L.L. Bean, Inc.

FOUNDED: 1912 by Leon Leonwood Bean

Contact Information:

HEADQUARTERS: Casco St.
Freeport, ME 04033
PHONE: (207)865-4761
FAX: (207)552-2802
URL: http://www.llbean.com

OVERVIEW

L.L. Bean, Inc. is a mail-order company specializing in outdoor products. In 1998 it had 24 different catalogs, representing seasonal items; specialty products for hunting and fly fishing; sporting goods; children's clothing; and household furnishings. In 1996 it distributed more than 115 million catalogs. The company's customer service policies have allowed consumers unlimited returns, as well as replacements of the soles of its Maine Hunting Shoe, the first product carried by the company. Taking advantage of the Internet, the company has considered conducting its mail-order business solely from its web site, allowing L.L. Bean to battle rising shipment costs.

COMPANY FINANCES

In 1998 total revenue for L.L. Bean was __BODY__.07 billion, up from 1997's __BODY__.04 billion. However, both years were slightly lower than 1996's revenue of __BODY__.08, but up from 1995 and 1994, which was $974 and $870 million, respectively.

ANALYSTS' OPINIONS

Many analysts consider retail and mail-order catalogs to be a mature business in the United States. For example, the outdoor-wear market in Japan is approximately $405 million, only one-twentieth the size of the U.S. market. The possibilities for growth in Japan, according to analysts, is partially due to the fast-paced lifestyles, making outdoor activities appealing. For years, Japanese men worked extremely long hours, thus neglecting their private lives. However, a new trend to explore nature and family-oriented activities developed.

Many analysts have viewed L.L. Bean's outlet stores as a financially rewarding move. These stores, where most merchandise sold has been discounted for various imperfections, have allowed the company to recover approximately $.90 of each dollar's value it would otherwise count as a loss. L.L. Bean says its research has shown that these stores do not take away from mail order sales. In fact, the company claims, catalog sales have been higher where outlet stores exist.

L.L. Bean has been criticized by some for its failures in the European and U.K. markets. Some say the company's poor sense of audience was to blame. One analyst said customers wanting to place an order in these regions faced an ordeal. First, the prices in the catalogs were in dollars and not pounds. Second, the customer had to calculate personal shipping costs, duty fee, and taxes. Also, to place an order required dialing an American number. Some say pricing the merchandise in pounds and making ordering more simple would have attracted more customers there. Consequently, L.L. Bean did not have much success in Europe.

HISTORY

L.L. Bean's first product, the Maine Hunting Shoe, launched the company's success. Its first shipment of boots, however, proved faulty in that they all leaked. The rubber-soled, leather upper boots were rapidly fixed at Leon Leonwood Bean's expense, beginning the company's reputation of top quality customer service.

Located in Freeport, Maine, the company sought a mailing list of avid hunters once Maine's hunting licensing system was active in 1917. Leon Bean created a showroom for consumers in the Freeport area. In 1920 he constructed a store located on Main Street in Freeport. By 1937, sales had escalated to __BODY__ million.

During World War II, times would have been tough for the company had the military not allowed Bean to design their boots. Continuing to grow and add products, L.L. Bean began staying open 24-hours-a-day in 1951. The company furthered its growth by adding a women's department store in 1954.

Leon Bean died in 1967 at 94 years of age, and witnessed sales having climbed to $4.8 million. Leon Gorman, Bean's grandson, took over as president. He brought in advanced mailing systems, improved manufacturing systems, and set a goal to attract nonsporting markets. The 1980s proved successful since sales grew steadily, averaging 20 percent each year.

Seeing a potential for growth in Japan, L.L. Bean signed deals with Seiyu and Matsushita. The first catalog and service facility was opened in Japan in 1995. Also expanding its market, L.L. Bean added a children's clothing line, L.L. Kids, in 1993. Due to overwhelming popularity, the company opened a separate clothing store for kids in 1997.

STRATEGY

L.L. Bean's strategy for success started with a standard Leon Leonwood Bean called "L.L. Bean's Golden Rule." Simply, the rule exemplified his belief: "Sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more." Customer service remains a large strategic factor in the company's success, backed by a 100-percent satisfaction guaranteed statement found on the company's retail stores and catalogs.

The other ingredients of L.L. Bean's strategy revolve around the way the company functions. For example, its main business has been conducted by mail-order. Factory stores exist, but their purpose has been to sell merchandise returned in a less than flawless state. Some items might have been returned without their original package. Others were items that did not sell well. In other words, the purpose of these factory outlets stores has been to get back the financial loss of those returned or never-sold products.

INFLUENCES

L.L. Bean claims much of its success was a result of its reputation, effective marketing, and enlarged circulation. L.L. Bean's sales dropped in 1989 however, forcing the company to lay off employees in 1991 and 1992. After that setback, the company began prospering rapidly and continued to expand. Increases in the postal rate in 1991 caused the company to charge a shipping and handling fee to its customers for the first time. Also in an effort to offset rising shipment costs, L.L. Bean set its sights on the Internet, creating its own web site as a means of mail-order service. The mail order business, the company's core business, accounted for 87.7 percent of the sales in 1995.

Sales grew by 10 percent—nearly __BODY__ billion in 1995. In spite of these profits, the company offered buyouts and early retirements to eligible employees in 1996. The company claimed sales were $90 million below target range and it had to cut costs for the next three years in order to remain competitive. Considering the fact that from July 1994 to July 1995, 50 percent of American companies did some sort of downsizing, L.L. Bean's cost-cutting efforts seemed ordinary.

