The Golden Rule: 'Sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more.' --Leon Leonwood Bean, company founder
L.L. Bean, Inc. is a leading U.S. catalog company and the largest catalog supplier of outdoor gear in the world. The L.L. Bean catalogs, a tradition since the company's founding, are the engine that drives company sales; in 1999 the company took in $854 million from catalog sales alone. The 1999 catalogs, 70 in all, offered approximately 16,000 different items, most tied to the pursuit of outdoor, active lifestyles. For the solitary fisherman or the busy baby-boomer, the name L.L. Bean stands for quality, value, and enduring style--so much so that each year more than three million visitors make pilgrimages to the company's original retail store, in Freeport, Maine, to soak up the Bean ambiance and the Bean bargains. Retail sales for 1999 (including those for the L.L. Kids Store, adjacent to the flagship store; a second L.L. Bean Store in McLean, Virginia; ten factory outlet stores; and more than 20 independently owned retail stores in Japan) reached $206 million. The llbean.com e-commerce web site has been operational since 1996. L.L. Bean also enjoys a high reputation, among its corporate peers as well as its customers, for order fulfillment.
Early 20th-Century Origins: The Maine Hunting Shoe
The founder of the company was a 40-year-old Maine outdoorsman named Leon Leonwood Bean. Orphaned at age 12, Bean began to develop his entrepreneurial skills by doing odd jobs and by selling soap door-to-door. He also earned money by trapping. 'Although he was a natural salesman,' according to Robert B. Pile in Top Entrepreneurs and Their Businesses, 'he was never really satisfied in one job and drifted about from place to place.' Finally, Bean went to work for his older brother, Otho, in a Freeport dry goods store. There Bean sold overalls to manual laborers and earned $12 a week. His true love, however, was hunting and fishing in the Maine woods and streams, a love that would eventually lead to the development of one of the most popular and enduring products in American retailing.
Like most outdoorsmen in the early 1900s, Bean frequently suffered the problem of hiking with waterlogged boots. In 1912 he decided to add leather tops to a pair of ordinary rubber boots. He sought the services of a local shoemaker, and, after a few pairs of the boots had been sewn together, he penned a circular entitled 'The Maine Hunting Shoe.' A model of early direct-mail advertising, the circular began: 'Outside of your gun, nothing is so important to your outfit as your foot-wear. You cannot expect success hunting deer or moose if your feet are not properly dressed.' Bean mailed the letter to sportsmen from outside Maine who had purchased Maine hunting licenses and touted his original shoe as 'light as a moccasin, with the protection of a heavy hunting boot.' He priced his product at $3.50 per pair and, to further entice his fellow hunters, offered a money-back guarantee.
Bean's marketing was flawless; however, his product was not. Of the 100 pairs of his Maine Hunting Shoes that were ordered and sent, 90 were returned because the tops had separated from the bottoms. Rather than give up his fledgling enterprise, though, Bean honored his guarantee and then borrowed $400 to redesign and perfect his boots (Bean also perfected his guarantee, making it unconditional and, in fact, the essence of Bean's customer service culture through the present day). His determination to satisfy himself and his customers paid off after he traveled to Boston to meet with representatives of the U.S. Rubber Company, who were able to fulfill his original design intentions. Bean redoubled his boot-making efforts and his commitment to the mail-order business, fortuitously in the same year that the U.S. Post Office began its parcel post service.
Bean's revamped footwear quickly became successful, and he soon expanded his marketing push into other states. A Fortune 'Hall of Fame' article records that when another of Bean's brothers, Guy, became the town postmaster, Bean established his factory directly over the post office and facilitated the mailing process with a system of chutes and elevators. 'He never lost his touch. Knowing that hunters from out of state often drove through Freeport in the middle of the night on their way to some hunting camp in the far wilds, Bean opened for business 24 hours a day. Night customers found a doorbell and a sign that read: 'Push once a minute until clerk appears.'
1920s Through 1950s: Adding Retail Store, Expanding Product Line
Bean's name spread during the 1920s, due to word-of-mouth as well as print advertising and the founder's continuing innovations. In 1920 Bean opened a showroom store adjacent to his workshop, in accession to the demands of visitors. In 1922 Bean reengineered the Maine Hunting Shoe by adding a split backstay to help eliminate chafing. Within two years, sales rose to $135,000 annually. In 1923 the company received welcome publicity when its boots were used to outfit the Macmillan Arctic Expedition. Two years later, the first full-sized catalog was mailed, featuring nonshoe apparel and sporting gear for the first time.
