No Cause for Celebrations: Lillian Vernon Shutting Spin-off Business

When White Plains, NY-based Lillian Vernon Corp. launched Celebrations in October 2004, it envisioned the business as similar to Tupperware–a consultant-themed, party-type venture. But due to “channel conflict” and a failure to develop a unique product line, the gifts and housewares cataloger will shut its Celebrations business on Sept. 30. Until then, all of the Celebrations products are being offered at a 50% discount.

After Sun Capital Partners bought Lillian Vernon in May (see “Lillian Vernon Sold, Muoio Takes Top Spot”), it decided to close Celebrations. “One of the significant reasons was channel conflict, which was much more severe than we thought,” says Celebrations president Scott Smith. “A lot of customers were asking why they should order from us when they can get it on the Web… When we launched the business, we took a ‘best of’ selection of Lillian Vernon products and extended certain categories and built a unique line of products in jewelry, home decor, and seasonal. It was a deep and wide product line with personalization, yet we needed to develop an exclusive product line.”

By the end of the first year, unique product accounted for about 30% of the merchandise mix, although “we’d hoped we’d be at 50%-60%,” Smith says. “Now at the end of the second year, we wanted to be at 100% and we are, but we were too late.”

Smith says Celebrations took in $4 million in sales the first year and $5 million the second. A Celebrations consultant would attend a party of 10-12 women and supply information on the products and catalogs. “Customers would have an order form, and the consultant would enter orders over our Web-based system,” he says. “There weren’t any phone orders with Celebrations.”

Smith says Celebrations launched as a different channel and a way to extend the brand and reach a different segment of the market. He notes that the average age of the Celebrations customer was 35, “which is young for Lillian Vernon’s audience.”

Lillian Vernon had been debating the future of Celebrations even before parent company Direct Holdings Worldwide sold it to Boca Raton, FL-based investment firm Sun Capital. “I clearly understand [closing the business] as a business decision,” Smith says. “However, someone could’ve taken a long view on this.”

Michael Muoio, who was hired as CEO of Lillian Vernon almost immediately after Sun Capital bought the company, says the issue with Celebrations is one of priorities. “We need to get Lillian Vernon profitable ASAP,” he says. “Keeping Celebrations would only divert resources from that goal. While the business may have made it, there certainly was no guarantee as it is still a new endeavor.”

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