Talbots: What Lies Behind the Red Door?

Oct 01, 2001 9:30 PM  By

Layoffs, sales shortfalls, and profit plunges have been the rule for marketers this season. Hingham, MA-based women’s apparel cataloger/retailer The Talbots stands out as an exception.

For its most recent quarter, which ended Aug. 4, Talbots’ net income was $17.8 million, an 18% increase from the comparable quarter of 2000. During the same time period, total company net sales rose 6%, to $384.3 million. The revenue includes the takings from the Talbots spin-offs: Talbots Petites, Talbots Accessories & Shoes, Talbots Woman, and Talbots Kids (the last three of which have catalogs as well as stores). And at $253.2 million, Talbots’ 2000 catalog sales were up 33% from the year before.

In all, Talbots and its signature red door — which signifies its catalogs (circulation this year: 59 million, up 2% from last year), 762 stores, and nearly two-year-old Website — have other marketers green with envy.

What enables the $1.58 billion company to buck the economic malaise? Simply put, “Talbots knows what its customer wants and how to deliver it,” says retail analyst Kurt Barnard, of Montclair, NJ-based Barnard’s Retail Consulting Group.

“Talbots has a great niche, and it services it well,” agrees Richard Jaffe, a research analyst with New York-based investment bank UBS/PaineWebber.

Or as Arnold Zetcher, chairman/CEO/president of Talbots, says, “What Talbots focuses on is providing women with apparel that they can wear in the real world…great, high-quality classic clothing that looks stylish now — and five years from now.”

Providing women with gold-buttoned blazers, tasseled loafers, and cable-knit sweaters sounds like a straightforward task. But marketers of classic apparel have it as tough as, if not tougher than, trendmeisters. As one-time high-flyers The Gap and Abercrombie & Fitch have learned, if the apparel is too classic, too unchanging in its details, customers eventually no longer need to stock up on the items. (After all, how many black turtlenecks does a woman need?)

Then again, if the apparel starts to veer too far from the classic, the company can alienate its core customer. Now-defunct apparel cataloger Tweeds made a serious merchandising misstep back in the mid-1990s when it strayed from natural fibers and earth tones to loud-colored and bold-patterned synthetics. Even Talbots learned that lesson the hard way several years ago.

A loyal following

The company credits much of its success to its eagerness to heed its customers — professional women ages 35-55. “We listen to our customer,” says spokesperson Margery Myers, “and more important, we respond to her. We do a lot to show her that we care about her, and as a result, we probably have the most loyal customers in retailing.”

Before merchandise is shipped to stores, Talbots will invite some of its best customers to come for sneak previews. This enables the company to get an early read on customer likes and dislikes.

Talbots has also completed 14 research projects this year, including focus groups to determine customer picks and pans, store intercepts (“man in the street” interviews), and online surveys. The company will use focus groups to determine the needs and wants of male customers as it prepares to launch Talbots Men in late 2002 or 2003. Research indicating that customers were interested in bath and body products has already led Talbots to unveil a beauty line in its stores this month.

Listening — and responding — to its customers also allowed Talbots to turn itself around following a merchandising shift gone wrong. In 1997, hoping to broaden its appeal, Talbots swapped much of its classic apparel for trendier, flashier clothing. There was certainly nothing wrong with the theory of trying to win over younger women, says UBS/PaineWebber’s Jaffe, but Talbots went “overboard. The fit of the merchandise was inconsistent with what its core customer was accustomed to, and the colors were all wrong.”

Customers responded to Talbots’ new merchandise line by not responding. The company’s catalog sales tumbled 11% between 1996 and 1997, to $159.2 million, and income for 1997 plunged to $5.8 million from $63.6 million the year before.

“Our customers told us that our color palette had gotten too trendy, our skirt lengths were inching up too high, and our fit was a bit too close,” recalls Myers. “We listened and executed based on what our customers told us.”

On top of its other problems in back then, Talbots had too much merchandise. Since then, Talbots has opted for leaner inventories, at the same time contracting with vendors to ensure swift replenishment so that the company can stay in stock on fast movers. “We focus on managing all aspects of our business with great discipline, including effective inventory management control,” Zetcher says.

Multichannel master

Another key to Talbots’ success may be that the 54-year-old company was multichannel before “multichannel” became a buzzword. Having originated as a store in Hingham in 1947, Talbots launched its print catalog in 1948. And for decades, Talbots has had its famed in-store red phones. If a shopper visits her local Talbots store only to learn that it’s out of the red cardigan in size eight, she can pick up the red phone and order it then and there — placing a catalog order in the store.

Talbots has long realized what many pure-play Websites, retailers, and catalogers have only recently twigged on to: that you need to be wherever your customer wants to shop. “I don’t care where customers buy it, as long as they buy it,” Zetcher says. “As long as it has the Talbots name on it, our customer should have the same experience buying it no matter where she shops.” The same philosophy holds true for returns: Customers can return merchandise bought either through the catalog or online to any of the company’s stores.

Then, too, Talbots’ apparent success in selecting retail sites has much to do with the catalog. For example, if the company is doing $100,000 worth of catalog business in a cluster of zip codes, Talbots would start looking to open a store in that vicinity, explains analyst Jaffe — and before you know it that store would be doing about $1 million in sales, he adds.

For certain, managing multiple marketing channels isn’t easy, but it helps to have 50-plus years of experience in two of the channels. It also helps to have a well-established brand, which no one can deny that Talbots has. And with a sizable portion of the population now moving into Talbots’ target market age range, the company is poised for future success. Its formula is indeed a classic.

Talbots by the Numbers
Net catalog/Web sales
1999 $191.0 million
2000 $253.2 million
2001 $265.0 million*
Net total sales
1999 $1.29 billion
2000 $1.58 billion
2001 $1.72 billion*
Net income
1999 $58.5 million
2000 $114.8 million
2001 $136.8 million*
* UBS/PaineWebber estimates