Retail Activity Is on a Roll

With several exceptions — such as J. Jill and Coldwater Creek — catalogers have been slow to embrace a full-scale retail strategy. But that’s changing, as several mailers have recently announced retail expansion plans.

Portland, OR-based children’s apparel mailer Hanna Andersson, which now operates three stores — in Portland; White Plains, NY; and Seattle — plans to open four more stores this year and at least another four next year.

Outdoor gear and apparel catalog institution L.L. Bean, which has long operated its flagship store in Freeport, ME, opened a store in McLean, VA, in July 2000 and a store in Columbia, MD, in May 2001; it plans to unveil its fourth store in Marlton, NJ, a suburb of Philadelphia, this month. And women’s apparel cataloger Boston Proper, part of Boca Raton, FL-based The Mark Group, will likely open its first stores in late 2003.

Among smaller companies, Wheeling, IL-based children’s furniture cataloger Land of Nod announced in April that it will open three stores next year; San Francisco-based furniture cataloger Design Within Reach opened its third California store in July; and Los Angeles-based maternity and baby products cataloger/Web marketer Babystyle will open two stores in southern California by the end of the year.

Why the sudden retail ramp-up? For many, retail is the last piece in the multichannel puzzle. According to L.L. Bean spokesperson Rich Donaldson, “Ours is not a retail strategy per se; it’s a multichannel strategy. We want to create marketing synergies across channels.”

Even for a venerable cataloger like Bean, retail could be the missing link keeping some consumers away. “There’s an interactive element you miss when you deal with customers only remotely,” Donaldson says. Particularly when you’re trying to reach new customers, “you want them to experience L.L. Bean and get a firsthand look and feel of the product.”

For Hanna Andersson, it helps that president/CEO Phil Iosca has retail experience from previous stints at apparel marketers Brooks Brothers and J. Crew. “The best way to optimize a brand is through retail,” Iosca says. “If you look at expenditures by channel, catalogs and Internet are relatively small. Most people spend their money through retail.”

Indeed, according to Catalog Age’s most recent Consumer Shopping Survey, slightly more than half of those surveyed (50.4%) said they did not shop from catalogs. The top reason for shunning catalogs: the inability to see the products in person.

Moreover, consumers who shop in multiple channels tend to be more loyal and spend more, according to the 2001 Multichannel Retail Report by consultancy J.C. Williams Group and research firm BizRate.com for online association Shop.org. The study found that retail customers who also buy from a store’s Website spend an average of $600 more a year with the marketer than store-only customers do.

“The market potential is larger in the store business than with catalogs,” says Michael Tiernan, president/CEO of The Mark Group. The company wanted to get its Boston Proper catalog and Website business up to what it considered critical mass — $75 million — before expanding it into retail.

And retail won’t be a stretch for The Mark Group, which has operated Mark, Fore, & Strike stores since 1951. “But we’re also going to recruit some outside talent, and, in the early stages, probably outsource some functions such as store design and site selection,” Tiernan says.

A different animal

For certain, retail can be a boon to business, but catalogers must remember that it’s an entirely different sector from direct selling. “With retail comes a whole different sense of esthetics that catalogers don’t understand,” says consultant Stan Fridstein of Westlake Village, CA-based Synapse Infusion Group. Catalogers know how to sell with photos and copy, “but they don’t understand store layout — they are not visual merchants.” Also, with such factors as site selection, leases, lighting, and displays, retail can be a capital intensive business on the front end, he says.

And you have to merchandise a store differently than a catalog, says operations consultant Curt Barry, president of Richmond, VA-based F. Curtis Barry & Co. “Catalog is an item-driven business; retail is assortment driven,” so stores may require a different or larger product selection, Barry says.

L.L. Bean’s 120,000-sq.-ft. store in Freeport carries a sampling of everything, but for the smaller stores, Bean must decide what select products to offer. In the new McLean location, for instance, “we have to strike a balance between how many soft goods vs. how many hard goods,” as well as determine which products are relevant to the market, says Donaldson. In the Washington/Virginia area, for instance, boating, biking, and fishing are popular, he says. Carrying more of those types of products excludes stocking such items as hunting and skiing accessories, he says, “but those are the merchandising tradeoffs you make.”

Hanna Andersson too must pare down its selection for the stores, Iosca says. Initially, the stores will carry only infant, toddler, and children’s clothing. The company’s line of women’s apparel will eventually be added to the stores, however.

But Seattle-based kitchen products marketer Sur La Table carries virtually the same inventory (typically 600 active SKUs) in its 25 stores as in its catalog, “so they help drive one another,” says president Renee Behnke. Granted, a plate with a palm tree design might not sell very well in Denver, “so we would not feature it there,” Behnke says. “But by and large, the merchandise is comparable.”

Rolling along

As several catalogers now plan to board the retail bandwagon, many mailers that already have stores are expanding their efforts. Food gifts cataloger Harry and David, part of Medford, OR-based Bear Creek Corp., began focusing on retail about four years ago. The company, which now operates more than 100 Harry and David stores nationwide, is looking to retail rather than its catalogs for growth.

Meanwhile, Springfield, MO-based outdoor recreational products marketer Bass Pro Shops has added 13 stores since 1995, says president of direct marketing Ron Ramseyer. Bass Pro now runs 15 stores in 10 states and will open six more through 2003.

Sur La Table will open five stores this year, with 10 more planned for next year. The company began adding stores slowly and then opened eight stores in a 16-month period about three years ago, says Behnke. “The good thing about opening a lot at once is it propels you to the next level. Then you can cool off and add slowly again and eventually ramp up for another bubble.”

Despite the challenges inherent in the retail channel, many feel that catalogers have an edge thanks to their merchandise expertise and customer databases. “I can’t imagine opening a store today without having customers, because they’ve experienced your product and have a relationship with you,” says Hanna Andersson’s Iosca. “Otherwise, I think you go through trial and error.”

Additional reporting by Mark Del Franco, Shayn Ferriolo, and Paul Miller

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