Building a Better Brookstone

As a gadgets marketer with “innovation” as its tag line, Brookstone in the past few years has innovated:

– an electronic barbecue fork

– a hair dryer that emits negative ions

– a talking photo album

– a multichannel marketing strategy that combines print catalogs, a Website, and retail stores.

If the last doesn’t strike you as terribly innovative for this age, consider that this is, after all, Brookstone, the staid Nashua, NH-based marketer that never met a big mall it didn’t like. Not long ago, “Brookstone’s mentality was that of a classic retailer, and direct marketing was something along for the ride,” says Larry West, principal of The West Cos., a New York-based catalog financial consultancy. Today, however, Steven Strickland, Brookstone’s vice president, marketing, practically tangles his tongue in describing Brookstone’s multichannel possibilities.

“We’ve been using the store to drive catalog sales,” Strickland says. “Now we’ve shown we can drive catalog sales through the Internet and use the Internet as a way to attract new catalog customers. And retail stores have proved a great way to drive registered users to the Website. For the fourth quarter of 1999 we took the entire opening spread for the catalog and dedicated that to the Website.”

What’s brought about this multichannel mania? Mostly, a quest for brand synergy. Five years ago, Brookstone carried nonproprietary auto gadgets and Swiss Army knives in dark, nondescript stores, accompanied by just enough (unprofitable) catalog mailings to drive store traffic. Today, thanks to three years of marketing overhaul by Brookstone CEO Michael Anthony, 60% of revenue comes from Brookstone-branded product. And the company vigorously drums its “innovation” theme in every channel – catalog, store, and Web.

Result: Last year, sales and earnings rose for each of the $300 million-plus company’s channels. Sales from Brookstone’s four-year-old Website, profitable since the start, jumped 10 times over between 1998 and 1999, gaining $3 million in revenue during the past holiday season alone. The stolid Hard-to-Find Tools catalog – traditionally a money loser for the first three quarters of each year – broke even in the second quarter of ’99 and made money the rest of the year. And per-store sales for Brookstone’s 211 stores (which make up 82% of revenue) were up 6% for the year, while earnings climbed more than 20%.

Meanwhile, Gardener’s Eden, which Brookstone acquired in May 1999 from Williams-Sonoma, will take on a multichannel identity of its own. Brookstone plans to create a Website for the brand during the next few months and will open one or two pilot stores this year. That’s in addition to expanding the catalog’s product line with proprietary gifts, decor, and tools and mailing around 12 million books, about the same as last year.

Check in six months from now, and Brookstone should look even more cutting-edge. By holiday 2000, company executives say, Brookstone will have an integrated database among all its channels, to predict customer behavior, enable automatic e-mail communication, and give clerks and order-takers one window into customer data.

But to some degree, Brookstone still lags behind its multichannel rivals. The Sharper Image, for instance, already has 3-D interactive technology on its shopping site and claims to bring in 7% of its sales over the Internet, compared to about 3% for Brookstone., meanwhile, is still just “an online catalog – it’s not dynamic or interactive,” says mail order marketing manager Phillip Bulebar. Currently, the company has no automated e-mail system to confirm shipping or to track orders. It doesn’t track online shopping habits through “cookie” technology. Retail clerks can’t access customer information, and order-takers don’t know who’s ordered what online.

According to Strickland, though, the company’s slow pace has been deliberate. “We haven’t been the fastest out there,” he says. “We haven’t been trying to see how quickly we could grow and not understand how to make money. In typical Brookstone fashion, we usually do things in a small, unannounced way. We try to understand things, and then come out of the box very good, very profitable.”

So far, Wall Street hasn’t argued with the strategy. The company’s stock has been on a steady, if unspectacular, rise over the past year, at about $18 a share in January. Even though 99% of dot-com companies currently emphasize top-line growth, Brookstone is smart to keep an eye on the bottom line, says David Leibowitz, managing director at New York-based investment banking firm Burnham Securities. “The future of e-commerce,” he says, “will probably be better evaluated when we see how many of the participants of the industry ultimately show a profit to their investors.”

Brookstone, evidently, has preferred to tackle the front end of its multichannel business before revving up the back end. For a look at the company’s progress, visit Strickland’s office, which he’s occupied since leaving The Limited in 1995. Among his collection of stuffed Taco Bell chihuahuas are posterboards of Brookstone space ads, sketches of store layouts, blown-up product images, and catalog spreads. Each element plays into the company’s revamped brand identity: The store posters have the same sky-blue backgrounds as the catalog opening spreads; the “innovation” tag line occupies both the space ads and the retail displays. “There’s always one voice happening around the brand,” Strickland says.

That might not seem like much, but it’s a long way from the days when Brookstone’s electric shavers and hair trimmers occupied clunky red shelf units in dark aisles, and the catalog offers barely resembled the store displays. “I’ve been quite impressed” with Brookstone’s brand strategy, says Sid Doolittle, founding partner of Chicago-based retail consultancy McMillan/Doolittle. “Brookstone now looks like it understands long-term branding and product development.” Previous Brookstone stores, he says, looked more like “catalog showrooms.”

