Bean CEO’s Agenda: Stores, Japan, the Web

Because Chris McCormick is the first CEO of L.L. Bean who isn’t a member of the Bean family, you might expect him to make some dramatic changes to the 90-year-old apparel and outdoor gear marketer. And in an exclusive interview with Catalog Age, McCormick says that he plans to grow the $1.11 billion cataloger largely by expanding further into retail.

But McCormick downplays his non-family status. “I don’t think it makes a difference,” he says. “Certainly the corporate values won’t change at all.”

An 18-year veteran of the company, McCormick, 45, was promoted from chief operating officer to president/CEO in May, replacing Leon Gorman, founder Leon Leonwood Bean’s grandson. Gorman, who had been president/CEO since 1967, became the company’s first-ever chairman. McCormick is only the fourth CEO in Bean’s history.

Concerned about the likelihood of yet another postal rate increase next year as well as about potential privacy roadblocks that could stifle catalog growth, McCormick hopes to build up a retail chain. Bean opened its first store (outside of its famed Freeport, ME, headquarters store) in McLean, VA, in July 2000. This past May it opened a second store, in Columbia, MD. Plans call for a third store to open next year in Philadelphia.

He won’t specify how big a chain Bean will become, but “we’ll never be a Gap that opens 300 stores a year,” McCormick says. “Because we’re committed to being privately held, that puts limits on our capital. So we will use cash flow from our existing stores to fund other stores.”

Wise move, according to financial researcher Ken Gassman, of Richmond, VA-based research firm Mann Armistead & Epperson. “L.L. Bean has seen the light that the multichannel companies are the most successful,” he says. “Coldwater Creek is a great example of a successful move from catalog to retail,” as are fellow apparel catalogers J. Jill and Delia’s.

Web, Japan also priorities

In addition to growing via retail, McCormick aims to expand Bean’s Internet channel. Although Bean’s total sales increased just 4% in 2000, its Web sales jumped 75%, and the company expects the pace to continue this year. In 2000, the Internet accounted for 15% of Bean’s sales last year, or roughly $167 million. This year the Web will probably make up 17% of the company’s sales.

But while McCormick knows he wants to capitalize on the Website’s success, he’s still trying to figure out how aggressively he wants to grow Bean’s Web business and what technology investments might be required. “We haven’t done the financial models to determine the optimal balance in sales” by various channel, he says.

And then there’s Bean’s $75 million Japanese business, to which McCormick would like to devote more attention. Bean bought out Matsushita, its venture partner in Japan, this past December and now operates 10 wholly owned stores there. Bean, which also mails a Japanese-language catalog, is building a Website for Japan, which is slated to go live in January. Even though Japan has been in a recession, “it’s still the second-largest economy in the world and you can’t ignore that,” McCormick says.

As for mail order, this year, domestic catalog sales make up 60% of Bean’s overall business with retail, Web, international, and corporate sales accounting for the rest. McCormick expects catalog sales to account for just 50% of overall revenue within five years as more customers opt for the Internet and stores. In fact, he feels that e-commerce has cannibalized a good deal of the catalog channel already.

Still, McCormick has no plans to drastically change anything involving the catalog — at least not this year. Looking ahead, he wants to review page counts and circulation, and “there are cost-savings opportunities we could implement next year,” he notes.

But until then, the most dramatic change will be a 12% increase in Bean’s fall/holiday circulation. As far as any other changes, the only real shift will be a greater emphasis on tracking internal and external marketing trends, McCormick says.

An outsider on the inside

Even if McCormick wanted to make sweeping changes, he might not have the authority. After all, as chairman, Gorman still occupies the top spot, and the company is owned by the Bean family (with the exception of two people who have held a few shares given to them by Leon Leonwood Bean years ago).

That a longtime employee was named CEO shows that the family “is not quite ready to shake the place up with an outsider,” says Craig Battle, managing director for Princeton, NJ-based investment bank Tucker Alexander.

But McCormick says Bean doesn’t need much shaking up anyway. Although sales growth during the past few years has been minimal, “last year, our overall sales grew in single digits, whereas most our competitors’ sales didn’t grow at all,” he says. And without sharing specifics, he adds that the company is “generating a reasonable profit.”

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