Lilian Vernon CEO describes turnaround strategy
In an article titled ‘New Life for Lillian‘ in Multichannel Merchant, Michael Muoio, recently appointed CEO of Lillian Vernon, provides details of how the fortunes of troubled online and catalogue retailer Lillian Vernon are being turned around. Lillian Vernon is one of the largest sellers of personalized products in the U.S.
Investment firm Sun Capital Partners acquired Lillian Vernon Corp. from Direct Holdings Worldwide on May 30. and immediately appointed Muoio as president/CEO of Lillian Vernon. The retailer had seen sales fall from $287.0 million for fiscal 2001, to about $180 million now. Muoio comments: “I think we can fairly and safely say that we lost our merchandising way and our methodology.”
Of particular interest from this website’s perspective is that the rapid expansion of personalization offers contributed to some of the problems:
“Lillian Vernon experienced back-end performance issues when in 2004 it doubled the number of items available for personalization, from 1,000 SKUs to 2,000. “We put a tremendous amount of pressure on personalization,” Muoio says, using the first-person “we” even though he hadn’t been part of the company at the time, “and that got them into gridlock. We had a very difficult customer care year that year. It was a little better last year. We returned to 1,000 SKUs and then took it to 750 SKUs.”
Part of the solution lies with how packaging is managed. The article states:
“The company is looking to move away from wave-batch picking, which requires orders to be combined after the personalization process. Given that “77% of all boxes shipped contain at least one item of personalization,” Muoio says, an order-based picking system will probably better suit Lillian Vernon’s distribution center.“
He goes on to say that Lillian Vernon will retain free personalization as a core strategy
” “Free personalization is a key differentiator, whereas free shipping and handling, anybody can do that,” Muoio says. In fact, the fall and holiday editions include cover lines emphasizing that personalization is always free.”
He goes on to state that about 75% of what the company ships in a typical holiday season is personalized. Even after scaling back on the number of SKUs that the warehouse will personalize, about 50% of Lillian Vernon’s merchandise mix is available for personalization.
Not all of the turnaround strategy being employed relates to personalization. The article also describes other measures that the company is now taking to improve its performance. However, the lessons that Lillian Vernon learned are valuable to any company that offers a combination of personalized and non-personalized merchandise - simple things like how orders are packaged can have a significant effect on overall performance.