Due to market demand, L.L. Bean established L.L. Bean Japan in 1995. L.L. Bean's early efforts to expand throughout Europe and the United Kingdom were not as successful. Some analysts attribute this failure to many factors including a confusing ad campaign and ordering difficulties.

L.L. Bean added L.L. Kids, a children's clothing store, after the popular clothing line demanded its own business in 1996. The fastest portion of L.L. Bean's business in 1996, L.L. Kids grew 29 percent in 1995. The company has claimed it learned a valuable lesson—seize opportunities as they present themselves instead of waiting.

CURRENT TRENDS

The newest trend of L.L. Bean's strategic moves has been to take advantage of technological advances to further its growth. In 1995 the company set up its own web site. Gaining new customers rapidly, the company made plans to put its catalogs on a Net Commerce server. Working with IBM and a consulting firm to develop an interface for users, L.L. Bean hoped to increase its customer volume even further.

Another recent change for the company has been in the area of customer service, long-established as a no-questions-asked, 100-percent satisfaction guaranteed policy. Due to increased dishonesty of many returns, the company has had to develop a more cost-effective return policy. The ability of a customer to return any L.L. Bean item without a receipt at any given point in time prompted some customers to try to return items they had bought at garage sales. One customer even tried to return clothes from a dead relative's closet.

PRODUCTS

Approximately 94 percent of its products carried the L.L. Bean label in 1998. The company manufactures more than 200 different products in six categories: Maine Hunting Shoes, handsewn footwear, sleepwear, dog beds, tote bags, and soft luggage. Bean's manufacturing center in Brunswick, Maine, also functions as a repair and refurbishment shop. In 1996, L.L. Bean reported that it replaced over 25,000 pairs of worn-out rubber bottoms on Maine Hunting Shoes.

CORPORATE CITIZENSHIP

In 1998, L.L. Bean offered its customers an Outdoor Hotline, staffed with employees who could give guidance on outdoor recreation topics, ranging from sea kayaking to backpacking. It offered to help customers plan trips, find the right camp site, or locate areas where particular fish were running.

As a special service to its Internet customers, its web site in 1998 linked to sites containing information on nearly 1,000 parks where they could camp, fish, hike, or swim—presumably using Bean products.

L.L. Bean, a nature-focused company, has committed itself to the environment. In 1996 it was the SCA's EarthWork America corporate sponsor. The efforts consisted of a day-long volunteer program with various conservation projects on the agenda. L.L. Bean also worked with several conservation and recreation groups to maintain the Appalachian Trail and has contributed $20,000 annually to the Grants to Clubs program of the Appalachian Trail conference (ATC). L.L. Bean's contribution has been the largest corporate donation to the organization.

The company also prides itself since, in 1996, it made the Trendsetter List released by the Labor Department in Washington. This list is comprised of retailers and manufacturers who make extra efforts to guarantee their products are not made in sweatshop conditions, including child labor, abusive conditions, and other compromising circumstances. In addition, it tries to support domestic manufacturing, particularly in Maine.

GLOBAL PRESENCE

In 1998, L.L. Bean maintained its Freeport, Maine, retail store and factory outlets in 4 states. It also had 10 retail stores in Japan as well. Because L.L. Bean, Inc. has targeted upper- and middle-class individuals, 50 percent of which are men, Japan became an increasingly profitable market. The Japanese were used to catalogs carrying cheaply made items with no apparent theme, unlike L.L. Bean's appeal to nature. American catalogs, however, offered top quality goods with pictures of top models to help sell them. Hungry for quality merchandise, Japan quickly developed a $20-billion mail order catalog market. L.L. Bean's mail order sales in Japan for 1995 were estimated to be $200 million, equaling 80 percent of international sales for the company.

SOURCES OF INFORMATION

Bibliography

"An Insider's Guide to Catalog Marketing in the UK and Europe." The Catalog Marketer, 26 March 1997. Available at http://www.smartbiz.com.

Cooper, Lane F. "Webbing for Dollars: Being a Webmaster Is Taxing, But the Work to Keep an Electronic-Commerce Site Profitable Can Be Herculean." Web Commerce, 13 January 1997. Available at http://techweb.cmp.com.

Lee, Louise. "Tired of Shopper Scams, Retailers Are Tightening Policies on Returns." The News Times, 18 November 1996.

L.L. Bean Home Page, 17 July 1998. Available at http://www.llbean.com.

"L.L. Bean." NSM Report Company Profiles, 14 November 1994. Available at http://dmworld.com.

Morency, R.R. et al. "A Methodology to Implement and Validate Ergonomic Improvements To Computer Workstations at L.L. Bean." R&D Ergonomics, 28 March 1997. Available at http://members.aol.com.

"Secretary Reich Releases Labor Department's 1996 Trendsetter List." News Alert, 27 November 1996. Available at http://www.newsalert.com.

Semilof, Margie. "Internet World: Hits and Misses." Interactive Age Digital, 3 May 1996. Available at http://pubsys.cmp.com.

Smith, Jeff. "L.L. Bean Accepts 340 Offers to Leave, Avoids Layoffs." Portland Press Herald, 24 February 1996.

Strosnider, Kim. "L.L. Bean to Build Store in Freeport Just for Kids." Portland Press Herald, 29 August 1996.

——. "L.L. Bean to Open on West Coast." Portland Press Herald, 16 April 1996.

Yamaguchi, Mari. "Japanese Consumers Embrace American Mail Order Catalogs." Associated Press, 10 November 1996. Available at http://www.virtuallynw.com.

Yokoyama, Kiho. "Nature Spawns a Shopping Bonanza." The Nikkei Weekly, 14 October 1996.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. L.L. Bean's primary SIC is:

5600 Retail—Apparel and Accessory Stores