Marketing Report for Mr. Gary C. Comer,

¶ … Marketing Report for Mr. Gary C. Comer, Chairman

Dear Mr. Comer,

As instructed, our firm has conducted the requested marketing research and provided recommendations so that Land's End will continue to remain a leader in the mail order catalog industry. Due to the current market saturation conditions, in order to keep it's market position; Land's end will have to expand its prospective market to reach the global community. It will also have to reach a broader range of income levels.

Key trends, which have influenced the mail order industry

The 1950s to the 1980s were an age of materialism. The 1980s began a new order of social thinking. People began to be more concerned about the quality of life and the quality of their home lives. The term "quality time" became a buzzword. The invent of the Internet had its beginning in 1982 [PBS.org, 1997]. Slowly over the next 10 years it grew in popularity. Today, the Internet is an integral part of our society. It is this shift in thinking that is responsible for the success that mail order and e-commerce have had in the recent decade.

According to statistics from the Direct Marketing Association released June 4, 2001, catalog sales continue to increase at a rate more than twice that of overall retail growth. Catalog sales for 2001 were expected to reach 120 billion U.S. dollars. That is an 8.9% increase over 2000 sales. By comparison, overall retail sales were only expected to grow 3.1% [DMA, 2001].

Traditionally mail order catalogs and other forms of direct marketing have performed well even in times of economic uncertainty. This is due to their efficiency and lack of overhead [DMA, 2001].

Expectations of Future Trends

Catalog sales are expected increase to 128 billion in 2002 and 160 billion by 2006. This is according to the same DMA study. Even though Internet sales are slowing from their triple-digit growth rate, they are still the fastest growing direct marketing medium. Web sales for 2001 were expected to reach 37 billion and, an increase over 2000 sales of 28 billion. Internet sales are expected to slow in growth, and are expected to reach 61 billion in 2002 and 181 billion by 2006 [DMA, 2001].

Structure of the Mail Order Industry Today

The Direct Marketing Association also reports that the Internet accounts for 13% of all catalog sales. Currently 53% of catalogers describe themselves as catalog/Internet/retail, 42% as Catalog/Internet, and only two percent as "catalog only. In these companies, 13% of sales were attributed to the Web, 62% of sales were driven by the print catalog and eight percent were generated by retail or outlet stores. This study is conducted annually by the Direct Marketing Association in cooperation with W.A. Dean & Associates [DMA, 2001].

Who is Land's End?

Lands' End is a leading direct merchant of traditionally styled, casual clothing for men, women and children, as well as soft luggage and products for the home. The company's products are offered through regular mailings of its primary and specialty catalogs and via the Internet. Lands' End sales for fiscal year '00 were $1.320 billion. Sales for landsend.com doubled from $61 million to $138 million during this time frame. Catalog Age ranked Lands' End as the 15th largest mail order company and second for apparel only. Over 236 million copies were distributed during fiscal year '00 [www.landsend.com, 2001]

Who are Land's End's Competitors?

The Spiegel Group is made of Eddie Bauer, Newport News and Spiegel. It is positioned to reach customers at different market levels. Service. They serve their customers through catalogs, e-commerce and more than 560 specialty retail and outlet stores.

Eddie Bauer, a leading tri-channel specialty retailer offering men and women distinctive clothing, accessories and home furnishings for today's active, casual lifestyle. Through joint ventures and licensing agreements, Eddie Bauer also markets its sportswear in Germany, Japan and the United Kingdom. [www.eddiebauer.com, 2002]

Newport News, a leading direct marketer offering moderately priced women's fashions and home decor through catalogs and online. Although the company specializes in swimwear and jeans, all women's apparel categories, including footwear, are well represented. [www.newport-news.com, 2002]

Spiegel is one of the nation's leading direct marketers, offering the benefits of home-based shopping via catalogs and e-commerce sites. Addressing multiple taste preferences, Spiegel provides its customers an extensive array of fashionable apparel and home furnishings that are relevant, comfortable and versatile. [www.spiegel.com, 2002].

JCPenney offers fashion and basic apparel, accessories, and home furnishings in a customer-friendly environment in our stores, in our catalog, and on the Internet. Their target-customer segments are mostly dual-earner households with up to two children and typically single or a young family with up to one child. The median annual household income of our targeted customer segments is $48,000.

Coldwater Creek mailed more than 180 million catalogs in the fiscal year 2000. The Coldwater Creek customer profile is a professional woman, 35-55 years of age, who puts in a long work week before going home to care for her family. She is educated, has more discretionary income than free time, and favors the ease of catalog and Internet shopping [www.Coldwatercreek.com, 2001].

L.L. Bean is a mail-order pioneer with a loyal following, strong reputation and more than $1 billion in sales. The recently launched a new line of clothing for women, opening more stores and making its catalogs more eye-catching. [Sharp, 1998].

Who are Land's End's Suppliers?

Lands' End relies on a select group of buyers and in-house designers who are given a great liberty in exercising their talents. They are encouraged to travel the world to seek out the best sources of products. Most of the suppliers, more than 250, are located in the United States. Some are located in the British Isles, others on the Pacific Rim [www.landsend.com, 2001].

Who Are Land's Ends Customers?

Approximately 88% of Lands' End customers have a college education and are 3 times as likely as the general population to have some level of post-graduate education. About two-thirds are in professional or managerial positions. The majority are between 35 and 54 years of age with a median household income of $60,000. They have served 6.2 million buyers in the past year. The majority of customers own a personal computer and are twice as likely as the rest of the population to live in an online household. More than 20% of the landsend.com customers were new to Lands' End in fiscal year '00 [www.landsend.com, 2001].