The Daily Herald from Chicago, Illinois • Page 87

Monday, December 27,1999 Section 3 Lands' End quietly becomes Web star Associated Press DODGEVILLE, Wis. When people talk about shopping on the Internet, names like Amazon.com, eBay and eToys frequently come to mind. But what about Lands' End? Yes, the catalog company best known for its classic clothes is quickly becoming a major player in cyberspace. In fact, Lands' End is one of the top sellers of clothes on the Web and has been lauded for its superb online customer service at www.landsend.com. "They have a well-developed e- coramerce site that is better than many of the well known sites out there," said Kenneth Gassman, an analyst at the Richmond, based investment firm Davenport Co.

"The Internet has the potential to become a significant portion of their business." Its success online is good news for 36-year-old Lands' End, which has been struggling in the last year with disappointing sales and profits. Earlier this month, Lands' End said that its overall sales fell by 18 percent in the first five weeks of the fourth quarter, a much steeper decline than Wall Street analysts had forecast. The stock is off more than 50 percent from its 52- week high. The sales drop-off comes amid a yearlong effort by the company to scale back the number of catalogs it sends to customers and reduce the numbers of pages within each catalog. While trimming back the paper, it's bulking up its presence on the Web.

Online sales more than tripled last year from 1997 to $61 million, and many analysts expect sales to top $100 million this year. That's still less than 10 percent of sales, though. In October, more than 1.1 million unique visitors came to the Lands' End Web site, more than those sites run by rivals Gap, J. Crew, Eddie Bauer or Macy's, according to New York-based Media Metrix, which tracks online traffic. Many credit its dominance online to the solid order and distribution system that the company already had in place for selling products through its catalog.

Lands' End already knows how to process an order, operate a warehouse and ship goods quickly, something Web start-ups and many of the brick-and-mortar retailers with online stores are struggling to build. The.company uses the same warehouses for its online and catalog operations. Inside the massive facility the size of 16 football fields workers sort merchandise at a rate of 10,000 pieces an hour. Lands' End ships up to 150,000 orders on its busiest days. Lands' End persona! shopper Shirley Schirz guides a customer through the company's Internet Site in Dodgeville, WlS.

Associated Press Photo ing a shirt from the ground up, making adjustments as you go along. The Web site also uses interactive software that connects a customer service representative to a shopper via on-screen "chat," a two-way dialogue that appears in a tiny box when the-shopper clicks on an icon. The agent then synchronizes her computer screen with the customer and can "push" pages of the Web site with the requested information before the shopper's eyes, in addition to answering questions about sizing, availability and billing. "We hear a lot from novices every day," said Darcia Torres, one of the personal shoppers. "Probably a year from now there will be a lot of experts out there." Analysts say the Web site is the company's best shot at significant growth in the coming years.

For one, it is attracting new customers, as well as those who are migrating from the catalog. The Internet also allows the company to reach more international markets, said Barbara Miller, an analyst with Goldman Sachs in New York. "It's certainly an effective way, and to the extent that the Internet is becoming better accepted as a tool abroad that's going to be important," Miller said. "I think Lands' End has developed some very good techniques online." Lands' End workers process orders in the company's warehouse in Dodgeville, Wis. Associated Press Photo "A lot of the new e-commerce retailers have had to set up infrastructure from scratch," Gassman said.

But Lands' End already has "the ability to handle thousands and thousands of incoming orders daily." The Dodgeville, company has worked hard to make the Web site look much like its popular catalogs, using the same color scheme and written descriptions. But online, women can "try on" outfits by building an interactive 3-D model with their exact measurements. The Web site also gives style advice and recommends figure-flattering clothes. For men, there's "Oxford Express," where shoppers can select shirts by color, fabric, cut, sleeve type and collar. The effect is build- PVRs poised to take couch potatoes to next level of convenience Reuters LOS ANGELES Has DVD lost its thrill? Is home theater hp-hum? For restless videophiles already looking ahead to next year, personal video recorders may be just the thing.

The machines, called PVRs for short, record 10 to 20 hours of shows on vast hard drives. They can "pause" live television, recommend shows based on your tastes and record your favorite shows automatically. But carrying price tags-from $500 to $700, the VCRlike boxes didn't attracted droves of buyers this year. Many in the electronics and television industries, however, predict they will soon become standard in homes, giving TV viewers unprecedented control over what they watch and how they watch it. The companies first out with products, TiVo Inc.

and Replay Networks, are set to see sales" skyrocket in 2000 after generating buzz this year. "This year we prove the technology, we build the retail channel and start to educate consumers about it. The process has only just begun," Jim Barton, TiVo's chief technology officer, said in an interview this week at the Western Show, the cable industry's big annual convention in Los Angeles. TiVo has striven to get the word out, getting its devices into nearly 3,000 retail outlets, taking its stock public and launching a colorful ad campaign featuring a cartoon "Tivo" television character with legs and a smile. Company executives declined to give exact sales figures, but said they were comfortable with analyst estimates of 25,000 units this year.

Replay, by contrast, said sales were in the "thousands." "We're holding back right now because we're not in retail and it's kind of a waste of money (to advertise). Next Christmas is really the breakout Christmas," said Steve Shannon, Replay's vice president of marketing. But the two start-ups are now threatened by none other than software behemoth Microsoft which has partnered with satellite TV provider EchoStar Communication "We're holding back right now because we're not in retail and it's kind of a waste of money (to advertise). Next Christmas is really the breakout Christmas." Steve Shannon, Replay Networks official Corp. to build video recording into its WebTV service.

Although Microsoft's service is limited to EchoStar customers, its deep pockets will make it a serious rival. "We take Microsoft very seriously, even more seriously than TiVo," Replay's Shannon said. But Microsoft's entry also confirms the potential of the marketplace, which consulting firm Forrester Research forecasts will reach 14 million customers in 5 years and rival VCR penetration in 10 years. "I don't believe this is a niche phenomenon," said Forrester analyst Josh Bernoff, who counts TiVo as a client. "It will be as fundamental a part of the viewing experience as remote controls and VCRs.

In 10 years, everyone will be watching TV differently." PVRs have also been largely accepted by broadcasters, who were initially spooked that viewers could skip over commercials, robbing them of their main source of revenue. "The knee-jerk reaction from network executives may be, 'Oh my gosh, my economic model" is The next reaction is 'What's the said Stacy Jolna, vice president of programming and media partnerships for TiVo said. Eventually, TiVo says it will get out of making hardware entirely it now pays subsidies to get its boxes made focusing instead on its personalization services. "If they become synonymous with quality television recording, they may be able to charge a premium for their service," Bernoff said. Free Digital Phone.

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