The catalog expanded again in 1927, adding fishing and camping equipment to the Bean line. Typical of the ad copy was the inducement: 'It is no longer necessary for you to experiment with hundreds of flies to determine the few that will catch fish. We have done that experimenting for you.' For years, in fact, Bean insisted on personally testing all of the products the company planned to sell. Perhaps this is why the Maine Hunting Shoe, as innovative as it was, proved to be simply the first in a string of classic Bean products, such as the Maine Guide Shirt, the Chamois Cloth Shirt, Bean Moccasins, the Zipper Duffle Bag, and Bean Cork Decoys. (The company also included high-quality non-Bean products, beginning with the Hudson Bay 'Point' Blanket in 1927.)
During the Great Depression era, the mail-order house managed not only to survive but to thrive, passing the million-dollar mark in sales in 1937. According to Pile, 'Bean invested nearly every dollar he made back into the business, with his eye on building it for the long term.' The secret to L.L. Bean's success during these growth years was a threefold emphasis on quality products, fair pricing, and creating a timeless appeal to the Bean catalogs, which always featured paintings of outdoor Maine scenes and stories that underscored the strong link between Bean products and an outdoor lifestyle. In addition, Leon Leonwood instituted a postage-paid policy, further strengthening the company's reputation for catering to the customer. By the post-World War II era, both Beans, the man and the company, had become living legends. Moreover, the list of Bean customers was fast becoming a collection of legends itself, with Calvin Coolidge, Franklin Roosevelt, Jack Dempsey, John Wayne, and Ted Williams alternately figuring prominently.
In 1951 Bean, still at the helm as he approached 80, announced that the Freeport retail store would begin operating 24 hours a day, 365 days a year. Another important innovation during this decade was the introduction in 1954 of a women's department. Yet, despite the now famous Bean name, as the company entered the 1960s its sales volume was not as high as might have been expected. Pile asserts that 'dark clouds loomed on the horizon as [Bean] became older. ... No longer did sales increase 25 percent or more each year; dollar volume actually began to flatten. Merchandise in the catalog and in the store was no longer up-to-the-minute and, even worse, orders were being slowly filled by part-time people who had little interest in doing the best possible job.' The downhill course the company appeared to be on was steepened by the inception of other sports specialty marketers. This course was altered, however, following Bean's death in 1967 when ownership of the company fell to the Bean heirs. Only one was interested in management: Leon A. Gorman, grandson of the founder.
Late 1960s Through Early 1990s: Modernization and Substantial Growth
Gorman was first hired by the company in 1960. In 1967 he became president of a languishing business, with $3.5 million in annual sales and $65,000 in profits. Strong leadership and redirection were required and Gorman filled the need. His first decisions included expanding the advertising budget and demographic target group and making prices more competitive. He refrained from seeking growth through more retail outlets for fear of jeopardizing the catalog business. During his first full year as president, sales rose to nearly $5 million. The company had gotten back on track just in time to enjoy a huge recreation boom that was spreading across the country. By 1975 sales had reached $30 million and the company was employing more than 400 people. During the 1970s, the computerization of many business segments and the relocation of manufacturing to a new building further speeded the company's growth. In 1974 the company built near Freeport a 110,000-square-foot distribution center, which was expanded to 310,000 square feet in 1979.
Several trends contributed to Bean's substantial growth in the 1980s. Among them was the accidental, or perhaps inevitable, affiliation of the Bean label with prep culture and clothing. According to Milton Moskowitz, Lisa Birnbach's Official Preppy Handbook, tongue-in-cheek or not in its declaration of the Bean store as 'nothing less than prep mecca,' helped fuel a 42 percent rise in 1981 sales. A new health and fitness boom contributed to Bean's growth, as well as a surge in mail-order shopping. First-time Bean customers, nearly 70 percent of which were women, increased rapidly during the 1980s. The company bolstered its retail space late in the decade, expanding the Freeport store by 40,000 square feet in 1989 and opening the first factory store in North Conway, New Hampshire, in 1988.
