Cataloger Spotlight: Lillian Vernon
Having topped out at $287 million nearly six years ago, Lillian Vernon’s sales have been falling ever since; it’s expected to finish out its fiscal year at about $170 million. But the bleeding could stop soon.
A public company until 2003, the general mer-chandise cataloger was sold to investment conglomerate Direct Holdings, led by media company Zelnick Media. But despite an aggressive game plan to broaden Lillian Vernon’s reach, Direct Holdings’ initiatives largely backfired.
Direct Holdings bailed out in May 2006 and sold Lillian Vernon to investment firm Sun Capital Partners, which installed former Miles Kimball CEO Mike Muoio to turn the company around. Muoio quickly sprung into action, and brought founder Lillian Vernon back into her familiar day-to-day role as chief merchant to cut SKUs, lower prices and eliminate ineffective catalog editions. Muoio says he’s planning on a 20 percent increase for the upcoming year.
Muoio and his team have implemented several key profitable initiatives since last May.
One of the most frequently told catalog success stories, Lillian Vernon launched the company in 1951 in the kitchen of her Mount Vernon, N.Y., apartment with a small space ad in Seventeen magazine for a personalized handbag and belt. As her company grew, it became too big for its headquarters and wound up moving to other high-rent districts in New York’s Westchester County; first Rye, then later White Plains.
Now the company has all but removed itself from Westchester, as Muoio moved the company’s headquarters to be closer to Lillian Vernon’s Virginia Beach, Va., fulfillment center where the rent is considerably less.
Below are other key changes the company has made over the past year, what their effect has been on the bottom line and key tips other catalogers can take away:
1. Reduce overhead. By closing the White Plains, N.Y., office, Lillian Vernon cut its overhead by 25 percent. In addition to the cost savings, Muoio says that bringing marketing and merchandising together with the rest of the catalog’s operations has produced a 40 percent increase in productivity.
“The processes of the entire enterprise are better served by having a highly collaborative group in the same building functioning on a daily basis,” he says. “We can monitor the pulse of the business better this way.”
2. Ship orders quicker. In the past, multiple operational inefficiencies drove product ship times to 10 to 11 days. Today, most orders ship either same day or the next day.
3. Cut back SKUs by 25 percent. Excessive SKUs didn’t produce incremental sales and contributed to the company’s slow shipping problem, in addition to driving down demand from each book. “The lesson learned was that we needed to figure out the cost of acquisition and managing a SKU,” Muoio says. “We learned we could go across the assortment and focus on the items that did perform vs. the ones that didn’t.”
4. Cut peak circulation by 25 percent. This brought sales down to the point where the warehouse could fulfill orders in a timelier manner. A temporary measure initiated last year, it was put into effect just until the company could get its operations working more smoothly. For this year, Muoio plans to increase circulation from 80 million to approximately 93 million. «
