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L.L. Bean Cuts Costs as Remedy for Recession

CAMBRIDGE, MA — L.L. Bean has cut costs and revised a variety of its operations to stay competitive during the recession, a company officer said at yesterday's New England Mail Order Association spring conference here.

Steve Fuller, vice president of corporate marketing at L.L. Bean, discussed several strategies the cataloger used, including the elimination of a combined 32 catalog titles and mailings as well as “2,300-plus” unproductive catalog pages. L.L. Bean also cut 25 percent of its SKUs and reduced its number of vendors 50 percent, he said.

“We renegotiated almost every single major contract at L.L. Bean,” Fuller explained. “A year ago we had three printers. A few months ago we consolidated all of our printing work with Quebecor. A year and a half ago we were buying paper from at least three companies. About a year ago we consolidated that to one company.”

Fuller said the vendor restructuring even involved renegotiating rates for e-mail fulfillment and that the company is now negotiating its data services contract.

“We're taking a page from our sourcing friends,” he said. “We had work spread across three companies. We're going back to those companies and saying it's a winner-take-all process. If you can give us the best price and the best results, all that work [will be yours.]”

He advised attendees to follow suit.

“If you haven't gone back to talk to your paper broker, your printer … your merge/purge company, every vendor you have, I encourage you to do so,” he said. “They would like to see you. They're expecting you.”

L.L. Bean said in February that it would eliminate 300 jobs from its regular work force within two months and earlier stated that more than 200 employees accepted an early retirement package offered in November.

The savings from L.L. Bean's cost-cutting measures have been passed to customers in the form of lower prices, Fuller said. Prices were lowered from spring 2002 to the current season on items such as the carryall rolling Pullman suitcase, $149 to $129; the field watch from $120 to $89; and the Double L Polo Shirt, from $22 to $19.50.

“This wasn't at the sacrifice of quality,” he said. “We have seen a double-digit decrease in returns for fit reasons in the past 12 months as we were able to get our hands around the fit process better.”

L.L. Bean also examined its circulation patterns, Fuller said.

“In 1992, we were mailing roughly 65 percent of our file at Christmas,” he said. “In 2001, that had dropped to 20 percent, and as an organization we had fixed costs that had been going up. And like many mailers … when things get tight … we had pulled back a long way. In 2002 … we mailed 55 percent of our file last Christmas.”

Fuller said he has seen encouraging economic signs at L.L. Bean, including an improvement in profitability. He also said L.L. Bean has noticed strong buyer growth.

“Our file had been relatively stagnant for … five or six years,” he said. “We ended this holiday season with our biggest buyer file in 90 years. But more importantly, the underlying growth was much, much healthier than we've seen in a long, long time.”

Improvements in call center performance were also cited in a discussion regarding the company's investment in technology.

“The average call time … was decreased by five seconds,” said Fuller, who also noted an increase in revenue per call.

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