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Q: David, you have referred to the Internet as the "cold, gray darkness of cyberspace." How has this influenced Lands' End's use of the Internet? A: That is really one of the primary reasons that we put in Lands' End Live. You have to understand that Lands' End's reputation has been built on the one-on-one relationship with our customer reps. As we looked at the Internet, the one thing we felt was a strategic advantage was the customer service delivered by our operators, and to not have that available on the Internet and to leave somebody on their own without the interaction, the personal touch, did not make sense. Q: How does Your Personal Model fit into that strategy? A: The whole idea is to make shopping online as customer-friendly as possible. Really what we want to do is...create a better experience than you can get in a store and...things we couldn't do in a catalog. Your Personal Model was a pretty neat way to be able to try clothes on virtually to see how they look on you. We think that you get a pretty good idea of how something could look on you...to make a decision more effectively than...just looking at pictures in the catalog. Take a look at swimwear, where we have a huge national market share. It's probably one of the most sensitive categories we have. Basically, customers don't like the experience of going into the department store, going into a dressing room, undressing, and trying on swimwear. The experience we are creating online, and letting people try things on in the privacy of their home, is certainly a favorable experience to the one they would have in a retail store. Q: What has been the biggest challenge from the standpoint of corporate culture on the Internet? A: The biggest cultural challenge was seeing ourselves as a direct merchant with multiple channels of distribution. That may sound like it's not a big deal, but when you think about it, what we've done now is organized ourselves to being what we call "channel-agnostic," where we don't really mind how a customer buys as long as they buy it from us. Rather than have individual business groups that are compensated based on their results, what we do now is look at ourselves as a global brand across many different channels. That was a big shift. There is now a common corporate goal that has nothing to do with the channel. Q: To have salespeople assisting people on the Net raises your costs. What cost advantages does e-commerce offer that compensate for that? A: There are different efficiencies for different business models. For us, when you look at the cost of printing, creating, and mailing a catalog -- which last year cost us something like 16% to 18% of our net sales -- running an Internet site is significantly less expensive than that. So what we can do is leverage our costs. The thing that was great for us was that a lot of people not only had to worry about Internet technology but they also worry about building the infrastructure in the distribution and getting the product to the customers. And that's something we don't really worry about. Q: Do you think that makes it tougher for pure-plays? A: Certainly. Look what happened last Christmas and what is happening right now as many pure-plays fail. I think there are three things you need to be successful in e-commerce -- a recognized and trusted brand, a proprietary product, and a distribution infrastructure. Hundreds of millions were spent the last couple of years trying to establish e-commerce brands for the pure-plays, and very few actually broke through the clutter. Second, without a proprietary product, it's hard to sell at a profit because your competitor can always undersell you. So the idea of having a product where you can control the distribution of brand that's proprietary to you, that has sufficient margin, and that allows you to be profitable I think is very important. Q:What does that say for a company like Amazon, which does not have a proprietary product? A: They better figure out how to make money so that they are not selling books at a loss. Q: It doesn't seem like a great long-term outlook. A: You can draw that conclusion. But you know one of the things you're looking at at Amazon is that they've obviously progressed rapidly in the other categories. Q: But Amazon still doesn't have proprietary products? A: That is the problem. If you're going to establish your reputation based on price -- with the shop-bots that are out there that will find you the lowest price --- you have nowhere to go. If you compete on service, if you compete on value rather than price, then I think that's the ultimate winning combination. Q: So you see service as a great way to differentiate yourself in the marketplace? A: Absolutely. That's why we've done Lands' End Live and many of the other product services that we have as the shopping tools. Q: We've discussed some of your service features. What are new things that you plan to add that you can talk about? A: This fall, we are expanding Your Personal Model to include men. We think that we can do some things to help in suggestive selling to customers, so that it's more like when you go into a store to buy a shirt and a salesperson says, "Can I help you pick out a tie?" We think that there are ways that we can provide wardrobe suggestions to a customer based on both their past purchases and on their personal tastes and preferences. Q: You mean similar to the way Amazon recommends a book? A:Yeah, it's a similar idea, but it's a bit more complex with clothing because you're dealing with many more variables. You're dealing with color. You're dealing with style. You're dealing with multiple clothing combinations. So it's a lot more complex. Q: But recommendations won't be based on just past purchases, right? A: Not necessarily. It will be somewhat based on your past purchases, but not totally, because, for instance, if I purchase something for my wife when I go online, I don't want them to suggest, you know, a dress for me. Q: You are seeking a patent for this new application, correct? A: Yes, but I can't say much more for competitive reasons. Q: It seems like there could be a strategic arms race around service features among Internet players? A: That's a good way to put it. I think anything that you can do to get a competitive advantage is certainly going to be helpful, because service and shopping features are a much better way to compete than on price alone. Having fair prices, great service, and terrific features is the ultimate winning combination. |