“For multichannel businesses, the key is to create an identity, build awareness and a consumer franchise, and get people to know the brand label,” agrees Leibowitz. “Brookstone management has been working in this direction quite wisely. The brand’s awareness factor is much higher.”

Channel synergy ties in with brand identity. Take a poster featuring Brookstone’s latest gift gadget, an electronic luggage tag. The poster, carrying the “innovation” headline, ran as a space ad in The Wall Street Journal during the holidays. The ad featured an 800-number and a Website address. If you’d called up the Website the week the ad ran, you would have seen the luggage tag on the home page, ready for one-click ordering. If you’d gone to a store, you’d have seen the poster at the front door, along with prewrapped boxes of luggage tags. If you’d received the catalog, you’d have found the luggage tag on the opening spread.

Moreover, each channel would have encouraged you to check out the others. Say you’d purchased the luggage tag from a store. The clerk would have asked not only if you wanted to receive a catalog but if you wished to submit your e-mail address to receive, say, new-product announcements. If instead you’d ordered from the catalog, you’d have found the opening spread suggesting that you “visit the Website and win” Brookstone prizes. Or if you’d purchased online, your name and address would have been downloaded onto the catalog mailing list – and the catalog, of course, would promote the stores.

More integration, Strickland says, is on the way. Prototype Brookstone stores in Las Vegas, Hartford, and New York, for instance, now feature dedicated terminals to Brookstone’s Website. Eventually, Strickland says, “we want every Brookstone store to have access to, because right now our average store houses 700-750 SKUs. But [with Web access], I can give you an additional 2,000-plus SKUs.”

Hardware roots

It’s not likely that Brookstone’s founder, Pierre de Beaumont, would have envisioned computer terminals in the palatial Las Vegas Venetian hotel. Thirty-five years ago, de Beaumont launched Brookstone (named after his farm) as a hobby and tools mail order supplier by running space ads in the back of Popular Mechanics magazine. He added the Hard-to-Find Tools catalog in 1967, followed by a few stores in the Northeast.

After buying Brookstone from him in 1980, Quaker Oats pointed the company straight at retail, launching 60 more stores by 1986. To create “mall appeal,” the company switched to lifestyle and gift products. >From that point, esoteric carpet rakes and vent filters remained in the Hard-to-Find Tools book, while calculators, golf gizmos, and hair dryers populated the stores. Brookstone’s retail potential charmed a venture capital group led by Bain Capital and Fidelity. The group hired former Jordan Marsh executive Merwin “Hank” Kaminstein to run the show, and by 1993 – the year it went public – Brookstone numbered 111 stores. By then, the Hard-to-Find Tools catalog made up just $22 million of the company’s $144 million in revenue.

At that point, direct marketing became a stepchild. Brookstone’s Gift Collection catalog launched in 1993, but with little interest or support. “It was thought of as a way to advertise the Brookstone stores using the Hard-to-Find Tools house file,” says Strickland. Neither book, though, bore much stylistic resemblance to Brookstone’s stores. Nor did either receive prospecting support. The Gift Collection catalog, in fact, mailed to only a small fraction of Tools’ 200,000-name house file.

Meanwhile, Brookstone was having an identity crisis. Like The Sharper Image, Brookstone had banked its fortunes on yuppie gadgets, “solution-type products found in the open market,” says consultant Doolittle. In the more frugal ’90s, “people got kind of tired of that.” Same-store sales barely budged from 1993-94 – at which point Kaminstein brought in the 39-year-old Anthony as flame-thrower.

But rather than clean house, Anthony, formerly president of the Lechter’s household goods retail chain, decided to rebuild it. By turning Brookstone toward barbecue forks and other higher-margin proprietary products, Anthony forged brand identity for the company’s goods. He then brought shoppers back to stores by clearing out the “museum-style” displays and placing products in light, natural-wood display areas. By 1996, Brookstone’s retail division roared ahead with a 5.6% per-store revenue increase and a 25% earnings increase.

What about mail order?

The catalogs, though, still languished. Hampered by rising paper and postage costs in ’95, Hard-to-Find Tools barely held its own on the bottom line, while the Gift Collection catalog was a clear drag on earnings. That’s when Strickland arrived. “In 1997, the conversations had become, `Should we pull the plug on the Gift Collection book so that we can focus on Tools?'” he recalls. Strickland, appointed to lead a multichannel strategy, chose to revive the books as brand builders. While the Tools team continued producing its own catalog, Brookstone’s retail marketing team took over the Gift Collection (which has since received its own merchandising and creative).

“We wanted to make the catalog synergistic with what was happening at the stores,” says Strickland. “That meant using the same look, color palette, and language, and most important, featuring the same new products. So now, if you walked into a store, what was shown in the windows and the front of the store most likely was going to be on the catalog covers, opening spreads, and features.”

Brookstone also gave the books circulation support. In 1997, the catalogs began using statistical modeling for the first time, rather than RFM. The Gift Collection house file doubled annually, reaching 60,000 last year. Overall, Brookstone increased circulation 20% and prospecting 40% during 1999, mailing 24 million catalogs, excluding Gardener’s Eden. The Tools catalog, which mails five times annually, accounted for about two-thirds of the mailings.

