea explains that Bean’s mail order business had a continued growth pattern until
three years ago. Then a number of new catalogs began taking away market share while
spiraling operating expenses, including increased costs for paper, printing and postage,
began to take a toll on the company’s bottom line. When e-commerce entered the
equation, the company moved to regroup on all fronts.
In repositioning its operations, L.L. Bean considered that it had a higher percentage of
hard good (bikes, canoes, etc.) sales in its Freeport, Maine store. “It’s hard
to buy hard goods without touching them, trying them out,” Shea explains. Outdoor
equipment sales also seemed to be enhanced by Bean’s Outdoor Discovery School
Program, which offers instruction in outdoor activities like orienteering, bike repair,
fly casting, kayaking and canoeing. And the Freeport store, still on the site of the
original store that opened in 1917, is a great public lure, drawing more than 3.5 million
visitors each year.
Catalog sales were still very strong, pulling in $887 million in 1998. At the same time,
researchers discovered that the Internet holds great appeal for younger, more active
people, while industry-wide sales from traditional vehicles fall out to about 92 percent
from brick and mortar operations and eight percent from catalogs.
After two years of study, the new strategy became clear: use mail order penetration to
create a brand presence, open stores in regions where a strong brand position exists, and
then back both up with a strong Internet presence. “The story is really one of
synergistic linkage between all outlets,” says Shea. “The retail move was a
linking of the three all along. We’re just helping people enjoy the outdoors —
the customer decides the channel.”
L.L. Bean launched a Web site in 1995 and began offering online commerce in 1996. Now it
is relaunching its site, llbean.com, with cutting-edge technology combining
consumer-friendly windows formats and beefed-up customer service. Shea points out that
keeping a Web site competitive in today’s market is an expensive and ongoing
endeavor. “It requires a significant investment in capital,” he says, adding
that expenses in keeping the site fresh continue just as they would in redecorating or
theming a store every three to four years. “It’s the same as retail, but at an
accelerated pace,” he says.
Because L.L. Bean enjoys a strong brand presence due to the popularity of its catalog in
the Northern and Eastern U.S., that is the target market for initial retail expansion.
Plans call for the establishment of 60,000-80,000-sq.ft. core stores surrounded by smaller
20,000-30,000-sq.ft. stores acting as “discovery stores,” or feeders, into the
larger locations. Core stores will contain Outdoor Discovery School operations. The new
Virginia location in Tyson’s Corner, scheduled to open in summer 2000, will be a
75,000-sq.ft. core store featuring an Outdoor Discovery operation along with a waterfall,
a trout pond, a children’s climbing wall and outdoor brand positioning features that
Shea terms “unique.” It will be followed by feeder stores being planned in
Virginia, Maryland, and Washington D.C. “We’ll use the Tyson’s Corner store
as a learning experience pilot,” Shea says. “When that area is successful,
we’ll backfill into New Jersey and New York.”
The Tyson’s Corner store is a mall anchor, and Shea says the first feeder store will
be in a regional mall on a pad being developed for it. Bean is looking at pads in regional
malls and at freestanding facilities along high-traffic or in high L.L. Bean areas for
future core stores. Future feeder stores, however, will probably be in village shopping
atmospheres.
In addition to its retail store expansion, Bean will continue to experiment with the
development of new brand concepts. When a category of merchandise pulls in a strong
customer response in sales from the main catalog, it may be spun off into its own catalog
and possibly into a new store concept. This was done successfully with L.L. Kids brand,
which in 1997 got its own 17,000-sq.ft. store next to the original L.L. Bean Store in
Freeport, Maine. In the last year, L.L. Traveler and L.L. Home, both sub-brands from the
main catalog, came out in new stand-alone catalogs, as did Freeport Studio, a brand-new,
developed-from-scratch affiliated brand of casual, upscale women’s clothing.
