1 Lands' End Lane
The Lands' End Principles of Doing Business: Principle 1. We do everything we can to make our products better. We improve material, and add back features and construction details that others have taken out over the years. We never reduce the quality of a product to make it cheaper. Principle 2. We price our products fairly and honestly. We do not, have not, and will not participate in the common retailing practice of inflating mark-ups to set up a future phony "sale." Principle 3. We accept any return for any reason, at any time. Our products are guaranteed. No fine print. No arguments. We mean exactly what we say: GUARANTEED. PERIOD. Principle 4. We ship faster than anyone we know of. We ship items in stock the day after we receive the order. At the height of the last Christmas season the longest time an order was in the house was 36 hours, excepting monograms which took another 12 hours. Principle 5. We believe that what is best for our customer is best for all of us. Everyone here understands that concept. Our sales and service people are trained to know our products, and to be friendly and helpful. They are urged to take all the time necessary to take care of you. We even pay for your call, for whatever reason you call. Principle 6. We are able to sell at lower prices because we have eliminated middlemen; because we don't buy branded merchandise with high protected mark-ups; and because we have placed our contracts with manufacturers who have proven that they are cost conscious and efficient. Principle 7. We are able to sell at lower prices because we operate efficiently. Our people are hard-working, intelligent, and share in the success of the company. Principle 8. We are able to sell at lower prices because we support no fancy emporiums with their high overhead. Our main location is in the middle of a 40-acre cornfield in rural Wisconsin.
Lands' End, Inc. is perhaps best known as a marketer of traditionally styled, casual clothing, available through catalogs known for their folksy, chatty style. The company's emphasis on quality merchandise and customer service has made it a leader in the mail-order marketing field. Based in rural Wisconsin, Lands' End has grown steadily since its inception as a seller of sailing equipment for racing boats. By the late 1990s, the company was marketing clothing for children and products for the home, in addition to its tailored clothing for men and women, as well as overseeing a popular Website, where customers could view merchandise and place orders.
Lands' End got its start in 1963 when Gary Comer, a successful advertising copywriter with Young & Rubicam, who had long pursued a love of sailing in his spare time, decided to pursue his long-standing dream of opening his own business. Comer quit his job of ten years, and with $30,000 in initial funds started a company that made sails and sold other marine hardware. The company set up shop in a storefront at 2317 North Elston Avenue, along the Chicago River in the city's old tannery district.
In 1964, Comer produced a catalog offering Lands' End's goods through the mail. The first booklet, entitled "The Racing Sailors' Equipment Guide," was printed in black-and-white, had 84 pages, and featured a variety of technical-looking sailing implements on its cover. A printer's error, however, resulted in the company's name being rendered "Lands' End," with the apostrophe in the wrong place. Since Comer couldn't afford to have the piece reprinted, he decided to simply change the name of the business to correspond with the brochure.
Lands' End began filling orders from its basement. The company shipped out orders the day they were received, and unconditionally guaranteed all that it sold. In a subsequent catalog, Comer put his copywriting skills to work in an innovative, customer-friendly format. The text in the Lands' End publications, rather than being dry, technical, and brief, had a casual, engaging, informative, and sympathetic air. Customers were put at ease reading it and came to feel that they had developed a personal relationship with the company that had produced the catalog and the items that filled it. Comer is credited with originating the concept of the "magalogue," in which pictured items for sale are surrounded and cushioned by appealing text and illustrations.
Lands' End's customers began to look to the company for more than just technical sailing gear, and many felt comfortable writing to the company to ask about purchasing foul weather gear and duffel bags. In response, Lands' End added a small clothing section to the catalog, featuring rainsuits, canvas luggage, shoes, sweaters, and some other clothing. The catalog's name was accordingly altered to simply the "Lands' End Catalogue." Items sold in the clothing portion of the catalog soon became the company's most profitable offerings.
