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Into the wild

L.L. Bean plans an expedition of its own — to brick-and-mortar retailing

By Nancy Cohen

After 88 years as one of the leading catalogers in the United States, L.L. Bean is staking its claim to retail real estate. It plans to open brick-and-mortar stores, with an initial trio of locations serving the Washington, D.C., market.

In expanding its store presence — it also intends to raise its profile on the Internet — the Freeport, Maine-based outdoor outfitter aims to promote its brand in every available retail channel.

"The world will be a different place five years from now, including how people want to shop," observed Bill Shea, L.L. Bean's senior vice president and general manager of retail. "We want to make sure we are wherever the customer wants to shop us."

L.L. Bean has built its brand — and a $1.07 billion business — primarily on the strength of the 150 million catalogs it distributes each year. (The company also operates a one-of-a-kind store in Freeport that is one of Maine's top tourist destinations.) However, surging catalog competition and rising costs spurred the development of a new strategy.

"The economies of mail order got to the point where we had to question the whole model of how we run L.L. Bean," Shea said. "The cost of postage, printing and shipping is very expensive, and we can't grow as profitably." With the U.S. Postal Service proposing rate increases for 2001, pressure on profits is likely to intensify.

Of course, retail stores carry their own high costs. But the stores will allow L.L. Bean to showcase its full selection in a way no catalog can.

"The retail store is the brand come to life," Shea said. "A customer may only receive the women's catalog, but in the store she'll see all our sub-brands, like L.L. Bean home and L.L. Bean kids."

The inclusion of store-only products will give shoppers an added incentive to make the trip.

Another dimension the stores will bring is the ability to touch. That's especially important to sales of high-end hard goods, such as bicycles, fishing rods and kayaks, as the Freeport store has shown. There, 30% of the sales are hard goods — double the percentage the category contributes to catalog sales.

"You probably won't make a $1,400 investment in a kayak until you sit in it," Shea explained. "And it's the only way to really know if you need a 21- or 19-inch bike frame."

The first of the new stores is slated to open in July at Tysons Corner Center, McLean, Va., followed in March 2001 by a second at The Mall in Columbia (Md.). A third will debut a year later, in Virginia or Maryland.

"This is a pilot," Shea said. "If they're successful, we'll backfill in the Mid-Atlantic region, then look westward."

The company will complement its new store development by expanding its factory outlets, too. It currently operates 10 outlets and plans to open two more in Virginia and another in Maryland.

"They will grow hand-in-hand," Shea said. "All the end-of-season products can go there."

Like the catalogs, flagship store and Web site, the new L.L. Bean stores will offer outdoor sports gear, footwear, and casual apparel for men, women and children as well as travel goods and home furnishings. But the new stores will be distinctly different from existing Bean venues — and even from each other.

The strategy is to develop in every targeted region hub-and-spoke clusters of two store types: the "core" store, at the hub, with a full assortment, surrounded by smaller "discovery" stores that carry the best of each merchandise category. The Tysons unit is a core store; it occupies a 77,000-square-foot anchor position (62,000 of it selling space) and will carry some 9,400 different items at a time. The Mall at Columbia branch, a discovery store sited on a pad in 30,000 square feet, will have one-third the selling space of the core store and offer about 3,400 items, Shea said.

By contrast, the Freeport store, which opened in 1917 and literally hasn't closed its doors since 1951, is in a league of its own: Its 110,000 square feet of selling space are stocked with 15,000 different items at a time and bring in $125 million a year. While it displays 25 different canoes, the Tysons store might offer three or four, and the Mall at Columbia unit, two.

To compensate for the limited selection, each new store will include a catalog order desk and Internet link; items not in the store will be delivered within 48 hours free of shipping costs. And unlike some retailers whose virtual stores beat their real stores' prices, L.L. Bean will tag its items with the same prices wherever they're purchased.

Merchandise is not all the L.L. Bean stores will offer. A key feature of each will be its Outdoor Discovery Center, where staff members will stage demonstrations and promote L.L. Bean's outdoor education programs. In Maine, the company has for 22 years offered an extensive roster of in-the-field programs for adults and children, including orienteering, wilderness skills, bike repair, photography, fly casting, kayaking and canoeing. In its new markets, it expects to offer similar classes and clinics at nearby resorts.

The Outdoor Discovery Centers will also add excitement to the in-store experience: For example, the Tysons store will have a waterfall and trout pond where shoppers can learn fly-fishing and catch-and-release techniques.

The educational component is one reason Tysons Corner Center management was eager to add an L.L. Bean store to the mix.

"They're bringing something unique to the market," said Charles Cope, CLS, SCSM, general manager of Tysons Corner. "It's not a sporting goods store: It's truly an outdoors experience, with the trout ponds inside and all the activities. They want to be an education concept, which is a nice positioning, and education is entertainment as well."

For L.L. Bean, the programs constitute not a profit center — Shea said the company breaks even on them — but rather a critical part of its brand positioning.

"Being an authentic outdoors company is one of the things that differentiates us," he said. "The programs reinforce that we're in business to help families enjoy the outdoors."

Not incidentally, they also create a profitable pool of loyal customers who outfit themselves to pursue their new interests.

"The average student in our Introduction to Fly Fishing course spends $1,300 before leaving town," Shea said.

Yet L.L. Bean isn't the only "authentic outdoors" retailer to offer workshops. And encroaching competition — particularly in the form of REI, the Kent, Wash., outfitter with 54 stores — is one force driving Bean's retail expansion, Shea acknowledged. But, he added, the two companies appeal to different markets.

"They go after the enthusiast, while we go after the aspirational, the entry level, the middle-of-the-road; we're helping people who want to get outdoors."

Clearly, L.L. Bean also means to entice new customers to come indoors — to shop. Will they?

"The strategy seems sound, but it's a risky play" said Bob Waggoner, a principal at Sibson & Co., a Princeton, N.J., management consultant. "Integrated, multichannel approaches to the market are the way to go, but can they get the volume to support the retail costs?"

Shea seems to think so, given that the Freeport store attracts more than 3.5 million people a year. And he expects any initial cannibalization of catalog sales to be offset over time by each retail channel's ability to promote the other and grow the entire business. Nevertheless, he said, "This is a learning period for us. We'll have to see the impact on mail order as well as the synergies."