Shea says the Freeport Studio catalog has been so popular that Bean is trying a
“store-in-store” experiment for it in the Freeport store. “We devoted 1,000
sq.ft. for Freeport Studio for four months before Christmas,” he says, adding,
“It’s going to be very hard to yank it out after Christmas. The response has
been terrific. I wouldn’t be surprised to see Freeport Studio stand alone like LL
Kids did.”
Casual, upscale women’s clothing has found such a significant mail-order audience
that two other catalogers, J. Jill and Coldwater Creek, are also expanding operations by
opening retail stores and Web sites. In March 1999, the J. Jill Group, Inc., based in
Hingham, Massachusetts, announced its intentions to open as many as ten stores during
2000, but the company accelerated its timetable and has scheduled November 1999 openings
for the first two in Natick, Massachusetts and Providence, Rhode Island.
Gordon R. Cooke, J. Jill president and CEO, explains that the accelerated launch was put
in place to capitalize on the 1999 holiday season. He also feels that the accelerated
openings will provide earlier initial customer feedback for the store concept.
“Entering the retail channel is a key component of our strategy to leverage the
strength of the J. Jill brand and we believe we have the infrastructure and organizational
depth in place to support these initiatives,” says Cooke.
Negotiations are underway for another five openings during 2000 in the Water Tower Place
in Chicago, Mall of America in Minneapolis, The Westchester in White Plains, New York,
Pacific Place in Seattle, and Tyson’s Corner Center in Virginia. The new stores will
average 5,500 sq.ft. and J. Jill now plans to have 10-12 stores open by the end of 2000.
J. Jill launched its e-commerce site, www.jjill.com, on September 1, 1999. The company
claims that since going online, and with minimal promotional activity, the site has
generated an average daily demand of $35,000, which represents more than five percent of
J. Jill’s total demand for the comparable period. Cooke says, “As the Internet
has become a powerful medium that is increasingly important in our customers’
everyday lives, the extension to an online channel is a natural evolution of our business.
By launching the jjill.com Web site, we can communicate more frequently with our existing
customers, leverage our extensive database, and introduce the J. Jill brand to previously
untapped markets.”
The Internet offers a great opportunity for shoppers to explore and find new places to
purchase desired items. David Gunter, director of corporate communications for Coldwater
Creek based in Sandpoint, Idaho, says that 25 percent of his company’s Web customers
are new ones, having discovered the company and its catalog offerings since it went online
at coldwatercreek.com. When public interest in shopping on the Internet really popped
during the 1998 holiday season, Coldwater Creek initiated an Internet commerce group to
study how to improve the site. It put up a new site in July 1999, has another in the
works, and plans constant upgrades. The effort and expense involved has paid off. For the
month of August 1999, e-commerce net sales were nearly $1.4 million, up from $22,000 the
previous year. Respective figures for the second quarter and first six months of 1999 vs.
1998 were $2.3 million and $61,000, $3.1 million and $134,000.
Coldwater Creek also expects to broaden its name recognition with a retail expansion that
started in 1997, which Gunter says was fueled by customer response to its single
headquarters retail location. “They started making pilgrimages to Sandpoint. It was
on a floor of offices, really a basement warehouse, not what they expected. We needed a
physical presence to match our image.”
In 1997, Coldwater Creek opened a second retail store in Jackson Hole, Wyoming, which is a
Western tourist destination like Sandpoint. Now the company is launching an urban
expansion, with new locations scheduled to open this month in Seattle and in Leawood,
Kansas, part of the Kansas City metro market. “We look at retail as one point on a
strategic triangle,” says Gunter. “Customers can come in, get customer service,
see, try on— it’s a more personal experience. Retail locations also help us pick
up more customers.”
He describes the 13,000-sq.ft. Seattle location, which is in a downtown retail
entertainment area at Pine and 5th, as “a lot of fun.” It will have two levels,
with design elements including two waterfalls and a glass-covered creek that flows through
the store. Although the water components are pleasing to look at and enhance the image of
a “Coldwater Creek,” they are strategically designed. The creek leads customers
through all of the store’s departments, literally pulling them through the
merchandise flow. At the store entrance, one of the waterfalls flows down to the lower
level, giving customers immediate cognition of the two levels available for shopping.