Shifting Focus in the 1970s
Throughout the 1960s, Lands' End continued to sell sailing equipment and related items through its catalog. In 1970, Lands' End's mail order business had grown large enough to merit computerization of its inventory and sales operations. Lands' End made its first foray into the world of manufacturing something other than sailing equipment in 1973, when the company began to make its own duffle bags. The next year, Lands' End also began to market its own brand of rainsuit, a two-piece outfit worn by sailors in foul weather. In 1975, the company came out with its first all-color catalog, which featured 30 pages of sailing equipment and two full pages of clothing. By the following year, the company had decided to shift its emphasis to the sale of clothing and canvas luggage, and the quotient of non-nautical equipment had risen to include eight pages displaying duffel bags, and three pages of clothing, including a men's chamois-cloth shirt.
In the spring of 1977, Lands' End issued its first catalog that paid serious attention to clothing, with 13 out of 40 pages dedicated to dry goods. In addition, the company introduced its own line of soft luggage, called Square Rigger. Following these innovations, sales for the year reached $3.6 million. After 1977, Lands' End phased out the sailing equipment aspect of its operation altogether, retaining the rugged, reliable, and traditional nature that sailing implied, and applying it to a broader variety of clothing. In 1978, the company introduced its first button-down Oxford-cloth shirt, heralding the move to offerings of solid, conservative, basic clothing upon which it would build its future.
Lands' End also began to shift its operations from its Chicago base to a small town in rural Wisconsin called Dodgeville. Comer chose this location for his growing enterprise because, as he noted in a piece of promotional literature, "I fell in love with the gently rolling hills and woods and cornfields and being able to see the changing seasons." In addition to the intangible spiritual benefits of life on the land, the move enabled Lands' End to ultimately locate the bulk of its operations in the middle of a cornfield in rural Wisconsin, an area in which costs were extremely low. The company began this shift when it moved its Chicago warehouse to an empty garage in Dodgeville in 1978.
Lands' End's operations were also shifting in another significant way during this time, as the company moved from filling orders by mail to filling orders by phone. The company had brought its first toll-free 800-number on line, and operators were standing by to take customer calls by the middle of 1978. With this shift, the company had incorporated another point of contact with the customer into its operation, and it stressed politeness and customer service in its operators, a continuation of the message it strove to portray in its catalog. Calls were answered within a ring and a half, and operators were permitted to chat with customers for as long as it took to make a sale.
Lands' End continued the process of transferring operations to Dodgeville in 1979, when it opened an office in a pre-existing strip mall, while it broke ground for an office building and an accompanying 33,000-square-foot warehouse in a Dodgeville industrial park. The following year, the company moved into its new space on "Lands' End Lane." By this time, the clothing section of its catalog had grown further, and the 800-number service had been expanded to accommodate customers 24 hours a day. Interested in gaining more control over the quality of the clothes it sold, the company began to recruit employees who were knowledgeable about fabric and the manufacture of clothing.
In addition to its new facilities in Dodgeville, Lands' End also opened an outlet store in Chicago, just one block from its original location, to sell the goods that made up excess inventory if catalog sales of a particular item were not as brisk as expected. Further physical expansion took place the following year, in 1981, when Lands' End began work on a 40,000-square-foot addition to its warehouse in Wisconsin. The company also broke ground on a plant to manufacture its own line of soft luggage in West Union, Iowa.
Marketing Tactics in the 1980s
To further support its burgeoning sales and reputation, Lands' End embarked on a national advertising campaign in 1981. The purpose of this effort was to make customers aware of the Lands' End business philosophy, and associate its name with service, value, and quality. The company used the expression "direct merchant" to describe its relationship, as a manufacturer and distributor, with the customer.
In the next year, Lands' End followed up this effort with a significant investment in computerization, as the company introduced on-line customer sales and ordering to speed up processes. Efficient use of computers was a keystone of Lands' End's program for success, and soon computer systems enabled operators to provide customers with a wealth of information at the touch of a finger.
In addition, Lands' End continued to expand its warehouse facilities as it started construction on an additional 126,000-square-foot warehouse across the street from its original Dodgeville facilities. Moving into this facility in 1983 required the unloading of 8,000 boxes of goods so that the company's new automated sorting system could be made operational. By this time, a nationwide boom in mail-order shopping was beginning to take off, and Lands' End saw its sales and earnings start to grow.