As the 1990s approached, however, the country experienced a serious recession; sales slowed, returns rose, and a 30 percent postal increase loomed on the horizon. For a time, Bean suffered along with the other major catalog marketers and was forced to lay off ten percent of its hourly and salaried workforce over a two-year period. In a 1992 Forbes article, Phyllis Berman placed the problem in a more serious context: 'What went wrong? To some extent L.L. Bean is the victim of success. A whole generation is already outfitted with L.L. Bean leisurewear and camping equipment. Its durable, high quality clothing lines have spawned many imitators. Meanwhile, similar items turn up in discount stores. ... Bean carried relatively few styles and introduced new products slowly. But today's trend-conscious and jaded consumers want variety and novelty.'
Berman, who continued by questioning Gorman's management decisions, may have been premature in her analysis; by the end of 1992, the company's 80th anniversary, sales had risen by 18 percent to $743 million. The same year, L.L. Bean opened its first store in Japan, a ripe market that also contributed high year-end catalog revenues. A second Japanese store was added in July 1993; both were jointly owned by Seiyu and the Matsushita Electric Industrial Co. By 1997 there were 11 L.L. Bean Japan stores. Meanwhile, in the fall of 1993, L.L. Bean launched its first line of children's clothing.
Mid-1990s and Beyond: Countering Stagnant Sales with Numerous Initiatives
Sales continued to grow smartly through the 1995 fiscal year, reaching $976 million, although that figure was three percent below the company's target. In fact, for the remainder of the decade, revenues were essentially flat, increasing only to $1.08 billion in 1996 (the first time the billion dollar mark had been breached) and standing at $1.07 billion by 1999. Once again, L.L. Bean faced criticism for not changing with the times, both fashion-wise and otherwise. Particular for women, the company's clothes were seen as 'too' traditional and not fashionable enough. The company's venerable catalogs were being lost amid the myriad catalogs now being mailed out to every American. In addition, the number of retailers offering casual outdoor clothing was on the rise, including such names as American Eagle Outfitters, the Gap, and REI. On top of all that, international sales were hurt by the sluggish Japanese economy and by the late 1990s Asian financial crisis.
L.L. Bean responded aggressively to its latest challenge with a number of late 1990s and early 2000s initiatives. The company joined the e-commerce bandwagon in 1996 with the launching of online ordering via the llbean.com web site. That same year, a new state-of-the-art order fulfillment center was opened in Freeport, boasting 650,000 square feet of space and the capacity to process 27 million items per year. With the new line of children's clothing proving to be a great success, L.L. Bean opened an L.L. Kids store adjacent to the flagship retail store in Freeport, in 1997. This 17,000-square-foot store featured a number of special attractions, including a two-story waterfall, a trout pond, a hiking trail, and an electronic rock climbing wall. On the women's clothing front, L.L. Bean launched a new brand and a new catalog called Freeport Studio in 1999. The company's first affiliated brand, Freeport Studio featured more contemporary and fashion-forward casual clothes for baby-boomer women. Finally, in 2000 L.L. Bean began what a number of industry analysts considered a long overdue expansion of its full-price retail stores. In July of that year, a 76,000-square-foot L.L. Bean store opened in McLean, Virginia, in a fancy suburban Washington mall.
This beginning of a potentially nationwide retail expansion was aimed at increasing overall sales as well as lessening the company's dependence on catalog sales, which comprised 85 percent of the total. Initial sales for the Freeport Studio venture were somewhat disappointing but perhaps not surprising given the extremely competitive nature of the women's clothing sector. It was nevertheless clear that L.L. Bean was once again attempting to update its image and its sales strategy through dramatic undertakings at the turn of the millennium, and it would take some time to determine whether the company could return to the strong growth of the 1980s and the mid-1990s.
Principal Competitors: American Eagle Outfitters, Inc.; Bass Pro Shops, Inc.; Cabela's Inc.; Coldwater Creek Inc.; The Coleman Company, Inc.; Columbia Sportswear Company; The Gap, Inc.; Gart Sports Company; Johnson Outdoors Inc.; Lands' End, Inc.; The North Face, Inc.; The Orvis Company Inc.; Recreational Equipment, Inc.; Speigel, Inc.; The Sports Authority, Inc.; The Sportsman's Guide, Inc.; The Timberland Company; Venator Group, Inc.; Wolverine World Wide, Inc.
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