Live from NEMOA: Bean Reinvests Savings

Cambridge, MA–Apparel and outdoor gear cataloger L.L. Bean has spent the past 18 months retrenching. During the past year alone, the company has eliminated 32 catalog editions from its mail plans, cut 2,300 unproductive catalog pages and 25% of its SKUs, and reduced the number of vendors it works with by 50%. It has renegotiated almost every one of its major contract in printing, paper, e-mail fulfillment, and credit– even its licensing deal with auto manufacturer Subaru. A renegotiation is currently in the works with its data services providers. In addition, Bean has closed down 47 buildings it had been using for a variety of purposes.

At a March 27 session during the New England Mail Order Association (NEMOA) conference here, Bean’s vice president of corporate marketing, Steve Fuller, said that it’s too early to tell if all the cutbacks are working, partly because Bean has been reallocating the cumulative savings on marketing and technology investments.

“We’re in a better position to compete,” Fuller said. “We’ve had marked improvement in our overall profitability, and we had our best holiday season in 2002 that we’ve had in 90 years, with strong buyer growth after five stagnant years, ending 2002 with our largest 12-month buyer file ever.”

With some of its savings—the exact amount Fuller of which didn’t reveal—the company has invested in call center productivity. As a result, the Freeport, ME-based company has reduced its average call time by 5 seconds.

In addition, Bean has seen a 37% reduction in information cue requests—situations in which reps are asked technical questions about Bean products that they previously had to refer to other reps for the answers. Since July, Bean has worked with former Sapian product developer Kristen Connor, now head of Boston-based Dakasa, to develop the software needed for reps to answer such questions on their own through information fed to them over their terminals. “We’ve cut our training expenses in half,” Fuller said, “because instead of training reps how to use the system, we’re training them how to service customers.” Customer and employee satisfaction has improved as well, he added.

Consistent with Bean’s desire to channel all downsizing savings on new marketing initiatives, Bean will test DRTV for the first time in April, Fuller said. “This is our way of stepping into a new market space,” Fuller said. “Ultimately, we have to make this medium work. We had wanted to test DRTV for the past five years.” The spot emphasizes quality and shows the company’s toll-free number for ordering but makes no mention of its Website.

Bean, which opened three stores in the 1990s, plans to resume its retail expansion next year, Fuller said. That will come on the heels of a period in which Fuller said the company learned several lessons:

* Relying solely on your best buyers is a short-term solution at best, because it causes buyer fatigue, skews product pricing downward, and drives unproductive SKU growth.

* Economic challenges can lead to opportunities. Bean has consolidated vendors, renegotiated contracts and media rates, as a result of the difficult economy. “Contact every vendor and renegotiate your contract,” Fuller advised. “They’re expecting you to.”

Along the same lines, this is a very good time to buy media. “You go to a magazine to advertise, and I guarantee you they’ll help,” in price, he said. “I don’t think we’ll go through another period wherein prospecting rates are as low as they are now.”

* The best employees are most able to identify the tasks with the lowest payback. “By letting loose our good people, we’ve said to them, ‘There’s fewer of you now, figure it out.’ And they’ve done so,” Fuller said.

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