Gardener’s Eden, meanwhile, should boost the direct marketing arm. Since Eden sells well in spring and early summer, it complements the mailing season for Gift Collection, which mails for holiday and Father’s Day. Better yet, the Gardener’s Eden customer – mostly 40-year-old urban/suburban women – looks a lot like Brookstone’s. “Household income [at about $90,000] and demographics are very similar,” says Strickland. “So we think there’s a high synergy between Brookstone and Gardener’s Eden.” (Not enough, though, to share the Brookstone brand and back-end. Currently, both brands maintain their own call centers, creative, and merchandising. “We felt that to understand the brand, we had to keep it 100% pure right now,” Strickland says.)

Finally, Brookstone brought e-commerce into its multichannel fold. Launched in 1996 with both Tools and Gift Collection catalog products, began its big customer push this past holiday season, soliciting customer e-mail addresses at store sites. It also began dangling incentives, including discounts and occasional free shipping, to lure online browsers into becoming registrants (the company won’t say how many have signed on). Brookstone also gained e-visibility by partnering with online brokerage E-Trade and with shopping site The latter sold Brookstone goods during the Christmas season, and E-Trade grants $100 Brookstone gift certificates to Brookstone customers who sign up.

As a result, finally emerged as a viable channel during the holidays. Its $3 million in Web sales during November and December equaled the sales of six Brookstone stores. In fact, profits from the Website paid for the company’s $500,000 space-ad campaign this past holiday season. Typically, though, Brookstone is soft-pedaling the news. Right now, says mail order marketing manager Bulebar, “the key thing is to educate the customer about e-commerce. It’s still a small universe out there compared to the retail world.”

So where will Brookstone be in five years? Three certainties: One, Brookstone will continue building its brand. In fact, Strickland says, 80% of the company’s product will carry the Brookstone brand by 2004.

Two: Brookstone will stay multichannel. Mail order catalogs, after all, not only support retail but also drive sales, since up to 20% of the Brookstone items are available only by Web or mail. E-commerce, moreover, has even better potential. Last year’s registered Web buyers bought six times as many goods this year. “That’s incredible repeat business,” says Strickland.

Three: Brookstone will likely stay the cautious course, particularly in the e-channel. As Strickland puts it, “What we’ve done in the past few years has been very slow and methodical, but from day one, we have been profitable.” “Which is probably,” says Leibowitz, “a very wise approach at this early date.”

Brookstone has B-friended a new brand image. It’s painted on store ceilings. It stands three feet high near product displays. It dangles from the bracelet of a model in the Gift Collection catalog, acts a prop for the president’s portrait in the company’s annual report, and dances as a moving icon on the Website.

It’s the initial “B,” which Brookstone conceived of as a brand-building icon during its 1997 catalog revamping. Its graphic role, says marketing vice president Steven Strickland, is to keep the Brookstone image in front of shoppers, regardless of which channel they prefer.

Some might say it stands for, well, “boring.” “It’s pretty subtle,” says Katie Muldoon, president of catalog consultancy Muldoon & Baer, as she pages through the Holiday 1999 Gift Collection, scanning for “Bs.” “It’s a contemporary approach, and it’s easy to remember as long as you have positioning behind it. But the problem is, nobody knows what Brookstone stands for. The `B’ would be good if the company tied it in with something.”

Stay tuned. “You’ve got to have some kind of brand, and it takes a lot of time and money to create it,” says Sid Doolittle, founding partner of retail consultancy McMillan/Doolittle. “Target’s been at this for 35 years, and now the name and symbol are synonymous.” The “B,” he adds, “doesn’t mean much now, but in the long run, it will probably be something people will recognize.”

In other words, just B patient.

1) Multiple channels draw bigger spenders. In other words, the more channels a customer can shop, the more likely it is that she will keep shopping. Catalogs handed out in stores, for instance, “are some of our most productive,” says Brookstone marketing vice president Steven Strickland. So are catalogs mailed to Web purchasers. Although he won’t reveal response rates, “Internet customers, from day one, operate as our best house file customers,” he says.

2) Multiple channels draw new customers. At rival The Sharper Image, for instance, “about 70% of online shoppers were new to our file,” says spokeswoman Kathryn Grant. Brookstone won’t reveal its own Web acquisition numbers, but mail order marketing manager Phillip Bulebar says, “The Internet is a great source of new names. There’s low overlap [with our house file], and the names respond well to catalog mailings. So that has been a great benefit to us.”

3) Multiple channels can translate into cost savings. Self-service Web orders, for instance, don’t involve humans answering the phone. They also don’t involve commissions paid to retail sales reps. What’s more, Brookstone will likely save labor costs next holiday season, once it begins automating e-mail order confirmations and tracking information. “About 50% of all customer service calls are `Where’s my order?'” says Bill Nicolai, vice president of multititle co-op gifts cataloger Good Catalog Co. Eventually, he says, those cost savings “should show up in the operating profits of most catalog companies, as they become more adept at using the medium for communication.”