Gunter says the urban retail expansion is part of Coldwater Creek’s broad strategic
plan. Initially, the company will focus efforts in the Northwestern United States, where
Coldwater Creek has a strong image and a strong presence. “We want phenomenally good
locations,” he describes. “We’re beyond picky; consequently we have and
will continue to grow slowly. We want downtown storefronts in A-plus locations.” He
adds that the company is not yet interested in super or regional malls, but will remain
opportunistic for the future.
Another catalog-based company, dELiA*s Inc., is focusing exclusively on opening stores in
malls as part of its expansion. The company has seen explosive growth since 1994, when it
offered the first dELiA*s catalog catering exclusively to the lucrative Gen Y market of
consumers aged 10 to 24 years of age.
Since then, dELiA*s has expanded on all fronts. It has launched or acquired new catalog
concepts, including TSI Soccer for teen soccer players; Droog, for Gen Y boys and young
men; Contents, a teen home furnishings catalog; dot dot dash, a catalog aimed at
7-11-year-olds; and Storybook Heirlooms, geared to 4-11-year olds. In 1998, the company
made the decision to target the Gen Y market even more aggressively by pumping up its
e-commerce capabilities. From its gURL.com community Web site, it launched dELiAs.com in
May 1998 and quickly expanded online offerings to include all of its catalog concepts. To
operate its Web sites, the company created a subsidiary, iTurf, which went public in 1998.
The retail expansion got a jump-start in July 1998 when dELiA*s acquired 26 mall-based
stores operating as Screem! and Jean Country. The acquisition gave dELiA’s a retail
knowledge base as well as access to store properties in the Northeastern and Mid Atlantic
region. In early 1999, the first dELiA*s retail location opened at the Westchester Mall in
White Plains, New York. It was followed by ten more openings at mall locations in
Connecticut, Illinois, Massachusetts, New Jersey, and Pennsylvania.
Chris Edgar, dELiA*s Inc. executive vice president and COO, says that four more stores
will open by the end of 1999 and that the company plans an additional 12-15 locations
during 2000, which may include some Screem! conversions; eventually, the company plans to
close all of its Screem! locations but will convert the majority of them to the
dELiA’s concept.
“Our ideal is 3,500-4,000 sq.ft. and we will focus exclusively on malls,” says
Edgar, adding, “We’re incredibly critical — the store environment must be
consistent with our brand quality.” The company’s initial target area is the
Northeastern and Mid Atlantic regions, including Chicago. When the mall-location concept
has attained operating efficiency, the company will begin looking at urban destinations
and Edgar says it is considering other regions for the future.
All dELiA*s stores will offer most of the items available in the concept’s catalog,
along with other selected manufacturers. Edgar notes that the retail locations offer a
better display venue for items like jewelry and accessories. “Our selling options are
not always clear in the catalog. Smaller items can really make better use of square
footage.”
He notes that all of dELiA*s operations, as well as its expansion plans, are interrelated.
“Our online strategy was directly because of the growth of our catalog operations.
From there, we were able to develop a national brand and an extensive data base. Retail is
a direct descendent of all our assets. We’ve understood reality and the need to use
all our outlets.”
So it seems that it is not stores that are becoming a thing of the past — it’s
the use of a single retail strategy that is on its way out. Today’s market is seeing
the use of multiple channels to reach and serve customers successfully. E-commerce and
catalogs, instead of competing with stores, can actually create the need and set the stage
for retail locations. As L.L. Bean’s Bill Shea says, “Instead of one big ship,
we’re doing several smaller ships. It allows you to be more nimble in the
market.”
For more information, contact: Bill Shea, senior vice president and general manager of
retail, L.L. Bean, Inc., 207-552-7878; Olga L. Conley, CFO, J. Jill Group, Inc.,
781-740-2718; David Gunter, director of corporate communications, Coldwater Creek,
208-265-3944; Evan Guillemin, president, dELiA*s, Inc., 212-807-9060.
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