In an effort to exploit Americans' increasing willingness to shop by phone using their credit cards, Lands' End introduced a line of fancier clothing for men and women in 1983, under the name Charter Club. Instead of cotton and wool, these products were manufactured from Italian silks and other luxury fabrics. This line soon had its own catalog of offerings.
In 1984, Lands' End passed another landmark on the way to becoming a full-fledged manufacturer when its logo was registered as a U.S. trademark. By the following year, demand for Lands' End goods had increased to the point where the company was able to begin issuing monthly as opposed to seasonal catalogs. In addition, Lands' End broke ground on yet another warehouse addition.
In 1986, Lands' End discontinued its Charter Club line of dressier clothing, despite the fact that it was profitable, in an effort to maintain the company's culture and focus on solid, traditional, no-nonsense clothes. "When they started shooting photographs of models in London, I said, 'That's it, enough'," Comer later told Fortune. His conception of the company was more straightforward. "I picked things that I liked, and over the years people interested in the same sorts of things gathered around," he said, explaining Lands' End's growth.
By 1986, growth had brought Lands' End profits of more than $14 million on sales topping $200 million. At that point, after several years of phenomenal advances, the company sold stock to the public for the first time, offering 1.4 million shares at $30 a piece. In the following year, shares of Lands' End began to be traded on the New York Stock Exchange, as the company racked up earnings of about $15 million.
Also in 1987, in response to customer requests, Lands' End introduced a line of children's clothing. Within a year it had yielded sales of almost $15 million. By 1988, Lands' End had built up a loyal core of catalog shoppers. The company shipped nine million booklets a month, full of homey straight talk about classic casual clothing, for a total of 80 million pieces mailed a year. To take the orders generated by this promotional literature, Lands' End also spent heavily on technology to improve its customer service, adding new sorting, packaging, and sewing equipment (for alterations). In addition, the company broke ground on an additional phone center in a town about 30 miles from Dodgeville, Cross Plains, Wisconsin. With this facility, Lands' End planned to add 100 new employees to its payroll.
At the end of the year, the company also opened a small retail outlet in Dodgeville to sell its clothes. Although Lands' End had no intention of branching out from the mail order business into conventional retail, the company had discovered that people felt so at home with the places and people depicted in the Lands' End catalog that they frequently got in their cars and drove to Dodgeville on vacation to see the place for themselves. After customers began wandering into Lands' End's corporate offices looking to buy turtlenecks and sweatshirts, the company opened a small store to serve them. Additional Lands' End outlet stores followed, offering overstock items to the public.
Challenges in the Late 1980s and Early 1990s
After a blockbuster year in 1988, Lands' End's revenues had nearly doubled in the span since its first stock offering, rising to $456 million for the fiscal year ending in January 1989. Two months later, however, the company was forced to announce its sharpest drop in earnings ever. Although sales had continued to grow, costs had grown at a much steeper rate. Confident that sales would continue strongly after 1988, the company had amassed a large inventory of merchandise. When sales slowed, it was forced to send out a large number of additional catalogs in an attempt to win new customers. This campaign proved to be extremely costly, adding about $2 million to the company's promotional budget. This cost promised to rise further as the post office implemented a 17 percent hike in third class mailing rates.
In addition, Lands' End found itself hurt by the stodgy reputation of its merchandise, as competition in the catalog sales field heated up. In particular, the company lost ground to Eddie Bauer, a marketer of rugged outdoor gear, as well as to L.L. Bean. Lands' End needed to update and freshen its offerings without alienating old customers who appreciated the company's solid, traditional goods.
The company's outdated offerings continued to damage its profitability throughout the start of 1990, and it posted a two-thirds drop in profits in the first quarter of that year. Concerned that Lands' End and its rival L.L. Bean might have grown so large that they had glutted the market for their type of merchandise, industry watchers predicted further declines at the company.
In response to its falling profits, Lands' End began to increase the amount of new merchandise in its catalog. Whereas the previous two years' catalogs had offered first eight and then 11.5 percent new items, as much as 18 percent of the products in 1990's catalogs were new introductions. Among the additions were sunglasses, children's swimsuits, and clothing and bedding for infants. The company also began to market "Mom Packs," combinations of merchandise packed together to be presented as Mother's Day gifts. In addition, Lands' End introduced three new specialty catalogs: Buttondowns and Beyond, which featured tailored clothing for men; Coming Home with Lands' End, with products for the bed and bath; and in August 1990, a separate catalog just for children called Kids. Also in 1992, the company created its corporate sales unit. This unit distributed five catalogs per year to corporations that regularly purchased gifts for clients and employees.
