By Baselinemag  |  Posted 2002-12-01 Print this article Print

Garry Kelly must help return the $41 billion department-store retailer to health, while simultaneously digesting a $1.6 billion direct-sales operation.

End Is Twice As Profitable">
Lands' End Is Twice As Profitable

After all, Lands' End in its fiscal year ended January 2002 recorded net profit of $66.9 million on sales of $1.6 billion. That's a margin of 4.3%—about double Sears' current profitability. So Sears is moving cautiously in order not to disrupt the famous Wisconsin catalog and Web-sales operation, one of the last and most successful direct-only apparel companies.

First moves include the decision that Lands' End's goods would be stocked in 180 of Sears' 800-plus retail stores by Dec. 1 (delayed from an original target date earlier in the fall) and the arrival of a button on the Sears.com homepage linking shoppers to the Lands' End site. Neither technology is very complicated.

"We've made no significant technological changes," says Sears spokeswoman Peggy Palter, of the early December move to retail stores. "We're treating Lands' End like any other vendor. The merchandise comes to our distribution centers from Lands' End suppliers, then it gets sorted and sent out to our stores."

Down the road, though, the decisions for Sears will be complicated and the projects potentially massive. Although neither Kelly nor the company is willing to talk about what lies ahead, it's clear Kelly has a consolidation chore of the first rank on his hands.

"The pros of this kind of deal are diversification, the ability to build revenue and operations," says Bernard Goor, vice president of retail product marketing at business-software producer i2 Technologies, which has worked with Sears for years. "But the cons come with the merging of two cultures and the integration" of its information systems.

First, experts say, Sears must sort out its priorities. It's not clear whether or how much Sears and Lands' End will want to integrate their computer operations. They are markedly different—and serve different needs and customer bases. Yet critical to the success of the merger will be creating opportunities to "multi-channel," to encourage customers to buy everything from shirts to saws at Web sites, retail stores and catalogs.

"The more they (customers) shop across channels, the more loyal they are, and the more profitable Sears and Lands' End will be," says Rick Schultz, vice president of industry marketing for the data warehousing technology firm Teradata. "You can create synergies in underlying business operations without necessarily having to share operational systems."

Then, Sears and Lands' End must decide what parts of their technology operations can yield the most benefit through integration. On Kelly's plate: internal architecture and general reporting systems, data sharing and warehousing, customer relationship management (CRM), supply-chain management, demand management and return on investment systems. What follows is a closer look at three of those areas...


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