Lands' End also began its first attempt to expand its market beyond the borders of the United States. In typical company style, Lands' End encouraged its customers to become part of this new push, asking them to send in the names of their relatives who lived overseas. The company first began to mail a catalog to potential customers in the United Kingdom, and eventually opened a U.K. phone center and distribution facility in the fall of 1993. By the late 1990s, the company was publishing catalogs for 175 countries, with prices converted to the English pound, the German mark, and the Japanese yen. Moreover, it introduced three international subsidiaries, Lands' End Japan, K.K., Lands' End Direct Merchants UK Limited, and Lands' End GmbH in Germany.
The Late 1990s and Beyond
During this time, the saturation of the catalog sales market had a major effect upon Lands' End's profitability. Although sales continued to increase, gross profit margins dropped. The 1990s saw the company acquire and then divest two subsidiaries--Territory Ahead, Inc. and MontBell America, Inc.&mdash well as liquidate Willis & Geiger, its outdoor clothing and accessories division. Lands' End made further reductions in early 1999, restructuring the company and eliminating ten percent of its salaried jobs and closing three of its 19 outlet stores. These efforts streamlined the company to help it maintain its competitive edge. Management changes also ensued. In 1998 President and CEO Michael J. Smith resigned and was replaced by David F. Dyer. Company founder Gary C. Comer remained as chairman of the board.
Lands' End faced the future armed with several new retailing concepts to enhance its operations. In 1997 the company opened its first Inlet Store, described by its designers as "a catalog come to life." The Inlet Store prototype, in Richfield, Minnesota, featured a central area decorated in warm, residential tones, designed to overcome resistance some customers had to catalog shopping. In a comfortable homelike atmosphere, the "catalog-in-a-store" provided sales and sizing assistance, returns, alterations, and monogramming services. Along the perimeter of the Inlet Store were Lands' End overstocked and discontinued items. After the prototype's successful launch, the company began converting its existing outlet stores to Inlet Stores.
Lands' End also hoped to enhance its operations via the Internet, and it launched a Website for that purpose. In 1998 management reported that the Internet was still an insignificant but potentially valuable portion of their $1.2 billion business, serving as another venue for already-established customers. Visitors to the Lands' End site could peruse and purchase from an online catalog that allowed various views of an article of clothing, additional information about the clothing, and side-by-side views of various articles of clothing. The online shopping experience, in contrast to the company's phone order rules against "upselling," offered the customer the opportunity to add accessories to their purchases. The Internet site was continuously updated, while discontinued and out-of-stock items were quickly removed from the site. From Lands' End perspective, the online site represented a savings in catalog distribution costs, rather than a means of increasing client base.
However, a 1999 innovation drew media attention, when Lands' End became one of the first to provide 3-D apparel modeling for women. At www.landsend.com, online shoppers could key in their personal measurements, and their own personal 3-D apparel model would appear onscreen, helping the customer better determine whether the clothing suited him. Computerworld magazine characterized the 3-D process as "cool" and fun, noting that "according to retail experts, it's seen as one of the most promising ways to convert online browsers to online buyers." Oxford Express was another new feature of the Lands' End Website in 1999. With this feature, customers could select sizes, fabrics, styles, collars, and cuffs, and a depiction of the shirt appeared on screen, ready to order. Still, Lands' End expected the major portion of its business to be conducted through traditional catalog sales well into the next century.
Prospects for the newly restructured Lands' End remained strong as it headed into the next century. Its strong reputation for quality and its steady course of business growth ensured that it was rigged for competitive sailing in increasingly competitive seas.
Principal Subsidiaries: Lands' End Japan, K. K.; Lands' End Direct Merchants UK Limited; Lands' End GmbH (Germany).
Principal Operating Units: Core Business; Specialty Business; International Operations.
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